CCT makes first foray into Europe with acquisition of 94.9% stake in €356.0 million freehold Grade A property in Frankfurt

Singapore, 17 May 2018 – Singapore’s largest commercial REIT by market capitalisation, CapitaLand Commercial Trust (CCT or Trust), is expanding its footprint beyond Asia for the first time.  With CapitaLand Limited, CCT is acquiring a freehold Grade A commercial property, known as Gallileo, in the prime Central Business District (CBD) of Frankfurt, Germany, at an agreed property value of €356.0 million (approximately S$569.6 million) (on 100% basis).  CCT will hold a 94.9% stake and CapitaLand will hold the remaining 5.1% stake in the Gallileo property through a special purpose vehicle.  The completion of the acquisition is expected to take place in June 2018. 

The agreed property value of Gallileo at €356.0 million, negotiated on a willing-buyer and willing-seller basis, represents a discount of 1.4% to the open market value of €360.9 million (approximately S$577.4 million).  The open market value as at 31 March 2018 was appraised by Cushman & Wakefield LLP, an independent valuer. 

Mr Kevin Chee, Chief Executive Officer of the Manager of CCT, said: “CCT has grown to become the largest office landlord in Singapore’s CBD by net lettable area over the years.  Expanding overseas is a strategic move to deliver long-term sustainable distribution growth to our unitholders and inject diversity to the portfolio.  CCT will remain predominantly Singapore focused and will look to allocate between 10% to 20% of its deposited property overseas.  We have been actively exploring opportunities to acquire core commercial assets in key gateway cities in developed markets.  Germany is a key focus for CCT given the depth of good quality investment grade commercial assets.  Frankfurt’s office market is particularly attractive in view of the strong momentum in office demand and resilient rents.”

Mr Chee added: “The Gallileo property is a freehold Grade A asset which offers a strategic fit with CCT’s existing portfolio.  Providing income stability with an established anchor tenant on a long-term lease, the acquisition offers an attractive net property income yield of 4.0%^[1].  This accretive acquisition is expected to increase CCT’s 1Q 2018 DPU^[2] by 1.4%, to 2.15 cents from 2.12 cents on a pro forma basis.  Post-acquisition, CCT’s portfolio value will increase from S$10.4 billion to S$10.9 billion with a 5% exposure to Germany.  This joint venture with CapitaLand also allows CCT to leverage our sponsor’s operational expertise and network platform to deepen our presence in Germany.”

Mr Gerald Yong, Deputy Chief Investment Officer of CapitaLand Limited and Head of CapitaLand International, said: “This is CapitaLand’s second office acquisition in Germany in less than six months following our acquisition of the Main Airport Center in Frankfurt last December.  Leveraging the Group’s 15 years of experience in Germany, the acquisition of Gallileo is in line with CapitaLand’s strategy of growing its platforms and increasing its holdings of well-located assets in developed markets outside of Asia.  In deepening our presence in one of the world’s largest and most stable economies, we will continue to deploy capital to achieve higher risk adjusted returns.  When the acquisition is completed, CapitaLand’s network in Europe will comprise 46 serviced residences and hotels, as well as two commercial properties with over 1 million square feet of net lettable area.”

The funding of CCT’s total acquisition cost of €342.7 million or approximately S$548.3 million will be via a fully-underwritten private placement of approximately S$208.8 million^[3] (38.1%) of net proceeds and bank borrowings of €212.2 million (61.9%).  With the proposed private placement, the Manager intends to declare an advanced distribution of income for the period from 1 January 2018 to the day immediately prior to the date on which the new placement units are issued.  The estimated distribution per CCT unit under the advanced distribution will be approximately 3.49 cents.  The actual amount of advanced distribution (which may differ from the estimate above) will be made by the Manager in due course.

Since entering Europe in 2000, CapitaLand has been growing its presence in the continent.  Apart from office, CapitaLand has a network of more than 5,500 serviced residence units and hotel rooms across 20 cities in seven European countries managed by its wholly owned serviced residence arm, The Ascott Limited.  To deepen its presence in the continent, CapitaLand has set up investment and asset management offices in key European cities of Amsterdam, Frankfurt, London and Paris.  In Europe, CapitaLand has a staff strength of more than 900, including professionals with legal, finance and technical expertise.

About the Gallileo property

The Gallileo property is strategically located in Frankfurt’s prime CBD, known as the Banking District.  It is in close proximity to the German Central Bank, European Central Bank office towers, and the Frankfurt Opera House.  The property also has easy access to a U-Bahn station at Willy-Brandt Platz, the Frankfurt Main Railway Station, Frankfurt Airport and Messe Frankfurt, one of the world’s largest trade fair venues.

¹ Based on Gallileo's FY 2017 net property income on 100% occupancy and valuation as at 31 March 2018.

² The assumptions for the pro forma financial effects of the Gallileo acquisition on CCT’s DPU for 1Q 2018 were: (a) The acquisition was completed on 1 January 2018 and held through to 31 March 2018.  CCT’s interest is 94.9%; (b) New loan facilities were used to partially fund the acquisition and refinance certain existing bank loans. The interest rate for the new loan facilities in Euros was assumed to be 1.4% per annum; (c) The total number of CCT units in issue at the end of the period includes 130 million new units issued in relation to the private placement to partially fund the acquisition.

³ Based on 130 million new CCT units to be issued and an issue price of S$1.631, which is the minimum of the issue price range between S$1.631 and S$1.676 per new unit.

⁴ Commerzbank AG’s lease expires in 2029 and the rent is adjusted based on an inflation index every two years. However, Commerzbank AG has an option to terminate the lease in 2024 with 24 months’ notice.