Korean fund set to log double-digit return from sale of German tower

  • 2018-05-23

South Korean institutional investors, including the Teachers’ Pension and insurance companies, are set to reap a profit of more than €106 million ($125 million) from the sale of an office tower in Frankfurt, which would translate into over 10% annualized returns.

IVG, a German real estate group, recently agreed to sell Gallileo, a 38-story commercial building, to CapitalLand Commercial Trust, Singapore’s largest commercial REIT, for around €356 million, according to investment banking sources and foreign media reports on May 21.

It had acquired the office tower in Frankfurt’s banking district for South Korean institutional investors at €250 million in 2013.

The investors include the pension fund for South Korean teachers, Kyobo Life Insurance Co. Ltd., Hyundai Marie & Fire Insurance Co. Ltd., KB Insurance Co. Ltd. and National Credit Union Federation of Korea. They invested through a domestic fund vehicle launched by Seoul-based Hanwha Asset Management Co. Ltd.

Once the transaction is completed, the investment return will exceed 10% per annum, above the target IRR of 8% and the expected dividend yield of the 6% range, according to the sources.

It is pending final approval from the German government.

As Frankfurt is becoming a financial hub in Europe after the Brexit decision in June 2016, rising demand for Frankfurt’s office space boosted the property’s value.

The office tower, previously owned by Comerzbank, is leased to the German bank. It is located across Commerzbank Tower, the bank’s headquarters which a consortium led by Samsug SRA Asset Management Co. Ltd. bought  for around 900 billion won in 2016.

By Daehun Kim

daepun@hankyung.com

<Edited by Yeonhee Kim>