Madison Spends $123M for 57 Percent Share in Iconic Frankfurt Office Complex

By Scott Baltic, Contributing Editor

Madison International Realty of New York, together with its German subsidiary Madison Real Estate, has signed a purchase agreement for Morgan Stanley P2 Value’s 56.95 percent interest in the Trianon complex in Frankfurt. An individual who’s familiar with the transaction, but spoke on condition of anonymity, told Commercial Property Executive the sale price was $122.8 million, or 92 million euro.

The 742,700-square-foot complex on Mainzer Landstraße in Frankfurt’s Westend financial district centers on the 47‐floor office tower, which is currently about 85 percent leased, predominantly to financial services firms. The anchor tenant is DekaBank, which holds a long‐term lease. The complex had been owned by institutional real estate funds Morgan Stanley Eurozone Office Fund and Morgan Stanley P2 Value. Though the latter’s interest is what Madison is buying, the former will retain its stake. Cologne-based Art-Invest Real Estate, also participated in the transaction in an unspecified capacity.

A Madison International spokesperson noted that the company specializes in acquiring partial or joint-venture interests in Class A properties and portfolios and never buys properties outright.

At 610 feet, the Trianon tower, completed in 1993, is one of Frankfurt’s tallest. (Nine of Germany’s 10 tallest buildings are in Frankfurt.) The complex also includes two low-rise residential buildings. One, built in 1992, has 43 apartments totaling about 26,900 leasable square feet. The other, completed in 1873 and extensively refurbished in 1992, totals about 5,900 square feet and is leasable in eight units. The Trianon tower is currently undergoing certification that will make it one of the first buildings in Germany to reach the LEED standard specially designed for existing buildings. A comprehensive update of the tower’s lobby is also planned.

Frankfurt’s economy is robust, with moderate unemployment of 7 percent, Christian Kadel, Jones Lang LaSalle’s head of office investment/Frankfurt, told Commercial Property Executive.

The city’s office vacancy rate peaked in 2004 at about 20 percent, he said, but has steadily declined since then. Prime office rents reached about 50 euro per square meter in the late 90s through 2001, but are now back to a moderate level of 33 euro per square meter, according to Kadel, “which indicates good upside potential to investors.”

Frankfurt’s investment market had “a terrific year” in 2011, he added, when the total value of just more than $4 billion surpassed the average transaction volume over the previous 10 years by about 30 percent. Transaction volume so far this year, Kadel said, is already 70 percent ahead of the first quarter of last year.

“Frankfurt is one of the most important investment markets in Germany,” Martin Braun, head of Germany’s capital-markets group Cushman & Wakefield Inc., told CPE. He added, however, that “The economic structure is very much focused on the financial industry, therefore the volatility is higher than in other markets in Germany.

“For this year, we expect strong demand for core investments and a focus on the top seven markets in Germany,” Martin said. “Thus, Frankfurt will stay in the focus of domestic and non-domestic investors.”