Axa Investment Managers SA and Norway’s sovereign-wealth fund agreed to buy two buildings in Frankfurt and Berlin for 784 million euros ($1 billion), the biggest German commercial real estate transaction this year.
The properties were sold by Royal Bank of Scotland Group Plc in a deal that will probably be completed by the end of the year, Axa Real Estate and Norges Bank Investment Management said in separate statements today.
“The price level in Germany is attractive,” Harald Magnus Andreassen, chief economist at Swedbank First Securities in Oslo, said by phone. “The prices may go up and down, but the rental income from good properties is quite stable over time.”
German commercial property transactions have slowed this year as banks curb lending to meet stricter capital rules. Pension funds and insurance companies with cash reserves are better to able to make acquisitions without borrowing money. In 2010, the Norwegian wealth fund got approval to invest as much as 5 percent of its capital in real estate.
The Berlin building, on the Kurfuerstendamm Boulevard, has 72,400 square meters (779,000 square feet) of office and retail space on 16 floors, according to today’s statements. The other property, in Frankfurt’s business district, has 81,600 square meters of mainly office space.
The buildings are part of the Pegasus portfolio, which RBS took over from Morgan Stanley when the New York-based bank liquidated its P2 Value German-property fund in 2010, a person with knowledge of the deal said. The Berlin property is the Neues Kranzler Eck, while the one in Frankfurt is a wave-shaped glass tower known as Die Welle, according to the person, who asked not to be identified because the information is private.
RBS was up 2.1 percent at the close of trading in London, while the benchmark FTSE 100 Index fell 0.6 percent. The International Monetary Fund today said European banks may need to sell as much as $4.5 trillion in assets through 2013 if policy makers fall short of pledges to stem the region’s fiscal crisis, an 18 percent increase from its April estimate.
Norges Bank and Axa SA formed a joint venture last year in which the French company’s Axa Real Estate unit acts as an asset manager, the companies said in their statements. It’s the venture’s first investment in Germany.
“Germany has a big real estate market and will form an important long-term part of our portfolio,” Karsten Kallevig, chief investment officer for real estate at the Norwegian fund, said in an interview today. The fund will look for more investment opportunities in the country, he said.
Investors bought German offices, malls and logistics centers valued at about 14.9 billion euros in the first nine months of 2012, 14 percent less than a year earlier, according to data compiled by Jones Lang LaSalle Inc.
“We like a bit of scale in our deals because we think it’s a less crowded space,” Kallevig said in the interview.
Union Investment Real Estate AG sold Die Welle for 703 million euros to a Morgan Stanley real estate unit in 2007, according to a statement at the time from the German company. Neues Kranzler Eck was also sold by Union Investment as part of a separate sale of 28 properties to Morgan Stanley at the same time for a combined 1.36 billion euros, according to the statement.
The Norwegian fund bought a 50 percent stake in the U.K.’s Meadowhall shopping center on Oct. 8. In July, it purchased shares in five French office and retail buildings, according to its website.
Axa SA was down 0.9 percent at 11.56 euros at the 5:30 p.m. close in Paris. RBS has climbed 6.8 percent in the past 12 months, while Axa is little changed.
CBRE Group Inc. advised Axa, while Jones Lang acted for Edinburgh-based RBS, two people with knowledge of the transaction said. Freshfields Bruckhaus Deringer LLP and Clifford Chance LLP were the legal advisers, according to the people.