KanAm Grund has become the first German open-ended fund manager to buy in Moscow with its $900m (€569m) purchase of prime offices.
The deal will pave the way for similar acquisitions.
Justin Berry, capital markets senior director at property consultancy CB Richard Ellis, said: “Many of the German funds are looking at Moscow and this will open a floodgate of interest now that one of them has completed a deal.”
Changes in the German investment act later this year will allow German open-ended funds to invest in property using several vehicles. Previously, they could use only one vehicle to hold the asset.
A consortium led by Russian investment bank Otkritie Financial Corporation sold the four-building, 101,000m2 complex in Paveletskaya at an undisclosed yield, estimated by Moscow agents to be around 8%. Jones Lang LaSalle and Knight Frank are leasing the buildings, which will be completed early next year.
Dmitry Mintz, managing director of the private equity division at Otkritie, said: “The sale is typical for office properties in Moscow. The total price will depend on the final rental flow that we get. We think the rents should be $1,000-$1,200 per m2 a year.”
James Macdonald of law firm Lovells, which is advising Otkritie, said: “The transaction shows that institutional investors are ready to invest in the Russian Federation and that European banks are happy to lend there, since Deutsche Bank provided [development] debt to the consortium as well as being an equity investor.” Bank Austria also provided debt.
The selling consortium comprises Otkritie (two-thirds), Deutsche Bank, Starr Investments Cayman, and two US hedge funds, Old Lane and Artha Capital.
The sale involved the exchange of shares in a holding company called Discovery, owner of four Cyprus-based companies that hold the Moscow offices.
