Successful divestment for AB European Real Estate Fund in Germany

Geneva, the 7th of December 2020

AB Alternative SICAV-SIF European Real Estate Fund, an open-ended Luxembourg based fund that invests in commercial real estate in Western Europe, announces the sale of one of its assets located in Wiesbaden, Germany. The property was sold to a German insurance company, with transfer of ownership occurring on the 1st of December 2020.

Well located in the dynamic sub-market of Wiesbaden, the property consists of three interconnected office buildings totalling ca. 10,000 sqm of leasable area. The asset is fully let to five tenants with a sustainable WAULT of 4.4 years generating €1.3m of rental income per year and having benefited from recent lease renewals.

At the end of 2019, the property was stabilized and well positioned for a sale in a healthy and vendor-friendly investment market. A competitive bidding process was organised and ninety 90 investors were contacted. Despite the difficulties to visit the asset during the beginning of the Covid outbreak, we received eight competitive offers. The winner was selected as the most reliable buyer offering the best price. After a period of due diligence and negotiation, the transaction was signed on September 21st 2020 and completed on December 1st.

This transaction demonstrates the winning strategy of the fund to invest in dynamic office sub-markets with strong fundamentals to benefit from income and capital growth over the years. And, finally crystalize the investment gain once the asset management initiatives have been completed and the asset stabilized. The results are outstanding for an investment of this asset class following a core+ strategy, the post-tax post-fees levered IRR stands at 32% and the equity multiple at 3.1x mostly owing to the 60% gain in capital compared to acquisition. Furthermore, this asset has also been a great contributor to the income performance of the fund delivering an average annualised 8.5% dividend yield.

Daniel Deléchat, Head of Asset Management at Arab Bank (Switzerland) Ltd., comments on this excellent result: “We are delighted to have realized a strong capital gain and delivered stellar investment performance for our investors through the sale of this office building in Wiesbaden. We had initially intended to hold this asset for a longer period, but given the favourable investment market condition and the recent asset management successes, we decided the asset was perfectly positioned for sale. We are very pleased to have completed this transaction in this challenging environment and continue to seek further opportunities.”

Savills Investment Management advised the fund on the execution of the transaction with Volckrick&Associates and ACT as legal advisors, and Colliers as broker.