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(Bloomberg) -- Abu Dhabi Investment Authority, the world’s second-biggest sovereign wealth fund, may invest in a Frankfurt property development set to cost more than 1 billion euros ($1.1 billion).
ADIA, which owns stakes in construction projects in London and Lucerne, Switzerland, is examining the site known as the Deutsche Bank Triangle, said Ralf Klann, a manager in ADIA’s real estate and infrastructure department. The site, which once contained the headquarters for Germany’s largest bank, spans 20,000 square meters (215,000 square feet).
“We’re researching it,” Klann said on the sidelines of a conference in Berlin on Tuesday. “It’s the right size for us, so if it’s a concept we can agree on, we’d invest in it.”
The roughly triangular city block -- not to be confused with the site of the silver twin towers that now serve as Deutsche Bank’s base -- has several buildings including a high- rise that’s used by the company’s investment bankers, and an events hall. In 1998, the city approved a rezoning of the plot that allows the construction of apartments, shops and as many as four office towers.
Tishman Speyer Properties LP and Gross & Partner Grundstuecksentwicklungsgesellschaft mbH are bidding to develop the site, two people with knowledge of the matter said on Jan. 29. It’s valued at as much as 300 million euros and would probably cost about 1 billion euros to develop, they said.
“We’re not in competition with Tishman or Gross & Partner,” said Klann, ADIA’s head of risk for Europe in the real estate department. ADIA would work alongside the developer to complete the project, he said.
ADIA is taking on development risk in order to improve returns as yields for prime office properties in London and Frankfurt drop to less than 5 percent, according to data compiled by Jones Lang LaSalle Inc.
In London and Germany, “prices are under pressure, which leads investors to buy lower-quality assets, either in terms of building quality or location,” Klann said. “For us, since we’re focused on core assets in good locations, the higher prices are leading us to pursue development.”
In London, ADIA has committed to invest as much as 200 million pounds ($300 million) in rental apartment construction by Fizzy Living, the company said last year. In Lucerne, ADIA is funding the Mall of Switzerland, due for completion in 2017 at a cost of 450 million Swiss francs ($485 million).
The Deutsche Bank Triangle would be the second-biggest development site in Frankfurt’s financial district, after the 21,000 square meter Maintor residential and commercial project on the Main river, set for completion by DIC Asset AG in 2017.
ADIA has $773 billion of assets, making it the second- biggest sovereign wealth fund after Norway’s Government Pension Fund Global, according to the Las Vegas-based Sovereign Wealth Fund Institute.
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