AM alpha’s timing-driven, value-add real estate play
By Cecilia Chow
/ EdgeProp Singapore |
Lemke: While AM alpha does not have a sweet spot per se, the $250 million to $350 million price range is where we feel very comfortable (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - AM alpha’s $269.7 million purchase of 112 Robinson in Singapore’s CBD in December 2021 was a coup for the Munich-based family office. It was the group’s maiden real estate acquisition in Singapore since 2009, when it established its Asia Pacific headquarters in the city-state.
AM alpha has a global allocation and a real estate focus. “It was important to have our footprint in Asia,” says Martin Lemke, managing director of AM alpha, who was in Singapore recently. “Since the Asian markets were hot in 2006-2007, we decided to wait a bit. And when the market cooled off, we started to acquire assets.”
From 2010 to 2012, AM alpha acquired prime mixed-use and commercial office buildings in key cities in Asia Pacific, namely Shanghai, Sydney and Tokyo. “We bought assets in Japan, even after Fukushima [nuclear accident in March 2011],” says Lemke.
The original facade of the 14-storey building at 112 Robinson (previously Robinson 112) that AM alpha acquired in Dec 2021 for $269.7 million (Photo: AM alpha)
In Singapore, AM alpha explored the residential sector but focused on commercial property instead. “We are open to further investments in office space, mixed-use developments and logistics if it makes sense,” says Lemke. “We are pretty much agnostic.”
At 112 Robinson, AM alpha’s purchase price translates to $2,925 psf, based on the net lettable area of 92,205 sq ft. The property sits on a freehold site of 9,794 sq ft.
The seller of 112 Robinson was Robinson Singapore Holding, whose ultimate holding company is Lion Trust. Cushman & Wakefield brokered the “off-market deal”.
The existing 14-storey office building has offices on the upper levels, and shops and F&B on the ground level. A previous owner had re- furbished it in 2003.
AM alpha intends to spend $12 million to enhance 112 Robinson, including the entrance façade (Picture: Forum Architects)
$12 million revamp of 112 Robinson
Instead of tearing down and redeveloping, AM alpha intends to revamp 112 Robinson. “We believe that retrofitting existing buildings like what we are doing at 112 Robinson is going to be the future,” says Lemke. “Decarbonisation of real estate is going to be the focus for the next 10 to 15 years. You cannot talk about decarbonisation and at the same time blow up existing buildings and release tonnes of carbon, and then build a new one and release even more carbon.”
AM alpha intends to spend $12 million to enhance the property, including the entrance façade, reception area, restrooms, lifts and lift lobbies, and add end-of-trip facilities to the rear of the building. “We’re going to clear all the old-style fittings and introduce a modern building,” says Lemke.
The building will retain its BCA Green Mark Platinum rating. “My strong belief is that if you don’t focus on ESG, you might do well in the short term, but you might face a bit of pressure in the longer term,” says Lemke. “And that’s also why we’re going to maintain our Green Mark Platinum rating at 112 Robinson.”
AM alpha intends to spend $12 million to enhance 112 Robinson, including the entrance façade (Picture: Forum Architects)
Some retail space on the ground floor will make way for the creation of a more welcoming entrance and reception area. “The whole arrival experience will be different,” he adds. There will also be a new café, “nice enough for people to want to go there instead of just grabbing coffee on the way up to the office”, he notes.
Renovation works began at 112 Robinson in 4Q2022, and AM alpha intends to complete them by 3Q2023.
112 Robinson is 85% leased, and existing tenants include those in financial and professional services, and consultancies. AM alpha wants to free up some full floor plates for co-working space. “I believe co-working is still relevant for office buildings today, especially for occupiers with executives and clients visiting from out-of-town,” says Lemke.
The new lobby after the refurbishment which is underway, and targeted for completion by 3Q2023 (Picture: Forum Architects)
On the hunt for ‘one or two more’
AM alpha is looking for “one or two more” office or commercial mixed-use properties to acquire for its Singapore portfolio. “There’s a lack of office space in Singapore,” says Lemke. “There is a limited pipeline, the new-build space is substantially pre-leased, and many of the older office buildings like AXA Tower and Fuji Xerox Towers have been torn down to make way for new mixed-use developments.” (Find Singapore commercial properties with our commercial directory)
While there is still demand for “top-notch office space” and a market for economy-range office space, “there’s nothing much for the medium-sized users who want quality space”, says Lemke. “We believe that 112 Robinson can fill that gap very nicely.”
While AM alpha does not have a sweet spot per se, the $250 million to $350 million price range is “where we feel very comfortable”, says Lemke. “We are not the guys who shoot for multi-billion-dollar assets.”
Lemke is “not a fan” of leasehold property, preferring to purchase freehold assets. “It’s my observation that freehold assets are getting rarer and rarer,” he says.
The mixed-use building on Coleman Street in London, located close to Bank of England, that AM alpha purchased at the end of January (Picture: AM alpha)
‘Good buying opportunity’
Incidentally, Lemke was appointed the chair of The European Association for Investors in Non-List- ed Real Estate Vehicles (INREV) in July 2021.
As a company, AM alpha has been certified by Climate Partner to be “climate neutral” since May 2022. Hence, the firm has a similar playbook of value-adding by retrofitting existing buildings for its global portfolio.
On Jan 30, the family office acquired a mixed-use building on Coleman Street in London. The building has offices, retail and leisure units, just one street from Moorgate and close to the Bank of England. AM alpha intends to enhance the property, including redesigning the facade, installing end-of-trip facilities and improving the energy efficiency of the building.
AM alpha acquired the Coleman Street property on behalf of several investors represented by a fund manager from Hamburg. The seller of the building was asset manager Abrdn plc.
“The market in London has already adjusted- ed downwards — by 20% to 25% — from the peak level,” observes Lemke. “It was a good opportunity to buy.”
Cushman & Wakefield and law firm Eversheds Sutherland advised AM alpha on the deal. Squarebrook and CMS advised Abrdn on the sale. The five-storey building at Coleman Street has a floor area of 2,500 sq m (26,910 sq ft). Built in 1981, the property was partly refurbished in 2013.
The F&B and retail units on the ground floor of the building at Coleman Street (Photo: AM alpha)
Origins
Set up in 2006, AM alpha began as a real estate investment vehicle for just one family. “We wanted to establish our own family office first, and to prove that it works,” says Lemke. “Once we had a track record to show what we can do, we invited other families in.”
Today, AM alpha is more of a multi-family office as it manages the real estate assets of several families based in Europe. “We do real estate allocation for the different families,” says Lemke. Several institutional investors have also participated in co-investments with the firm.
While the firm does not disclose total assets under management, Lemke says “it’s somewhere in the middle — between zero and EUR10 billion ($14.3 billion)”. When acquiring assets, the firm is open to joint ventures with others, “but our preference is to have control”, Lemke emphasises.
AM alpha is converting the iconic Rylands building on the corner of Market Street and High Street in Manchester into a mixed-use development comprising retail, leisure and office space. It formerly housed the Debenhams department store (Photo: AM alpha)
Early forays
Its first acquisition in Asia Pacific was in China, namely the former Tianchen Rose Plaza in Shanghai, purchased for EUR150 million in February 2010. The property was a commercial building with office and retail space on North Sichuan Road. AM alpha renovated and reopened the building in 2012 as a mid-tier shopping mall, One Prime.
AM Alpha then sold the building in 2015. “We saw the oncoming stress in the retail sector,” relates Lemke. Despite the office space be- ing fully occupied and rents going strong, “we thought it was a good time to sell it”, he adds. They found a local buyer for the property and were able to make “a nice profit” from the sale, according to Lemke.
The firm has yet to reinvest in China, although Lemke sees opportunities in the future. In Japan, AM alpha focused on prime commercial buildings in Tokyo over a decade ago. Its first acquisition in July 2010 was the Renai Aoyama Building in the commercial district of Aoyama, a four-minute walk from Omotesando and Gaienmae train station. A second property, Axall Roponggi, was purchased in April 2012, a year after the Fukushima nuclear disaster. The commercial building is just a minute’s walk from Roppongi train station. The firm has divested both office assets in Tokyo.
In March 2020, it acquired a portfolio of 25 residential properties in Tokyo (Photo: AM alpha)
Banking on multi-family in Japan
AM alpha has since switched to the multi-family residential sector in Japan. In March 2020, it acquired a portfolio of 25 residential properties in Tokyo. Four properties were completed at the time of the acquisition, with the rest at various stages of completion and handover. AM alpha has a partnership with a construction company in Japan to build the properties. The firm also ensures that the buildings are energy-saving and have an energy rating.
“We remain convinced that residential, especially in Tokyo — and also in other parts of the country, like Osaka — is going to be very stable,” says Lemke. “We’re still deploying capital into that market.”
Other international investors are also seeking opportunities in the Japanese multi-family residential segment. “Increasingly, we are seeing colleagues from other firms,” says Lemke. “But we went into the Japan residential market early.”
Last September, AXA Investment Managers acquired a portfolio of 33 properties across Japan for US$421 million ($567.8 million). The properties were a mix of multi-family buildings (29) and purpose-built student housing projects (four) in Greater Tokyo and Greater Osaka. In March 2022, Allianz Real Estate acquired a portfolio of multi-family residential assets in Tokyo for US$90 million on behalf of its Allianz Real Estate Asia Pacific Japan Multi-Family Fund 1.
Ultimately, success in the Japanese multi-family residential space depends on expertise and experience, reckons Lemke. “Residential is the most asset management-intensive asset class you can buy,” he says. “We used to say, ‘If you can manage residential assets, you can manage office buildings.’”
AM alpha acquired the heritage-listed, mixed-use building in Brisbane’s up-and-coming Fortitude Valley District in April 2019 (photo: AM alpha)
Reinvesting in Australia
In Australia, AM alpha also exited its original office asset. It was an office building at 309 George Street, which it acquired in October 2011 for A$68.75 million. It sold the building in 2015 for 1.63 times higher at A$112.3 million.
“When we went into Australia in 2011, it was a good time to buy,” says Lemke. “Markets were down, and the vacancies and interest rates were high. It was perfect in terms of timing for us to move in.”
AM alpha has reinvested in Australia, acquiring the office tower 179 North Quay in Brisbane’s CBD in December 2018, followed by the heritage-listed, mixed-use building in Brisbane’s up-and-coming Fortitude Valley District in April 2019. AM alpha purchased the colonial-style, former TC Beirne Department Store at Fortitude Valley District “in an off-market transaction”.
AM alpha acquired the office tower 179 North Quay in Brisbane’s CBD in December 2018 (Photo: AM alpha)
In 2021, AM alpha completed the acquisition of the largest industrial asset in Australia to date, with the purchase of Treasury Wine Estates Intermodal Facility in Adelaide, from SCT Logistics, for A$98 million.
“We were fortunate to get this asset,” says Lemke. “It was during the lockdown. But luckily, we had already seen the property and had known everything about it. And there were no foreign buyers but us.”
Last August, just a year after the purchase, AM alpha sold the Treasury Wine Estates Intermodal Facility for A$121 million ($109.7 million). The buyer was Sydney fund manager Fife Capital.
Last year, AM alpha sold the Treasury Wine Estates Intermodal Facility for A$121 million, just a year after it purchased the property for A$98 million (Photo: AM alpha)
AM alpha had purchased the property in Adelaide for the longer term. “But we received an enquiry from a brokerage firm, asking if they could introduce a potential buyer,” says Lemke. “We agreed to talk. With the money from the sale, we can reinvest in something else.”
Lemke describes AM alpha’s investment style as “timing-driven”. He believes it’s a good time for AM alpha “to buy assets worldwide”. AM alpha’s favoured markets in Asia Pacific are Singapore, Japan, South Korea and Australia, he says. “Massive adjustments are al- ready happening in Europe, which is also an opportunity.”
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