UK-based private equity real estate firm Benson Elliott has acquired a portfolio anchored by German grocery and DIY operators from Brack Capital Properties for €175 mln.
The portfolio comprises three regionally dominant convenience retail assets totalling 100,600 m2.
Brack Capital Properties is a Dutch company, 70% of whose shares were bought by Germany’s Adler Real Estate in April 2018. Brack has retained a minority stake. A press release by Adler in March suggests this is 10.1% and that the sale is in line with Adler’s strategy to remain a pure play German residential real estate company by opportunistically disposing of the remaining parts of its retail holdings. The three assets are the first to be sold and represent around 37% of its retail portfolio. Adler added that the portfolio is being sold in a share deal reflecting a circa 7.6% premium to the book equity value. Proceeds will go to pay around €107 mln of debt to enable the Germany-based company to strengthen its balance sheet.
The centres, which serve markets outside the cities of Dortmund, Hanover and Rostock, are long-established and trade-area dominant, says Benson Elliot, and have a strong occupational history and are currently 99% let on long and seasoned leases. Tenants include occupiers with a high resilience to e-commerce penetration, including leading German grocery chains and DIY operators.
Modulus Real Estate, the Hamburg investor and asset manager, supported Benson Elliot in the transaction and will manage the three assets.
Joseph De Leo, senior partner at Benson Elliot, said, ‘This acquisition reflects our continued confidence in market dominant, needs-based retail formats. While there is much debate around the challenges facing the retail sector, these properties are established anchor points for daily shopping needs, resilient to e-commerce growth and of a scale that would make them difficult to replicate today. Moreover, traditional retail sales in Germany are on a positive trajectory, underpinned by favourable economic conditions, including strong real wage growth. As a consequence, assets of this nature, with their robust cash flow generating capacity, continue to be prized by institutional and other investors seeking secure cash flow streams in a low interest rate environment.’
The largest tenants have recently made significant capital investments into their stores, including to support order fulfilment and regional distribution strategies, highlighting their commitment to locations and formats that would be difficult to replicate today. The asset management strategy for the properties will focus on an optimisation of lease terms and space usage, as well as an enhancement of the tenant mix. This will see the portfolio maintain its community-led offering, catering to the local demographic of each market, whilst enhancing the visitor experience.
Carl-Christoph Pieper, managing director at Modulus, said the portfolio was extremely strong in location quality and local dominance leading to sustainable tenant demand. ‘Although the properties are almost fully let, we will put a strong focus on optimising the tenant set-up in close collaboration with the existing and prospective tenants,’ he explained.
The three assets are in:
• Brentwisch, and comprises the largest retail park in the state of Mecklenburg-Vorpommern
• Castrop Rauxel adjacent to the city’s main shopping street
• Celle, home to a high concentration of companies in the oil and gas industry, including General Electric, Baker Hughes and Halliburton