Benson Elliot buys prominent Berlin retail centre at discount

UK-based private equity real estate funds manager Benson Elliot has expanded its German convenience retail strategy by buying a €65.5m grocery-anchored retail asset, the 18,600sqm Schloss-Strassen Center in the Steglitz district of Berlin. The deal marks Benson Elliot’s first investment since the onset of Covid.

The seller was the UK’s RDI REIT plc, which is in the process of withdrawing from the German market to focus on the UK. 

RDI said the disposal, which is in line with its strategic decision to exit its German retail portfolio, reflects a net initial yield of 6.6% assuming full purchaser’s costs and a 16% discount to the 29 February 2020 market value. The disposal includes the transfer of the associated €62m bank facility, it said. RDI had bought the asset for €93m in 2013, so the price represents a 30% discount to the price it originally paid.

The property is a well-known shopping centre at the beginning of the popular Schlossstrasse in Steglitz, one of Berlin’s premier retail streets. With direct access to the Walther-Schreiber-Platz U-Bahn station, the property is arranged over the basement, ground and first floors, with a 350-space car park located on two further upper levels. The centre is 97% occupied, with a mix of national and international retailers and a convenience/value offering including Germany’s second largest supermarket chain, REWE, drugstore retailer dm-drogerie markt, as well as a two-storey Primark.

Benson Elliot said it intends to reposition the centre by consolidating its grocery and convenience offering, reconfiguring space and re-gearing lease terms. After buying a portfolio of three regionally prominent centres in May 2019, this latest acquisition takes Benson Elliot’s German convenience retail holdings to €250m.

Modulus Real Estate, a Hamburg investor and asset manager, has taken a minority stake in the transaction, and will implement day-to-day project and asset management at the property.

Joseph De Leo, senior partner at Benson Elliot, said: “We continue to see long term value in market-dominant, needs-driven retail formats. While the structural trends underpinning the retail sector have no doubt accelerated over the past few months as a result of the enforced lockdown, the benefits of grocery-anchored centres, which remained open because of the community services they provide, were also accentuated.”

„This property is in a high footfall location and we believe significant value can be created by refining its offer. Moreover, in a low interest rate environment we’re confident that investors will continue to favour the stable cash flows offered by grocery-anchored formats in fast-growing, supply-constrained locales, let on sustainable rents to strong covenants.’

Mike Watters, CEO at RDI, said: “The sale of the Schloss-Strassen Center in Berlin is in line with our stated strategy to reduce RDI’s retail exposure and focus the portfolio on core assets in the UK market whilst strengthening the balance sheet.

“We are pleased to have successfully concluded this disposal, particularly against a highly challenging macro-economic backdrop, and to have made further progress on our withdrawal from the German market where we now have only €50.5m of assets still subject to disposal, all of which are at various stages of negotiation.”