BMO Real Estate Partners launches Best Value Europe II fund
BMO Real Estate Partners, a unit of Canada’s BMO Financial Group’s Global Asset Management business has launched its second fund in its Best Value Europe series, Best Value Europe II (BVE II) following seed commitments from repeat investors.
Like its predecessor, which is now over 90% invested with a portfolio of 12 assets totalling over €700m, BVE II will focus on selective retail investment opportunities in prime shopping streets within major European cities. BMO Real Estate Partners plans to initially grow the latest fund to a €500m vehicle, with a view to increasing it to upwards of €1bn in the medium-term.
‘The fund will invest in high street retail in major European cities with the common theme of tourism, including Berlin, Madrid, Milan and Prague,’ Ian Kelley, fund director Europe at BMO Real Estate Partners, told REFIRE. ‘We’ve recently bought two assets in Verona and Madrid and currently have two properties under exclusivity in Cannes. We typically invest between €300m and €350m per year, so we would hope that BVE II should reach target GAV of €1b within around three years.’
In addition, the fund has acquired a trophy asset on Avenida da Liberdade 108, Lisbon’s top luxury shopping destination, which was purchased off market for €15.2m. The asset is a fully refurbished mixed-use building comprising 2,104 sqm, including offices and a retail unit which is let to Michael Kors.
The fundis deal driven, rather than country driven, ‘so we work more on risk parameters’, Kelley said. ‘That said, we won’t invest more than one third of the fund in any one country. It’s a core/core plus fund, so the annual return will be in line with that [typically 4-6%].’
BVE II marks the fifth high street retail strategy for BMO REP, with a total of over €2.7bn of high street retail assets under management across Europe.
‘The launch of BVE II demonstrates our consistent track record in delivering returns in this specialised area of the retail market and one which we see as very resilient in the current climate, whilst offering a strong income based return,’ said Iris Schoeberl, managing director Germany and Head of Institutional Clients at BMO Real Estate Partners.
However, the high street retail has changed significantly in the past couple of years, according to Stefan Wundrak, head of European research at TH Real Estate. ‘Investors used to buy any high street retail but now vacancies have increased for the first time,’ he told REFIRE. ‘Investors have become more rational – the game has changed. Many retailers are not prepared to play hardball with landlords anymore. If rents are too expensive or a landlord wants to lock them into expensive 10-year leases, they will just walk away, reasoning that they don’t have to have a presence on every high street.’ (ssk)