Berlin investor acquires German shopping centre portfolio

An unnamed Berlin investor represented by Frankfurt-based real estate manager Curator r.e.m. has acquired a portfolio of three German shopping centres from UK-based real estate group Edinburgh House for a price described as ‘in the high double digit euro millions’.

The portfolio comprises centres in the Thuringian cities of Nordhausen and Sondershausen as well as one in Wuppertal in North Rhine Westphalia. Tenants include supermarket chains REWE and EDEKA and apparel retailer C&A. German real estate manager ESTama advised Edinburgh House. Curator advised the buyer.

‘The Berlin-based investor who acquired three German shopping centers from Edinburgh House was attracted to the yield and the value-add potential,’ said Christian Bodtke, investment executive at ESTama. ‘They saw the potential to improve the WARLT of four years as well as the vacancy rate that currently stands at 22%, although it is higher in Wuppertal. It was an opportunistic buy.’

Interestingly, shopping centre growth has been outpaced this year by that of retail German parks. Investment in German retail parks has soared by 181% y-o-y to €711m, accounting for a quarter of all retail deals, according to Savills. Shopping centres transactions, on the other hand, were down 22% y-o-y and high street deals were down by a massive 95%, largely due to the lack of investment opportunities.

‘Shopping centres that wouldn’t have found a buyer two years ago are easier to sell today as investors expand into other cities and are willing to take on more risk,’ Bodtke added.

Overall, retail deals overall increased in the first quarter to €2.77bn, up 8% on the first quarter of 2016, according to Savills. Germany’s seven biggest markets – including Munich and Berlin – accounted for 36% of deals in the first quarter, up from 30% a year earlier.

International investors accounted for 45% of retail acquisitions in the first quarter and 76% of sales, according to JLL. ‘Due to ongoing strong demand for assets, many investors see the opportunity to sell properties for a profit,’ said Sandra Ludwig, head of retail investment at JLL in Germany.

And there are some big centres up for grabs. Blackstone is in the process of selling its Rhein-Ruhr Zentrum (RRZ) in Mülheim an der Ruhr, according to Sabine Keulertz, team leader of shopping center investment at JLL in Germany. ‘The centre has been established since 1975 and is one of the largest retail schemes in Germany. Due to its investment volume and potential in a market environment with a lack of large-scale transactions, it will likely attract national and international investor interest,’ she said. While Keulertz did not comment on the price, the centre is expected to sell for around €300m, according to those who track the market. JLL is not advising. Blackstone could not be reached for comment.

There were around €3.6bn of shopping centre deals in Germany last year and Keulertz is forecasting a similar volume this year. ‘The deal volume fell in 1Q but only due to the lack of product brought to market. Prime yields have fallen in the past year from 4.25% to 4%. We could see sub-4% by the year-end because there is a lot of capital looking for shopping centres and interest rates are still very low,’ she added.

ESTama Gesellschaft für Real Estate Management, which specializes in the retail sector, was founded in 2005. It currently manages around 400 assets with a combined value of €4.1bn.