BVK buys first German outlet centre, Finnish residential

The Munich-based Bayerische Versorgungskammer (BVK), Germany's largest pension scheme group, has been powering ahead with its 'high street retail' strategy over the past year, and has now bought its first German outlet centre, through its mandate with Invesco Real Estate.

Invesco bought the Designer Outlet Centre (DOW) in Wolfsburg from Europa Capital for an unnamed sum, (talk within the industry suggests it might be around €150m) and plans to redevelop the asset for BVK, adding around 4,500 sqm and bringing the number of retail brands in the centre up to 100 units. Munich-based landesbank BayernLB is providing financing for the deal.

Europa Capital's Europa Fund III has been the owner of the centre since 2012 with local partner Hans Dobke of Outlet Centres International, who originally opened the centre in 2007 and will continue to manage the 17,500 sqm centre for Invesco, while retaining a minority interest.

Europa Capital bought out the original equity backer Lehman Brothers Europe RE and itself funded the development of a second phase in 2013, which enlarged the centre by a further 19 units to over 80 shops currently. The centre is unusual for both its conspicuous modern archtiecture, and in that it is located in the town centre of the Volkswagen city of Wolfsburg, in Lower Saxony, rather than on the outskirts, as would be more typical.

It is one of only 12 outlet centres in Germany, a market which lags much of the rest of Europe in development of the factory outlet retail segment. With 2.6 million annual visitors, the centre is the third-biggest by trade volume of Germany's outlet centres.

Europa Capital's Nic Fox, partner and head of Middle Europe for the London-based group, said the sale to Invesco highlights emerging instituional investor interest in the niche retail segment. "The successful purchaser led a group of other leading institutions in the bidding process, alongside specialist funds, fund managers and established retail operators. I anticipate the new owners will see further significant growth in turnover in the long term, not least following completion of the next phase”, he said.

Fabian Manegold, senior transactions director in Germany at Invesco, said outlet centres were “key distribution channels for today’s brands”.

“Coupled with robust consumer spending in Germany and the unique location of this particular centre, this proven concept and sub-sector of the German retail market will provide strong income growth and total returns for our client’s portfolio,” Manegold said.

Separately, BVK also bought an €80m residential portfolio in Helsinki, comprising of 356 apartments and a total aral of 18,800 sqm at seven different locations in the Finnish capital's metropolitan area. The seller was local property fund Tapiola.

Local Finnish-based partner CapMan Real Estate, which acted for BVK as part of its investment mandate, will also act as asset manager.

As part of its strategy to increase its weighting to real estate, the €75bn BVK has global mandates with LaSalle Investment Management, UBS Global Asset Management, CapMan Real Estate and others, and plans to add a number more this year, according to Norman Fackelmann, BVK's head of real estate investment management, at the recent MIPIM in Cannes.

At a current 14%, BVK is targeting an increase to 15% or 16% this year, but is keeping a close eye on market allocations. Speaking at INREV's seminar at the MIPIM, Rainer Komenda, responsible for real estate funds at BVK, commented: “We think that markets are peaking at the moment, and we're not sure future performance will be as good as it has been.” Despite that, BVK intends to raise its allocation to real estate from its current 14% to up to 16% this year, he said. 

With overall assets under management of €75bn, this would suggest extra investment of up to €1.5bn by BVK. "We are cautious in the short term, but for the long term we see a continued low interest rate environment. We are heavily invested in alternatives and real estate is a big part of that", said Komenda.

BVK manages the portfolios of 12 occupational pension funds in southern Germany, covering pensions for more than 2 million doctors, pharmacists, engineers, lawyers, musicians, civil servants, and other white-collar workers.