Patrizia buys €286m Eurocastle German retail portfolio

The Augsburg-based full-spectrum investor Patrizia Immobilien has acquired a supermarket portfolio with 107 retail properties, consisting  of supermarkets, discounters and retail centres throughout Germany, most of which are leased to well-known food retailers. The seller was Guernsey-based, Amsterdam-listed closed-end fund Eurocastle Investment Ltd, part of US private equity group Fortress, while the purchase price was €286m.

The deal is a now-typical co-investment for Patrizia, along with several of its institutional investors. In this case, the portfolio was made up of three of Eurocastle’s five retail portfolios – the Superstella, the Tanneberg and the Turret – and are expected to net €24.4m in proceeds, said Eurocastle.

Eurocastle has been re-focusing its business onto real estate in Italy, while actively managing its exits from German commercial real estate and pan-European real estate-related debt. Meanwhile Patriczia has been rapidly expanding its third-party business and now has €15bn in assets under management, mainly for third parties.

The retail properties in the portfolio are located in regions with strong economies throughout Germany, with a focus on western German states, and comprise total rental space of around 229,000 sqm. The occupancy rate is 95%. Patrizia said it plans to upgrade, modernise and expand a large number of locations.

“Right from the purchase phase on, we had a very positive contact with many of the key chain operators, so we’re happy to have once again succeeded in turning a complex portfolio into a stable investment product for our institutional co-investors," said Wolfgang Egger, CEO of Patrizia Immobilien AG. “This acquisition increases the value of the real estate assets managed by Patrizia in the retail sector to around €1.6 billion, making us one of the biggest landlords in this segment in Germany", he said.

Only around 18 months ago, Patrizia acquired the "DEIKON" portfolio with 85 retail properties for institutional investors for €178 million. As with DEIKON, this latest purchase was managed by Patrizia Alternative Investments GmbH in close collaboration with Patrizia's Berlin-based Portfolio Management division, which specialises in retail investment.

Separately, Patrizia closed on a financing deal for its recent acquisition of 5,500 Dutch housing units in 137 buildings across central and southern Netherlands, in a €578m deal from Dutch housing association Vestia announced earlier this year – the biggest Dutch residential transaction of the last year.

Three banks – Deutsche Hypo and pbb Deutsche Pfandbriefbank, along with Amsterdam-based ING Real Estate Finance – are providing €331m in loans on the deal. Each of the three is taking a third of the full loan volume each, said lead arranger Deutsche Hypo.

According to Deutsche Hypo board member Andreas Pohl, “The Dutch residential property market has been presenting itself as very stable over the past years,” said Deutsche Hypo Board Member Andreas Pohl. “Thanks to a surplus from births and immigration, demographic prognoses are positive against those of other EU states. That is why we expect further high demand for residential space in the Netherlands.”

In a separate, earlier deal, the rapidly growing Patrizia also beefed up its involvement in the Danish property market, buying a commercial portfolio along with several residential properties and projects in the capital Copenhagen for a combined €270m. This brings to over €600m the company’s assets in Denmark.

Patrizia bought 22,000 sqm of office and retail space in mainly the very heart of Copenhagen from a private seller for €170m. The assets are destined for the recently-launched Patrizia Nordic Cities fund, which groups two German institutions.

According to Rikke Lykke, managing director of Patrizia Nordics, “Our investors have a long-term outlook and pursue a buy-and-hold strategy. However, to improve cash-flow we plan to convert smaller offices into apartments as we are seeing high demand in this sub-market. In total, the share of residential space in the portfolio will be raised to 20%.”

Additionally, Patrizia also concluded several residential deals in a co-investment with German institutions, with a total volume of €100m, including construction projects and existing buildings near the Royal Palace. “While for the new apartments we are focusing on long-term portfolio maintenance and rental, when it comes to the existing apartments we are pursuing a gradual divestment strategy by way of resale of the individual apartments,” said Lykke.