Rockspring refinances €275m German retail, plans new equity raising

UK-based Rockspring Property Investment Managers said last week it was planning a second equity raising of €100m by the end of this year for its German Retail Box Fund. The news follows on the heels of the group’s recent securing of a five year €275m refinancing loan for the fund.

Rockspring are old hands in the German retail sector, currently managing over €1bn of German retail warehouses, including the German Retail Box Fund which it established in 2005 with twelve institutional investors on board – well ahead of most foreign competitors.

The Box Fund itself now has about €650m of assets under management, made up of 50 retail warehouse parks and hypermarkets anchored by big food retailers mainly across the western part of the country, with major holdings including The Iller Center, Senden in Bavaria, Bous Center in Saarland, Emspark, Leer in Lower Saxony, The Hornbach Center, Dortmund and the Freesen Center, Neumünster in Schleswig Holstein. Currently, the fund comprises of what it describes as 13% core, 72% core-plus and 15% value-added, with Prime Management Düsseldorf handling the asset management for the portfolio.

The refinancing was a significant move for Rockspring given that original financier Lloyds Halifax Bank of Scotland (Lloyds HBOS) made it clear last year that they were withdrawing from the German market and would not be refinancing the German Retail Box Fund’s €282m facility when due in September 2013. A new €275m five-year loan was concluded with a consortium made up of SEB as lead arranger, along with Helaba, Deutsche Hypo, Corealcreditbank and ING.

The new loan represents Rockspring’s largest single loan facility, and obviously comes on the back of a lot of hard work. According to Stuart Reid, Rockspring partner based in the Berlin office, talking to media recently, “We really felt it was imperative for us to remove all refinancing risk from the fund, which we have now done. In total, it took us around 15 months to refinance – on a portfolio with a loan-to-value of 60% - which is a typical length of time given today’s very conservative banking climate in Germany.”

“Financing all products at the current time, including non-core retail boxes, is very hard. Individual banks typically don’t lend more than €50m to €70m, so you do have to rely on club deals. Otherwise, refinancing would be impossible”, he added.

On the new proposed capital raising, Reid commented, “We did the first raising of the same amount back in 2010. We have 12 investors in the fund who are mainly European pension funds, and we expect them to be enthusiastic as the market for non-core German retail boxes is offering a number of interesting opportunities.” He also suggested that Rockspring were looking at launching a smaller-sized core retail park fund later this year, targeting assets in and around larger German cities, including second-tier urban markets.