Dr. Joachim Arenth
Joachim Arenth
Dr. Joachim Arenth, CEO, JenAcon
UK-based private equity real estate firm Benson Elliot has paid Brack Capital Properties (BCP) €175m for a portfolio of three German convenience retail assets. BCP is retaining a minority stake in the 100,600 sqm portfolio.
The centres, which are currently 99% let on long and seasoned leases, serve markets outside the cities of Dortmund, Hanover and Rostock, and are anchored by German grocery and home improvement stores. The Hamburg investor and asset manager Modulus Real Estate will manage the three assets, which also comprise more than 3,500 parking spaces.
Benson Elliot said the asset management strategy for the properties will focus on optimising lease terms and space usage, as well as an enhancement of the tenant mix.
Joseph De Leo, a senior partner at Benson Elliot, said the deal reflects the firm’s continued confidence in market dominant, needs-based retail formats.
“While there is much debate around the challenges facing the retail sector, these properties are established anchor points for daily shopping needs, resilient to e-commerce growth and of a scale that would make them difficult to replicate today.”
“Moreover, traditional retail sales in Germany are on a positive trajectory, underpinned by favourable economic conditions, including strong real wage growth. As a consequence, assets of this nature, with their robust cash flow generating capacity, continue to be prized by institutional and other investors seeking secure cash flow streams in a low interest rate environment.’
The locations of the properties are:
• Brentwisch, comprising the largest retail park in the northern state of Mecklenburg-Vorpommern
• Castrop Rauxel, adjacent to the city’s main shopping street
• Celle, home to a high concentration of companies in the oil and gas industry, including General Electric, Baker Hughes and Halliburton
The previous owner, Brack Capital, is a Dutch company, of which 70% of its shares were bought by German listed Adler Real Estate in April 2018, with Brack retaining a minority stake of 10.1%. Adler remains primarily a pure play German residential investor, pruning off its retail real estate holdings. The sale of these 3 assets represent about 37% of its retail holdings, says Adler, with this deal representing the first of its retail disposals.
The price being paid by Benson Elliot in the share deal reflects a 7.6% premium to the book equity value in Adler’s books. The proceeds are designated to paying down about €107m of debt to help Adler strengthen its balance sheet, the company said.
Carl-Christoph Pieper, managing director at Modulus, which will manage the assets, said the portfolio was extremely strong in location quality and local dominance leading to sustainable tenant demand. ‘Although the properties are almost fully let, we will put a strong focus on optimising the tenant set-up in close collaboration with the existing and prospective tenants,’ he said.
Meanwhile, in another significant retail property deal, the listed Augsburg-based Patrizia AG bought a portfolio of 19 food-anchored retail assets in northern Germany on behalf of one of its pan-European funds.
Patrizia said it had been working for nearly two years on the deal, and bought the assets – the so-called Dune Portfolio - from the Irish seller for an undisclosed sum. The seller, Custom House Capital, filed for insolvency in 2011 and its management was accused of misappropriating funds.
The fully-let portfolio comprises 54,100 sqm of retail space including some 2,300 car parking spaces. The assets are anchored by Rewe Group and Edeka Group, with a WALT of 5.5 years, and are thought to generate annual rent of €6.9m. At that rate, using the current prevailing market multiples for supermarkets, the price is likely to have been around about €100m.
Patrizia is allocating the assets to its Spezialfonds Patrizia Gewerbe-Invest Deutschland III. Daniel Herrmann, head of retail fund management at Patrizia, said: “The strong covenants offered by the portfolio’s occupiers underpin an attractive income return which we aim to improve through actively managing these assets.
“We are confident in the continued strength of the food retail market in Germany, especially assets such as these which are dominant for their locations with high footfall and are defensive against E-commerce retail.”
Separately, JenAcon, the Jena-based advisory group which has a long history of successfully concluding bidding processes for its clients, has gained its fourth mandate in 2019, this time from a leading insurance company for the sale of a food retail property portfolio. The portfolio consists of 16 stores, with the regional focus on western Germany. Nearly all the assets are leased to a major German discount grocer.
The annual rent generated is €2.5m, with a weighted average lease term of 4.4 years including the tenant’s special termination rights, and respectively 14 years without them.
JenAcon, headed by founder Dr. Joachim Arenth, has now completed more than 70 deals, with a total transaction volume of about €2.7bn. Over the company’s 13-year existence, several deals have involved big retailers such as Karstadt, Woolworth, Aldi Süd, and grocery chain Edeka, as well as chemical group Bayer AG. The company also advises on M&A, project management and strategy.
