Meyer Bergman, the London-based private equity real estate investment manager, has bought a majority interest in a large residential portfolio with assets in the Frankfurt am Main and Rhine-Main area. It marks the group’s first foray into the German residential market, and its first Frankfurt acquisition since 2002.
The seller of the 72,000 sqm portfolio is a joint venture between a wholly owned subsidiary of Starwood Global Opportunity Fund XI (which is managed by the Starwood Capital Group), Stepstone Real Estate and Round Hill Capital. The joint venture selling partners had acquired and assembled the residential portfolio over time and built it into a diversified, institutional-grade portfolio. The price paid by Meyer Bergman in the off-market deal was undisclosed.
The majority of the newly-bought portfolio, which consists of 800 residential and 125 commercial units spread over 60 properties, is concentrated in the centre of Frankfurt, where Meyer Bergman said it is looking to unlock the value of the portfolio through active asset management.
This is part of the firm’s strategy of extracting and creating value in micro-markets by identifying cities, regions and sectors that have strong market fundamentals. The group has been steadily building up a portfolio of German assets containing retail, office and mixed-use properties located across Frankfurt, Berlin, Potsdam and Hamburg.
According to Henning Zimmermann, managing director at Meyer Bergman in Germany, “Frankfurt is the leading business destination in Europe and has strong potential to attract new investors and corporate occupiers post-Brexit. The city’s commercial success is a key driver of demand for quality housing in the city. This acquisition builds on our expansion into urban mixed-use schemes with a strong residential element and we will be drawing from our expertise in residential asset management to help drive value.”
Marcus Meijer, Meyer Bergman’s founder and CEO, said of the deal, “Europe’s continued urbanisation, focused around a number of core city regions, will continue to drive demand for high-quality residential space, which remains supply-constrained in many markets.”
The company cited research from property adviser CBRE highlighting a “severe existing mismatch between demand and supply for housing in Frankfurt and a 0.4% vacancy rate as at 2019, outlining the need for residential investment.” Property adviser Savills has also published research showing Frankfurt to be one of only eight core European cities to see its population increase by more than 5% between 2019 and 2023 and is expected to see household income growth of 10% to 13% over the same time period.
Meyer Bergman is primarily known in Europe for its prestigious retail investments, including London’s Burlington Arcade, downtown shopping in Oslo, the Galeria Katowicka in Katowice, Poland, and the Topas Arcade on Berlin’s Friedrichstrasse.
It is also the owner, through its “Meyer Bergman European Retail Partners III” fund, of the Stadtpalais in Potsdam, which houses the Karstadt department store, which it bought for €53m at the end of 2016, and subsequently paid a further €8m for the adjoining parking house. The store had been on the list for closure by Karstadt as part of the group’s nationwide closing of 60 of its stores, but has since been given a reprieve.
Separately, Meyer Bergman has been creating a €2bn platform allowing institutional investors to tap into the burgeoning demand for last-mile distribution centres. Its Crossbay platform claims to be the first pan-European real estate platform targeting single tenant assets in gateway cities. It’s an extension of the company’s existing urban mixed-used strategy which manages more than €8bn of assets across Europe and can tap into the company’s network of business partners including many leading retailers and local asset managers.
The Crossbay portfolio now has more than €500m of last-mile assets under management, which it expects to double to €1bn over the next 12 months. It has an occupancy rate of more than 97% with a WALT of five years, with tenants being a mix of 3PLs (such as FedEx and DHL) and e-commerce brands (including Amazon).
Two months ago, founder and CEO Marcus Meijer commented: “Demand from e-commerce, online grocery shopping and third-party logistics businesses has soared in recent years. This is a structural shift. Conviction investors rightly see a return premium given the lower level of risk in this property type coupled with continued growth in occupier demand.
“We are creating a long-term institutional platform that will work in parallel to our traditional value-add strategy. For the first time, pension funds will be able to access high quality assets, with grade A occupiers managed by an institutional-grade operator.
“Although we began our last-mile journey in 2018, Covid-19 has highlighted how integral urban logistics are to all aspects of life. As companies look to reassess their supply chains, we will see significantly enhanced investment targeting this area.”
