An EDEKA grocery store at the Stuttgart airport
The recent move by Canada's Slate Asset Management to buy all of X+bricks grocery-anchored German real estate portfolio for about €1bn gives the company a major footprint in the one sector that has proved an out-performer over the last four years, including right through the COVID-19 pandemic.
The X+bricks portfolio consists of 188 properties, which Slate is buying in two separate tranches, subject to certain closing conditions and regulatory approvals. Slate already owns more than 220 retail properties across Germany, all meeting the 'daily needs' of consumers in line with the company's target profile.
The deal is probably the largest in Europe so far this year, and certainly the largest whole-portfolio transaction, in a market environment that has seen three consecutive quarters of declines in transactions. X+bricks' founder Sascha Wilhelm is reported to be both selling his shareholding in the company, and playing no further role in its management. Jorgen Verink, the current CFO, will step up to take over Wilhelm's role, with X+bricks remaining as interim asset manager until the deal is completed.
Brady Welch, the co-founding partner of Toronto-headquartered Slate, said: “We are very pleased to be increasing our exposure to high-quality daily needs-based real estate in Germany, which we believe is a stable and defensive asset class with a positive growth outlook. Our ability to source and execute a transaction of this scale demonstrates the strength of Slate’s global team, the depth and breadth of our regional relationships, and our access to flexible capital through trusted partners who understand the value we bring to bear as investors and managers.”
The 188 properties involved in the sale are supermarkets and discount grocers leased to tenants such as EDEKA, Rewe, Lidl and Aldi.
Slate's senior VP in Germany, Sven Vollenbruch, added: "We plan to continue strategically investing across our portfolio to provide our tenants with high-quality spaces that meet the wants and needs of their customers. We look forward to further modernizing these properties with new infrastructure that will enhance their sustainability and convenience, with the goal of making these assets even more efficient, healthy, and attractive to tenants and end users.”
Stefan Hohmann, head of investment at X+bricks, said the company "had created a high-quality portfolio through numerous value-adding acquisitions and investments" and were now passing on a 'best-in-class' portfolio to Slate.
Slate has been active in Europe since 2016, and after a three-year period studying the German market, has focused on buying, owning and operating cash-yielding, daily needs-based real estate assets, primarily grocery but also pharmaceutical and other healthcare services assets, along with affiliated warehouse and logistics properties.
Slate's strategy has been backed by a group of international investors led by New Zealand Superannuation Fund, which originally accompanied Slate in its push into European daily needs-based, essential retail real estate. The Fund is thought to be increasing their equity with this latest deal.
Part of the attraction of the asset class, according to CEO Welch, is its proven stability and how the leases in Germany for grocery-anchored retail are nearly all CPI-linked, which offers strong protection in inflationary periods such as now. He indicated that this latest huge deal was securing assets for Slate at below market rents, which offered good upside organic potential by re-investing capital into the portfolio.
Since starting in Germany it has completed more than 650 transactions, while with this latest deal it will bring its current holdings to more than 400 assets, valued at about €1.8 billion. Worldwide it has about $5bn in such assets under management.
Slate's European business is headed by Irishman Briain Morris, based out of Dublin. Last year Slate paid €130 for the Dublin-listed Yew Grove, a Dublin-listed REIT, which owns offices and industrial properties outside Dublin.
