MGPA is working to create an investment-grade German retail property company that can be spun off to the institutional market within the next few years. The new company will be built on a portfolio of 140 assets MGPA Europe Fund III acquired from German discount retailer Aldi last September. A further 26 stores purchased in July this year from struggling AIM London-listed German investment company Develica Deutschland will also be part of the mix.
The investment volumes for the acquisitions were kept confidential but the portfolio is believed to worth a few hundred million euros. The Develica portfolio acquired by MGPA Europe Fund III is mainly located in western Germany.
'German retail is now flavour of the month and there are some good reasons for this given the macro-economic conditions in the country but we started this investment thesis more than 12 months ago,' Laurent Luccioni, European CEO of the global private equity real estate investor, told PropertyEU. He added that the Develica portfolio provides the 'right diversification' of tenants and location.
The portfolio comprises 21 food retail properties, of which 11 are supermarkets including the leading German retailers Edeka and Rewe and 10 are discounter units. The remaining five units are occupied by DIY retailer, automotive retailer and textiles retailers. The 41,200-m2 of net leaseable area is 97% let.
MGPA's strategy current strategy for Germany has been to focus on retail rather than office and this is reflected in Europe Fund III's portfolio following the two big retail deals. About 40% of the portfolio now consists of retail, about 30% is office properties and the rest residential assets.
MGPA Europe Fund III was established in 2007 with $1.3 bn (now EUR 908 mln) of capital commitments. The fund is now largely invested following the Aldi and Develica deals. The majority of the transactions prior to this involved single office buildings. The fund uses 55% leverage.
Develica Deutschland is effectively under water and faces being wound up after acquiring properties with significant leverage during the boom.
MGPA has $10 bn of real estate under management globally, with Europe accounting for just under EUR 3 bn.
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