Cordea Savills, the international property investment manager, has had a first closing of its 500 million plus European Retail Fund.
The first closing raised 70 million of equity from four German institutional investors and with gearing the Fund now has capital to acquire up to c. 140 million of assets. The Fund will initially focus on markets in Germany, the UK, France and the Nordics to construct a diversified portfolio of shopping centers, retail parks and high street retail units.
Thomas Guetle, Fund Director, commented: "The retail sector has outperformed offices in each of the of the target markets over the 10 years to the end of 2011. We anticipate retail will outperform as a sector over the next five years in the majority of Western European economies. German investors, especially, are traditionally underweight in retail property but surveys indicate their allocations are rising so this Fund will meet their appetite for this sector."
Ian Jones, Portfolio Manager added, "Income is a major driver of returns in the current environment and the level of income is higher in retail than the office sector measured on a pan-European basis. We also see the advantage of investing across the retail spectrum.
"In this way, we can achieve more attractive risk-adjusted returns by combining higher yielding segments, such as Swedish retail warehousing, with traditional high street retail, for example in major German cities. An additional benefit is the ability to access a greater range of investment opportunities leading to the potential to achieve higher returns."
The Fund is targeting an internal rate of return of 7% per annum with an average distribution of 5% per annum after fees and local taxes over a 10-year term. It is structured as a Luxembourg-domiciled Fonds Commun de Placement (FCP) and is targeted at German institutional investors. The Fund's target size is 500 million plus with a gearing ratio of 50%.
Source: Citigate Dewe Rogerson