Cordea Savills has launched the Cordea Savills German Retail Fund, a Luxembourg investment structure offering institutional investors the opportunity to benefit from income distributions and capital gains from selective investment in retail properties located in Germany. The Fund secured a cornerstone investor in May and has just completed its second closing attracting further institutional interest and raising more than €190 million of equity in total. The Fund is targeting returns of 10% including income distribution of 5% per annum.
An initial portfolio of c. €230 million has already been purchased by property companies to be acquired by the Fund, with assets which include a dominant regional shopping center, discount supermarkets, retail parks, city center retail and DIY stores. It is also in due diligence for a significant pipeline of assets in the region of €200 million and this includes an additional regional shopping center.
The properties will be managed by Cordea Savills' investment team which has considerable experience and extensive local market knowledge. The team will take an active asset management approach in order to obtain higher rental and capital growth.
Key components of the German Retail Fund's investment strategy are: obtaining reliable income streams by using security of tenure; diversifying assets geographically but with a focus on the former West Germany, and achieving a combination of income and capital growth by enhancing existing retail provisions through for example introducing new tenants and reconfiguration of retail space. The fund is primarily targeting shopping centers, out-of-town retail warehouse schemes and city center retailing which are dominant in their local catchments.
Germany has the largest commercial property market, the highest population and GDP in Europe. Although it has underperformed economically relative to other countries in recent years, its post-reunification population is still the most affluent on the continent. While substantial amounts of retail property in Germany are still owner-occupied, this ownership is unwinding, providing acquisition opportunities for investors. German yields are relatively high compared with the rest of Europe, and an improving economic outlook offers the prospect of capital growth and yield compression.
Justin O'Connor, Chief Executive Officer for Cordea Savills, commented, "We have an experienced investment team with a proven track record in relation to German real estate, which means we are extremely well-placed to generate strong returns in this promising market. The German Retail Fund underlines our growing reputation for launching country and sector specific funds run by specialist teams that have an in-depth understanding of their particular market as well as extensive contacts to secure the right stock."
Berith Kübler, Director of the Fund's Luxembourg management company, commented, "Germany has a very low provision per capita of modern retail outlets and this restricted supply is unlikely to change as a result of any planning policy. However, many international investors underestimate the risks in this market and are buying the market without local guidance or asset management experience. We believe the key to success is in understanding the market and having a focused investment approach."
The Cordea Savills German Retail Fund is a Luxembourg domiciled, Euro-denominated, closed-ended real estate mutual investment fund - specialized investment fund (Luxembourg fonds commun de placement - Fonds d'investissement spécialisé or FCP-FIS) with a planned life of 10 years from the establishment of the fund. Further closings are planned in 2007 and 2008.