London & Capital continues to capitalize on Germany's economic recovery, confirming its increased exposure to the retail market in its German Real Estate Fund via the acquisition of a multi let supermarket and office investment. At a purchase price of €24.9 million, the acquisition reflects a net initial yield of 6.78%, delivering an attractive arbitrage above Euro borrowing rates and driving the Fund's assets under management through the €400-million mark.
This latest acquisition is located in Bayreuth, an important regional center in Northern Bavaria. The immediate area is undergoing extensive infrastructure redevelopment with former industrial sites being converted to out of town retail uses, seeking to capture the spending power of some 230,000 inhabitants with an annual retail appetite in the region of €630 million. The property, a listed former textile mill originally built in the early 1900's, has been refurbished to the highest standard. In anticipation of a positive shift in market pricing, the managers agreed the price of the purchase before the refurbishment. The market has moved significantly since then, benefiting the Fund upon completion of the acquisition.
As the property is multi-let on long leases (10 years +), London & Capital will benefit from a steady and secure income stream, one of the key investment guidelines for the Fund. The building's principal tenants are Rewe, a food retailer, wholesaler, specialist retailer and travel agent and one of the leading enterprises in the German and European food trade, and Plus, one of the largest supermarket chains in the country. A third key tenant is health insurance business Barmer Insurance, which occupies office space in the building.
Alison Yard, Head of Real Estate Funds at London & Capital, said, "The property is a newly completed development, fully let on long leases. Because of the location, mix and calibre of tenants, as well as the lot size, this property fits ideally into the structure of our German Real Estate Fund. At London & Capital we are 100% committed to the opportunity in Germany and the impact that the economic recovery will have on the retail scene."
The German Real Estate Fund was set up in March 2006. In the 12 months to the end of July 2007, the Euro-denominated Master Fund generated returns of 17%.
Source: Phoenix Financial PR
