Matthias Schmitz, ACREST Property Group

Established in 2006 in Berlin, ACREST Property Group is an asset manager and developer of retail real estate in Germany. The company has approx. 2.6 million m² of retail space under management, including the entire Woolworth portfolio and Metro cash and carry market portfolio, large retail park, shopping center, and distressed retail portfolios right across Germany. Here Kate Hanlon talks to Managing Partner MatthiasSchmitz about his plans for the company’s future growth and development and the outlook for retailers in Germany.

What sets your company apart from the competition?

“Our approach in terms of asset management is to offer our mostly English-speaking clients the full scope of work – advising them in the course of acquiring a portfolio and then working with them on asset management, property and center management and letting. We have 12 architects and 10 development people in house so we can build within the portfolios we have and tap their full potential – we’ve currently got 14 construction sites open just in the asset management mandates. In addition we develop for ourselves, and currently have three shopping centers under development in Germany, totaling around 94,000 m² GLA with a total investment value of approx. €500 million.

“Retail real estate is the asset class, and particularly in Germany we’re seeing strong appetite especially from Anglo-American clients to acquire further retail real estate portfolios. There are still a lot of distressed portfolios with the banks at the moment, and in the course of the next year we assume that many of these will come to the market. We’re being approached by many potential investors who want to team up with us to show deal credibility to the banks."

How has the company grown?

“From taking on the Woolworth portfolio from Cerberus at the end of 2009, we grew from just five people to 67 people in just two years. We will take on another two large, multi-retail asset portfolios in the next few months – and with this will need to grow by another 25 people by the end of the year.

“In retail real estate size really does matter because you’re in a better position to negotiate as a larger company – so we will grow further into 2013, but we also need to fulfill the promises we make and build a company that is sustainable.”

What’s happening on the German retail market?

“Germany is an attractive country for tenants at the moment, but people aren’t irrationally euphoric.

“Who knows what we’ll see in the next 15 years – this period represents not only one generation, but also the duration of a standard lease in Germany. It’s difficult for retailers to know what’s going to happen in any given location with stationary retail, and how the size of stores will be affected by market change. For example consumer electronics retailers and book retailers are already restructuring themselves.

“There are foreign retailers looking at the German market and trying to make use of this uncertain situation and look particularly at the department store market which is suffering. There will be large vacant space available as a result of this. German retailers are a bit more hesitant than last year also because they’re afraid of what will happen in the future.

“I believe that the well located high streets and shopping centers will always survive. But in the future we could see retail provision in cities in the eastern parts of Germany and in some of the structurally weaker areas of western Germany completely disappear – with larger vacant areas even we’d find it difficult to restructure, reposition and re-let. In addition I see mobility continuing to increase, so retail parks have a good future ahead of them as long as they are well located and very accessible. It’s all about location and this will only become more important.”

Would you look at other countries?

“Although I have international experience (Schmitz joined ACREST from a senior management role with Fitness First), currently it’s healthy for us to profile ourselves as German – as an asset manager and developer in retail real estate – this is what we’re good at and we don’t want to play everywhere. It’s not necessary. We have good relationships with clients and can satisfy their expectations, which is important for us. It is interesting to look at other markets – we’ll watch other countries and keep in touch with our contacts there, but we’re not going making use of this knowledge just yet.”

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