Savills Investment Management, the international real estate investment manager, has launched a new fund for institutional investors. German Retail Fund 2 - High Street Plus will invest in retail properties in prime locations in towns and cities throughout Germany. Approximately 30% of investments will be deployed in major cities with 70% going into economically strong medium-sized towns. The Fund will also consider value-added investments. The purchase agreement for the first property has already been signed, comprising a commercial building in a prime area of Regensburg.
"Prime locations in economically strong medium-sized cities offer the same long-term stability for retail investments as major cities," said Christian Härtl, Portfolio Manager of the German Retail Fund 2 – High Street Plus.
“Whilst there is a lot of competition in the German retail sector, Germany remains the number one target for international chains looking to expand their business in Europe," said Thomas Gütle, Managing Director of Savills IM in Germany.
Retail assets in this category are therefore highly attractive and stable in value, and investors with a core/core-plus profile have primarily focussed up to now on large cities - a highly competitive environment. "It therefore makes sense to broaden the investment horizon and capitalise on the opportunities available in mid-sized cities," added Christian Härtl. The spread of industry across Germany - mittelstadt - means its smaller towns and cities offer significant investment potential, much in the same way as small and medium sized businesses are a tremendous source of its economic power.
When looking at retail assets, its important to bear in mind not just the retail sales of position of the asset, but also the quality of the surrounding environment - including restaurants, culture, services and the wider retail mix. The higher the quality of the surrounding environment, the less vulnerable the retail asset becomes to economic vulnerability. Cities that successfully combine this mix with smart urban planning and marketing are also much better protected against the increasing threat of online commerce. The High Street Fund’s first investment in Regensburg meets all the key investment criteria. The medium sized city’s Old Town district is a UNESCO World Heritage site. According to research by Savills IM, the city is among the most desirable locations in Germany.
The German Retail Fund 2 - High Street Plus has a target size of around €500 million with a distribution yield of 4% per annum. BBE Handelsberatung, a research specialist focused on the German retail sector, assisted with strategy development and will feed in to the assessment of each potential investment prior to acquisition.
"The concept of using external expertise in conjunction with our own retail experts proved its worth previously with our European Retail Fund launched in 2012 and investors have repeatedly confirmed this," said Thomas Gütle. He adds: "Following the success of German Retail Fund 1 and the sale of the entire portfolio 25 well-let and well-positioned retail properties, the services and expertise of Christian Härtl and the entire team are now focused on German Retail Fund 2. The team can use its experience in value-added investing to further enhance the Fund’s performance."
Source: Savills
