UK-based private equity real estate fund manager Benson Elliot’s acquisition of a grocery-anchored retail asset in Berlin further emphasises the current strength of food-led retail. The sector has frequently been accorded “essential” status during the corona virus lockdowns across Europe.
In what is Benson Elliot’s first investment since the outbreak of Covid, the firm has paid €65.5 million to RDI REIT for the 18,600 sq m Schloss-Strassen Center located in Steglitz-Zehlendorf in the south-west of the city.
“We continue to see long-term value in market dominant, needs-driven retail formats,” said Benson Elliot senior partner Joseph De Leo.
Lockdown accentuated benefits of grocery anchors
“While the structural trends underpinning the retail sector have no doubt accelerated over the past few months as a result of the enforced lockdown, the benefits of grocery-anchored centres, which remained open because of the community services they provide, were also accentuated,” De Leo said.
“Moreover, in a low interest rate environment we’re confident that investors will continue to favour the stable cash flows offered by grocery-anchored formats in fast-growing, supply-constrained locales, let on sustainable rents to strong covenants,” he added.
Schloßstrasse, where the centre is located, is one of Berlin’s prime high streets and is in one of the city’s more affluent areas. The centre, which comprises a basement with access to a U-Bahn station, ground and first floors, also has a 350-space car park located on two levels above.
The centre, which produces net rental income of approximately €4.7 million pa (£4.2 million pa), is 97% occupied by a mix of national and international retailers including Germany’s second largest supermarket chain, REWE and leading drugstore retailer dm-drogerie markt. It also includes a two-storey Primark and other key tenants are Contipark, Smyths Toys and Fitness First.
Benson Elliot said it will reposition the centre by consolidating its grocery and convenience offering, “optimising tenant composition”, and by reconfiguring space and re-gearing leases.
BE’s German convenience retail strategy continues
The firm said the purchase marks a continuation of its German convenience retail strategy and follows the acquisition of a portfolio of three regionally dominant centres in May 2019. The acquisition increases the value of the firm’s German convenience retail holdings to about €250 million, it said in a statement.
RDI, an income focused UK REIT said selling the centre is in line with its strategic decision to dispose of its German retail portfolio. The deal reflects a net initial yield of 6.6% and a 16% discount to the 29 February 2020 market value. The Disposal includes the transfer of an associated €62 million bank facility with a maturity date of 31 March 2021.
RDI CEO Mike Watters said the firm now has only €50.5 million of assets to dispose of in Germany and all are at various stages of negotiation.