Benson Elliot acquires grocery-anchored retail asset in Berlin for EUR65.5 million
Benson Elliot, a UK-based private equity real estate fund manager, has acquired a 18,600 sq m grocery-anchored retail asset from RDI REIT for EUR65.5 million.
Located in the Steglitz-Zehlendorf borough in the south-west of Berlin, it is the first investment undertaken by Benson Elliot since the onset of Covid.
Set in a highly visible and well-connected position on Schloßstrasse, one of the capital’s prime high streets and most affluent areas, the centre benefits from direct access to the Walther-Schreiber-Platz U-Bahn station, and sits adjacent to one of Berlin’s busiest bus terminals. The property is arranged over the basement (U-Bahn egress), ground and first floors, with a 350-space car park located on two further upper levels. The centre is 97 per cent occupied, with a mix of national and international retailers and a convenience/value offering that has proven to be highly resilient to e-commerce penetration. Tenants include Germany’s second largest supermarket chain, REWE, leading drugstore retailer dm-drogerie markt, as well as a two storey Primark.
Benson Elliot intends to reposition the centre by consolidating its grocery and convenience offering, optimising tenant composition, reconfiguring space and re-gearing lease terms. As one of the only retail formats to remain open during the Covid lockdown, grocery-anchored assets have maintained their appeal to institutional investors seeking secure income streams.
The investment marks a continuation of Benson Elliot’s German convenience retail strategy, following the acquisition of a portfolio of three regionally dominant centres in May 2019. The acquisition takes the firm’s German convenience retail holdings to cEUR250 million.
The deal, which is in line with RDI’s strategic decision to exit its German retail portfolio, reflects a net initial yield of 6.6 per cent assuming full purchaser’s costs and a 16 per cent discount to the 29 February 2020 market value. The Disposal includes the transfer of the associated EUR62.0 million bank facility with a maturity date of 31 March 2021.
Joseph De Leo, Senior Partner at Benson Elliot, says: “We continue to see long term value in market dominant, needs-driven retail formats. 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. This property is in a high footfall location and we believe significant value can be created by refining its offer. 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.”
Mike Watters, CEO at RDI, says: “The sale of the Schloss-Strassen Center in Berlin is in line with our stated strategy to reduce RDI’s retail exposure and focus the portfolio on core assets in the UK market whilst strengthening the balance sheet. We are pleased to have successfully concluded this disposal, particularly against a highly challenging macro-economic backdrop, and to have made further progress on our withdrawal from the German market where we now have only EUR50.5 million of assets still subject to disposal, all of which are at various stages of negotiation.”
Modulus Real Estate, the Hamburg investor and asset manager, has taken a minority stake in the transaction. They will implement day-to-day project and asset management at the property.