AAIM bets on Germany's rebound

UK property fund manager AAIM plans to launch a new pan-European fund shortly after having built up a EUR 2 bn portfolio across Continental Europe over the last year. The new fund will have about the same size as its £2 bn (EUR 2.8 bn) older brother Symmetry.

'With Symmetry almost fully invested at the moment, the launch of a new pan-European fund is imminent,' said Robert Whitton, CEO and co-founder of AAIM in an interview with PropertyEU. 'We are increasingly looking at Europe, in particular Germany. But we are also considering eastern countries such as Romania and Bulgaria.'

The UK celebrity-backed fund manager recently snapped up a 400,000 m² portfolio in Germany from Curzon's EPI Orange for EUR 700 mln reflecting a net initial yield of 5.5% in one of the biggest retail deals last month. AAIM's shift to Continental Europe comes in the wake of rising prices in the UK.

'The UK is suffering a period of adjustment that will probably last for some months,' Whitton said. He believes that the UK has ceased to provide the yield profile that opportunistic investors are looking for. 'We want to further reduce our exposure to the British market in the coming months.'AAIM's UK operations currently account for about 40% of the firm's business. With average retail rents more than 30% below those in the UK, Whitton believes that 'the value is still very much in Germany rather than in the UK'. The portfolio acquired from Luxembourg-based EPI Orange comprises 51 German retail assets including 34 DIY stores let to Praktiker and 17 department stores let to Sinn Leffer.

A few weeks earlier, the UK firm bought three shopping centres in Germany, the Czech Republic and Hungary in another EUR 500 mln string of deals. ‘Germany’s macroeconomic picture is very encouraging, and the country still offers good prospects in both yield compression and rental growth,’ said Whitton. Germany's property market has been booming over the last two years, mainly fuelled by foreign real estate investments. In 2004, commercial property investment volumes totalled EUR 16.8 bn, growing to EUR 20 bn in 2005 and a record of almost EUR 50 bn last year, data from Jones Lang LaSalle shows. As the ‘sick man of Europe’ continues to recover, the percentage of foreign investors in Germany jumped to 75% last year from 62% in 2005.