MGPA has EUR 500m firepower for Europe

MGPA has at least EUR 500 mln of firepower to invest in European real estate and is working on a new fund following two major retail asset deals carried out by its main European opportunistic vehicle in Germany.

Laurent Luccioni, European CEO of the global private equity real estate investor, told PropertyEU, that while the EUR 840 mln MGPA Europe Fund III is now largely invested, the firm is currently examining other investment opportunities for other mandates.

'It is difficult to talk about the exact amount of capital available but in terms of a ballpark number we have about EUR 200 mln of equity, which, with debt, probably translates into EUR 500 mln,' MGPA’s European CEO said. Due to regulatory constraints Luccioni was not able to provide further details on MGPA's capital-raising initiatives for new funds. However, he noted that there is a lot of institutional interest in real estate at the moment. And while prime assets can be both expensive and scarce, Luccioni said that MGPA's 'bread and butter' is a strategy based on vigorous asset management and sometimes redevelopment to bring assets up to investment grade before selling them on as part of a platform.

MGPA Europe Fund III is using this strategy to create a company of around 140 assets it acquired from German discounter Aldi in September 2010 and 26 stores bought recently from struggling AIM-listed investor Develica Deutschland. Luccioni said the fund is now largely invested, although it is still in exclusive talks or has binding agreements on other assets.

The closed-end fund was created in 2007 for European institutional investors and their counterparts in the US and Asia. Since 2007 it has carried out 10 acquisitions, with the UK, Germany, France and Poland - where MGPA has offices in Europe - accounting for 75% of the portfolio. Using about 55% leverage, the fund has built up a portfolio consisting of 40% retail assets, 30% office and 30% residential.

Luccioni said the fund has had a good run so far. ‘With a combination of foresight and a bit of luck we managed to invest more than 75% of the capital after Lehman Brothers collapsed.’

'We stopped investing in early 2008 and then restarted in June 2009 with Les Trois Quartiers in the centre of Paris which we bought for above 8%,' he said. MGPA acquired the office property for about EUR 210 mln from UK REIT Hammerson. Luccioni: 'Looking back the market recovered much faster that anybody expected so that really helped performance and other acquisitions at end-2009 and the beginning of 2010. Because of timing we were able to buy very high-quality assets that are performing quite strongly right now.'

The previous fund, MPGA Europe Fund II, invested in 2005-6, which Luccioni said was probably the worst time in terms of valuations. 'Yet, the fund is still performing quite well because we have been able to offset a lot of the downgrading in valuations through asset management.'

MGPA manages just under EUR 3 bn of assets in Europe.