MGPA targets German retail with three risk/return strategies

Private equity advisory firm MGPA is drawing on three pots of equity with different risk/return profiles in its efforts to build a retail property platform in Germany. The firm is looking at different asset types to feed the three strategies. ‘We are looking at shopping centres, big box retail and discounters,’ Marius Schöner, MGPA’s head of Germany, told PropertyEU.

Investments will be divided between opportunistic investment for MGPA Europe Fund IV as well as separate value-add and dividend strategies for two North American clients.

MGPA announced the value-add acquisition in early July of the 21,700 m² Komm shopping and office centre in Offenbach near Frankfurt am Main. The shopping centre component offers 15,700 m² of lettable area over 60 retail units and restaurants.

MGPA carried out the transaction on behalf of an unnamed North American investor. The investment volume was not disclosed.

MGPA expects to carry out further deals on behalf of all three capital sources. Schöner said putting a figure on MGPA’s war chest for Germany is difficult as Fund IV also looks at the UK and France, and the two mandates have a big appetite. ‘The institutional investor in the Komm transaction is looking to do further investments in Germany and hasn’t given any limit as to how big the opportunities can be.’ In March this year MGPA acquired a portfolio of 11 retail properties for this client.

Schöner said additional investment will be made in the centre to increase the attractiveness of the retail offering. ‘This will not be a complete refurbishment. But some retail tenants may be relocated and we aim to improve the centre’s signage in the city and the marketing concept,’ Schöner said. Another focus will be leasing the remaining vacancy in the office space.

MGPA is targeting dividend-generating rather than IRR-driven investments in the German retail sector for the second mandate. The main criteria are longer leases (7-10 years) and a high income yield running cash flow.

MGPA Europe Fund IV - like its forerunner - is pursuing a opportunistic strategy to take advantage of the ongoing volatile market conditions. The fund held a quick first close in November last year and raised $100 mln (about EUR 75 mln) of equity commitments from investors in the previous European fund, MGPA Europe Fund III, which is now fully invested.

Fund III acquired a portfolio of 26 retail properties from Develica Deutschland in July 2011, and 140 assets from discount retailer Aldi Sud in September 2010.

MGPA is an independently managed private equity real estate investment advisory company focused on Europe and Asia. The firm manages $11 bn in assets throughout these two regions.