Increased vacancy, downward pressure on rents, increase of profit warnings and CVAs have made today a buyers’ market with realistic vendor pricing adjustments trickling through, according to Michel Nangia, founder of AMK2 Real Estate and former head of European Designer Outlets at Resolution Property.
‘More institutional funds are trying to reduce their exposure to this asset class - the universe of potential deals has consequently increased,’ Nangia tells PropertyEU in an interview. ‘But one needs to focus on counter-cyclical retail sub-sectors (discount/value proposition and leisure) offering stronger fundamentals to weather the delicate current retail landscape. Gone are the days of just collecting rent and clipping a coupon. Landlords need to understand and listen to their retailers and find synergies to enhance the retailers' bottom line.’
This can only be done by maintaining a close relationship with his network of retailers and continually leverage on the initiatives and best practices he implemented in the outlet sector, he adds.
Nangia's AMK2 has just closed two value-add retail transactions in the UK. The deals are indicative of the company’s strategy to focus on high yielding transactions below replacement value, with robust alternative use downside mitigants and on assets with long WAULT to ride out cyclical troughs.
In Derby, the company acquired from AXA REIM a retail warehouse let to B&M garden centre with low rents creating a ‘fantastic’ arbitrage opportunity for industrial use. It also signed a sale-and-lease back with Marstons PLC and Five Guys for a freehold building in the prime pitch of Watford’s recently pedestrianised High Street and just opposite the new £180 mln Intu extension.
Since leaving his last position at Resolution, despite a challenging environment marked by drops in capital values and rents, Nangia has grown the like-for-like income and weighed average unexpired lease term of the company by 20% through active asset management of the existing properties. He has also restructured the vehicle to create an efficient platform for future pan-European expansion, he adds. ‘In addition to deploying further equity in the UK, I am planning to broaden the investment focus to include the Spanish retail property market which is where I have been most active in my past career.’
Prior to focusing his time and equity in growing AMK2 Real Estate, Nangia has previously held positions at AXA Real Estate Investment Managers in Spain and Resolution Property as head of European Designer Outlets and head of Spain. He has acquired and asset managed in excess of in £1.5 bn of real estate across seven countries over the past 20 years.
