Rockspring eyes additional €100m equity raise

London-based Rockspring Property Investment Managers is planning a second equity raising of €100 mln this year for its German Retail Box Fund.

The news follows the company's recent announcement last week that it had secured a five-year €275 mln refinancing loan for the fund.

‘We did the first raising of the same amount back in 2010. We have 12 investors in the fund who are mainly European pension funds and we expect them to be enthusiastic as the market for non-core German retail boxes is offering a number of interesting opportunities,’ Stuart Reid, a partner in Rockspring’s Berlin office, told PropertyEU.

Rockspring is also considering launching a smaller core retail park fund this year which would invest in and around larger German cities, not just in the ‘Big 6’, Reid said.

Rockspring’s German Retail Box Fund focuses on non-core and value-add properties with asset management or value-enhancing opportunities. Currently, the fund comprises around 13% core, 72% core-plus and 15% value-added. Around 95% of the properties by value are located in former West Germany with major holdings including The Iller Center, Senden in Bavaria, Bous Center in Saarland, Emspark, Leer in Lower Saxony, The Hornbach Center, Dortmund and the Freesen Center, Neumünster in Schleswig Holstein.

Last week, Rockspring announced that it had secured a €275 mln refinancing from a consortium of five German banks for its German Retail Box Fund, eight months prior to its due date.

The five-year loan is Rockspring’s single largest facility and was refinanced by a consortium comprising ING, SEB, Deutsche Hypothekenbank, Landesbank Hessen-Thüringen Girozentrale and Corealcredit Bank. According to Reid, the new agreement will allow Rockspring and the asset manager, Prime Management Düsseldorf, to establish a strong base for core-plus and value-added acquisitions going forward.

‘This is a good deal for the German refinancing market. It’s a very interesting deal but it would have involved a lot of due diligence, with 50 assets in 40 locations,’ said Jörg Schürmann, managing director of corporate finance at JLL in Frankfurt. ‘Deals like this show that some banks are willing to take on more risk and finance non-core assets,’ he added. JLL did not advise on the deal.

However, it is still very difficult to get financing for non-core property, Schürmann warned: ‘There is around €300 bn of outstanding commercial property loans in Germany today. If you make the assumption that original loan durations are, on average, for five years, 20% of this – or €60 bn – will need to be refinanced every year. Some products in the retail or office markets can be more difficult to finance. However, in other sectors, such as residential, refinancing is often easier, with banks typically lending between €100 mln and €150 mln each,’ he added.

Reid conceded that the financing climate in Germany is extremely challenging: ‘Financing all products at the current time, including non-core retail boxes, is very hard. Individual banks typically don’t lend more than €50 mln to €70 mln, so you have to rely on club deals. Otherwise, refinancing would be impossible,’ he said.

According to Reid, it became clear to Rockspring last year that Lloyds HBoS would not refinance the facility for the German Retail Box Fund as the bank is no longer lending in Germany. ‘It was imperative to us to remove all refinancing risk from the fund, which we have done. In total, it took us around 15 months to refinance – on a portfolio with an LTV of 60% - which is a typical length of time, given that the banking climate in Germany today is very conservative,’ he added.

The attraction of retail boxes is that they provide good income backed by long-leases, strong covenants and a restricted development pipeline, Reid noted. Typically, Rockspring invests in single-storey retail boxes in Germany anchored by large food retailers such as Real, Kaufland or Edeka. Yields for core properties hardened significantly up to peak pricing in 2008 and during 2009 and 2010, there was a lull in activity. However, pricing is now keener for the best core product with core net yields at around 5.5%, although yields for secondary products are 250 bps weaker, Reid said.

The fund, which was launched in 2005, holds just under €650 mln of AUM. It comprises 50 food-anchored retail warehouse parks and hypermarkets in Germany. In total, Rockspring manages €1 bn of retail warehouse properties in Germany.

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