Savills Investment Management, the international real estate investment manager, has launched a European food retail–focused vehicle, the Savills IM European food retail fund.
The German special fund has received capital commitments of €109 mln from six German institutional investors at first closing. Its debut investment is a Danish supermarket portfolio of 38 urban properties with a total volume of €140 mln.
The assets are let to the food discounter Rema 1000 Denmark on a 15-year fixed-term. The acquisition is part of a sale-and-lease-back transaction based on a yield of 5%.
Ian Jones, director of investment at Savills IM said: 'We are delighted to have been able to work with Rema to close this major deal. We look forward to a long partnership with Rema to help maintain and develop their position as a leading supermarket operator in Denmark.
'This is the first transaction for our new flagship grocery fund, which will be investing in food retail across Europe. There is significant appetite for this sector among our investor base and we look forward to further significant transactions in 2021.'
As a core/core-plus fund, the new fund mainly aims to achieve a sustainable annual distribution yield of at least 5%. The forecast yield for the Danish seed portfolio exceeds this target. The fund target size is at least €750 mln with a maximum debt ratio of 50%.
While the main fund strategy is to acquire further supermarket portfolios with lot sizes usually starting at c. €50 mln, the fund may also acquire neighbourhood centres, mixed-use urban properties and specialist retail centres provided that they have a food retailer as an anchor tenant and at least 70% of the rental income comes from food/grocery and basic services tenants. At least 85% of the rental income at the portfolio level will come from supermarket/food tenants.
After this first transaction in Denmark, the geographical investment focus is on Benelux and France, but complemented by Southern Europe (Italy, Spain, Portugal), the UK and Ireland as well as Germany and Austria. The German allocation is a rather low maximum of 15% because the fund is primarily aimed at German institutional investors, who are often already invested in German-focused comparable products and are seeking diversification into other European countries.
The advisors to Savills IM on the transaction were Bruun & Hjejle, KHR Architects, Savills and Capital Investment.
