GERMANY - Rockspring Property Investment Managers has acquired four German commercial properties ahead of what it anticipates will be a two-year acquisition spree focused on non-core real estate with repositioning potential.

The regionally diverse set of assets worth €125m comprise two retail warehouses, a logistics centre and a shopping centre based in Leipzig, and were acquired for three separate Rockspring funds.

The retail warehouses acquisitions were described by the manager as "core-plus", while the Löwen Center shopping mall was said to represent a "value-added opportunity". Rockspring plans to refurbish the latter next year at a cost of €6m.

Stuart Reid, Rockspring partner with responsibility for Germany, said three of the sellers were overseas investors who had entered the German market between 2006 and 2008.

Either they had been unable to construct a portfolio of sufficient size to support and asset management strategy, or they lacked funding actively to manage the assets. "Many of these investors are underwater on their banking covenants and have not the equity resources to take the financing and real estate forward," he said.

Reid said the firm would dispose of core retail-related assets in response to strong market demand where it has completed its value-added business plan on them.

Potential acquisition targets could include core-plus assets attracting weaker demand as banks restrict their lending to core. In contrast to the market peak, when the yield gap all but disappeared between core and core-plus, the gap has now widened to 200 basis points. "This is where we see value," said Reid. "We keep our eyes open for what we consider to be underpriced non-core assets, whatever the sector."

Despite his prediction for an influx of secondary assets onto the German market over the next two years, Reid estimates that only 50% of them - if that - will be of institutional quality. Pricing for what he describes as "third-class assets" will suffer significantly, in contrast to pricing for good non-core stock.

"The buyer needs to be able to purchase and effect the business plan with either full equity or low LTVs, so competition is currently weaker in this market," he said.