EUROPE - Matrix European Real Estate Investment Trust (MEREIT) has mandated Schroders to manage the disposal of a £362m (€450m) pan-European property portfolio comprising mainly secondary assets.
Schroders head of property funds Duncan Owen told IP Real Estate he had yet to review the assets, but said: "Some are good, others will be difficult to sell at the right price. Sentiment is negative across Europe, and, in general, it isn't easy to sell assets. Some in this portfolio are capable of active management to improve the letting quality. It isn't a firesale."
Although the contract does not specify a deadline for the asset sale, Owen said: "The next 18 months will be important. But if we get a better return to shareholders by holding onto assets, improving the rent and selling later, that's what we'll do."
He added: "We're not a forced seller. We're a seller at the best price."
He cited opportunities to fill 22% vacancies in the 60-unit Europort office and industrial asset located near Frankfurt airport.
"If we change the marketing strategy and get income up, it should lead to a better price," he said.
In theory, Schroders could seek alternatives to asset sales to maximise capital returned to shareholders, who have claimed just over £7m in redemptions since they agreed last August to dissolve the portfolio.
"But, at the moment, it seems clear the best thing to do is sell the assets and repatriate the capital," said Owen.
Earlier this month, MEREIT accepted €2.5m less than the anticipated €19m to sell a Leiden office asset following an 18-month marketing effort.
As rationales for the deal - which returned no capital to shareholders - the board cited the need for refurbishment, as well as re-letting risk associated with a "significantly worsening" local office market characterised by vacancy rates and strong incentives for new lettings.
According to an interim statement issued in March, MEREIT has five assets, each valued at less than €25m in Spain. Four of the assets are industrial, and one is office.
"Anything in Latin Europe will be more difficult to sell than anything in northern Europe," said Owen.
Much of the Spanish portfolio is let to the country's largest baker on long leases.
"If you have one occupier, it can make an asset easier to sell," Owen said. "But how long is a piece of string? Where there are multiple occupiers, if anyone moves out, it isn't the end of the world.
"It can be a good opportunity in the right market because it allows you to re-let at a higher rent."
The mandate announced Friday effectively sidelines Matrix Property Fund Management, which previously ran MEREIT and entered the five-party bidding for reappointment as manager after it was given 12 months' notice last October.
Klockensteijn, hired last autumn to consult on the asset disposal programme, will hand over to Schroders, but stay on as a consultant.
Under the terms of the contract, MEREIT will pay Schroders an annual fee of €1m for the first 12 months, and €0.6m.
It will also receive a fee of €0.25% on assets sold.