EUROPE - Unnamed German pension funds, insurers, government bodies and church organisations are among the "very conservative" investors that have committed €300m to a fund designed to take advantage of rising shopping centre values.
The target €750m spezialfond, launched by Union Investment specifically for German investors, will invest in key European countries - the Netherlands, Germany, Austria, Belgium, France and Italy, though it could also consider investments in Poland and the Czech Republic.
Gearing will be capped at 40%.
Christoph Schumacher, deputy managing director at Union Investment Institutional Property, said: "We're trying not to have currency exposure. The total return is getting higher in the core euro-zone countries, but it might make sense to add good returns from the Czech Republic and Poland, which have very established retail markets."
The fund manager has acquired €4.6bn in shopping centre assets over the past five years. It is targeting assets priced above €90m for the fund.
"Retail, especially shopping centres, are in good shape right now," said Schumacher.
"They're more expensive to invest in, but there are good prospects with regard to performance so far, especially compared with other segments such as office.
"And we've got the money. There aren't that many of our competitors with €300m of equity."
Investors in the fund will be consulted on each investment decision, including acquisitions and due diligence.
"It's not fully a discretionary fund, though by law we take the final decision," Schumacher added. "We wouldn't take a decision without consulting our investors."
He described the high-maintenance model as "like a large club deal".
Although it will have no exposure to development risk, the fund will consider refurbishment is part of a broader active asset management strategy.
"We'll take any opportunity for enhancement," Schumacher said. "We might add a bit of development, but we're concerned with stable cash flows."
He said the fund was currently doing due diligence for an acquisition where there were opportunities for enhancement at the end of the lease of one of the main tenants.
The anticipated return will be 5-10%. The fund manager plans to launch a similar product aimed at overseas investors in the near future.
