Sistema Capital Partners has teamed up with Corestate Capital to buy four high street retail property assets in Germany.
The private equity platform, launched late last year, invested €120m for a club of co-investors, anchored by its parent company, London and Moscow-listed Sistema JSFC.
Marjorie Brabet-Friel, Sistema Capital chief executive, told IPE Real Estate: “One of the first requirements was to provide opportunistic returns in mature, liquid market markets.
“Third-party investors were looking for capital preservation and diversification towards Western markets as a hedge to their activities in Russia.”
The company is working with Corestate, which, she said, understands the needs of high net worth and institutional investors and has similar return expectations.
The four properties, on main pedestrianised shopping streets in greater Hamburg, Bremerhaven, Paderborn and Halle, total 60,000sqm. Tenants include H&M and Esprit.
Sascha Wilhelm, chief executive of Corestate, said the four assets typify the opportunities that the joint venture is targeting.
“They present plenty of angles to enhance their attractive yields through active asset management,” he said. “We still see a lot of such opportunities in the German market and therefore plan to grow our portfolio significantly within the next two to three years.”
The deal follows a similar purchase by Sistema late last year, when a Sistema-led group of investors bought a 56,000sqm portfolio in mid-sized German cities for €125m.
Brabet-Friel said the company was looking to build a portfolio of assets it could then offer to other like-minded institutional and high net worth investors, providing net returns of approximately 15%.
“The starting point was really asking how we could achieve those kind of returns,” she said.
“We felt Germany was a liquid market – and secondary German cities could provide that.”
Brabet-Friel said institutional investors made prime high street assets in Germany’s major cities their main focus, overlooking individual assets in lesser-known locations.
The company, she said, was buying at a low level, with the aim of exiting assets at current price rather than holding them for future yield compression.
“The biggest driver for us is underpricing,” Brabet-Friel said.
“We can attract more institutional investors once a portfolio is cleaned up and ready.”
Sistema is buying smaller lot sizes, she added, using a “step-by-step” approach.
In addition to Germany, Sistema is looking at opportunities in the Czech Republic and Poland.
“The Czech Republic has dried up a lot over the last few years, but it still provides a good opportunity, especially for development,” Brabet-Friel said.
A global luxury hotel strategy could also form part of the company’s real estate investment, anchored by European assets, with 50% invested in developments and refurbishments and the remainder split between value-added and core assets.