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Amid improving sentiment for retail investment, a number of European fund managers have returned to the capital raising trail in recent months.

Pan-European real estate investor Resolution Property now plans to invest up to £800 mln (€1 bn) in Europe over the next two years, after raising funds for its fourth fund from investors ranging from global institutions to family offices from the US, the Middle East and Europe.

The new fund will target the UK, the Netherlands, Germany and Poland, in particular mixed-use city centre projects, shopping centres and outlet centres in major European cities, where it feels ‘hands-on asset management can release additional value’.

It will also target office and residential opportunities in London and other large UK cities. Resolution Property had already ac quired two properties in the UK and one in Poland for a total of £310 mln since launching the fund in 2013. In its latest transaction, the fund manager has acquired the Designer Outlet Soltau, centrally located between Hamburg, Bremen and Hanover.

Germany’s leading retail property specialist ECE has also been active on this front and recently announced it has raised €500 mln in commitments in the first close of its second shopping centre fund. Investors backing ECE European Prime Shopping Centre Fund II include the Otto family (which controls ECE), ECE employees, a number of global institutional investors including leading pension funds and sovereign wealth funds.

The total target volume for the fund is €750 mln which equals a gross asset value of about €2 bn when leverage is included. ECE Fund II will continue the investment strategy of ECE Fund I and focus on acquiring existing European shopping centres with value-add potential.

VALUE-ADD RETAIL FUNDS GAIN MOMENTUM
The ranks of fund managers raising pan-European retail funds are swelling as they seek to capitalise on the upswing in the sector. Alongside Resolution Property and ECE, Meyer Bergman has also carried out a successful fund raise for its second value-add retail vehicle. In September, the London-based fund manager capped the equity raising for its European Retail Partners II fund at €750 mln at the final close following strong demand from international institutional investors. The fund – MBERP II – attracted 15 pension funds, endowments and asset managers from Asia, Europe, the Middle East and North America. The vehicle focuses on assets in dominant shopping centre locations across Europe that require active asset management.

MBERP II has already deployed 50% of the total equity capital now raised by the fund. the fund has made 10 investments to date, of which it has already exited two. They include buildings on Bond Street, Piccadilly and Queensway in London, a prime retail investment on the Champs-Elysées in Paris and the Karstadt department store in Berlin’s Hermannplatz. MBERPII’s first investment was the forward purchase of the Westfield Broadway mall development in Bradford, northern England, construction of which commenced at the start of the year.

TH Real Estate has likewise successfully tapped the capital market in recent months, albeit on the core side of the investment spectrum. In early October, the Londonbased fund manager announced it raised €100 mln at first close for its Core German Retail Fund (CGRF). The fund is targeting a total investment volume of €400 mln, for core and core-plus German retail assets. It has a 10-year life and expected loan to value of 40-45%. A second closing is planned for Q1 2015. The fund has also completed its first purchase: an incomplete 11,000 m2 retail site in Bruchsal, southern Germany.

The anchor tenant is German food retailer REWE, with completion due in the summer of 2015. ‘The Core German Retail Fund seeks assets in established, dominant locations across German metropolitan areas and medium-sized towns. Target properties have a gross rental area of at least 7,500 m2,’ said fund manager Thilo Wagner. ‘Asset management will play an important role in the process.’

Earlier this year, TIAA Henderson Real Estate announced it has extended its UK Retail Warehouse Fund by six years, to December 2021. The original £1.1 bn (€1.4 bn) fund was due to expire in December 2015. All 70 unit holders, comprising UK and European institutions, elected to extend their participation in the vehicle.

Another core investor with big retail plans is CBRE Global Investors. Earlier this year Florencio Beccar, head of CBREGI’s retail strategies, told PropertyEU that the investment giant is considering launching a new €1 bn shopping centre investment strategy to combine exposure to Europe’s core markets with Southern Europe and CEE. The new strategy will be a follow-on vehicle from its first European shopping centre fund and will seek to raise €500 mln of equity, versus the €380 mln raised by Fund I.

Like Fund I, the new initiative will look for core-dominant shopping centres offering an opportunity to extend and re-gear leases near expiry to enhance rental income before selling the assets to core buyers. CBRE GI aims to have the first closing of the followup retail strategy before year end, depending on the approvals required under the new European AIFMD regulations.

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