BMO Real Estate Partners, part of Canada’s BMO Financial Group’s £189 billion Global Asset Management business, has announced that its fund Best Value Europe I is fully invested following the off-market acquisition of a prime luxury retail asset on Serrano 30 in Madrid.
Best Value Europe I has a €700 million portfolio comprised of 13 trophy retail assets of exceptionally high quality located on prime high streets across eight gateway European cities.
The portfolio includes leading international retailers in the luxury sector which comprise over 60% of the rental income. The remaining is generated from high-end premium retail brands:
| CITY | LOCATION | RETAILER |
| Amsterdam | Rokin 17 | Hudson Bay Children |
| Barcelona | Paseo de Gracia 32 | Adolfo Dominguiez, Isabel Marant |
| Brussels | 38 Blvd de Waterloo | Prada |
| Paris | 15 rue de la Paix | Dunhill, Mauboussin |
| Paris | 48 rue Francois 1er | Zilli |
| Paris | 50 rue Faubourg St Honore | Ermenegildo Zegna |
| Paris | 10 rue Faubourg St Antoine | Jordan Store |
| Prague | Wenceslas Square 17 | Van Graaf |
| Madrid | Serrano 30 | Future Luxury |
| Milan | Via Gesu 2 | Brioni |
| Rome | Via Condotti 24 | Loro Piana |
| Rome | Via Cola di Rienzo 173 | Coin Excelsior |
| Rome | Via del Corso 172 | Swatch, Vodafone, Superdry |
BMO REP said that it continues to see strong demand for physical stores in prime locations and in top cities, which benefit from above average economic growth, strong tourism levels and affluent footfall.
Retailers increasingly recognise the advantages of having an omni-channel sales approach, a seamless integration of all channels including online, mobile and the physical store.
Whether the purpose is to support sales, wider wholesale, franchise or online businesses, or even to enhance brand awareness, physical stores are an integral part of any strong retail brand. But visibility and footfall remain the defining criteria for store locations and, as a result, prime high streets in top locations will continue to be an attractive opportunity for the long term.
Ian Kelley, Fund Director, Europe at BMO Real Estate Partners said: “For this core strategy, we have assembled an impressive portfolio of exceptional assets in ultra-prime locations, with high footfall and strong demand from retailers in these tourist destinations. To bring this fund to full deployment with the majority of the acquisitions made off-market is a true testament to our sourcing capabilities and market expertise across Europe. Many of these properties are currently below market rent and offer value creation opportunities in the short, medium and long term.”
RPA Perspective Separately, Benson Elliot, the UK-based private equity real estate fund manager, has acquired a portfolio of three regionally dominant German convenience retail assets from Brack Capital Properties for €175 million. The vendor has retained a minority stake in the transaction.
The portfolio comprises 100,600 sq m of lettable space across three properties and more than 3,500 car parking spaces. The centres, which serve markets outside the cities of Dortmund, Hanover and Rostock, are long-established and trade area dominant. The centres have a strong occupational history and are currently 99% let on long and seasoned leases. Tenants include German grocery chains and DIY operators.
The asset management strategy for the properties will focus on an optimisation of lease terms and space usage, as well as an enhancement of the tenant mix. This will see the portfolio maintain its community-led offering, catering to the local demographic of each market, whilst enhancing the visitor experience.
Modulus Real Estate, the Hamburg investor and asset manager, supported Benson Elliot in the transaction and will manage the three assets.
Joseph De Leo, Senior Partner at Benson Elliot, said: “This acquisition reflects our continued confidence in market dominant, needs-based retail formats. While there is much debate around the challenges facing the retail sector, these properties are established anchor points for daily shopping needs, resilient to e-commerce growth and of a scale that would make them difficult to replicate today. Moreover, traditional retail sales in Germany are on a positive trajectory, underpinned by favourable economic conditions, including strong real wage growth. As a consequence, assets of this nature, with their robust cash flow generating capacity, continue to be prized by institutional and other investors seeking secure cash flow streams in a low interest rate environment.”
Carl-Christoph Pieper, Managing Director at Modulus, said: “The portfolio is extremely strong in location quality and local dominance leading to sustainable tenant demand. Although the properties are almost fully let, we will put a strong focus on optimising the tenant set-up in close collaboration with the existing and prospective tenants.”
