Greenman OPEN has notarised a deed to acquire five food-anchored retail properties with a combined purchase price of circa €112m, increasing its portfolio value to circa €707m and consolidating its position as Germany’s largest food retailer focused investment fund.
The newly acquired assets comprise a portfolio of five Kaufland-anchored properties with a total lettable area of around 71,400 sq m in North East Germany with Kaufland meeting circa 74% of the portfolio’s annual rental income.
The addition of five Kaufland-anchored properties in the latest transaction strengthens Greenman’s relationship with Kaufland who now become the fund’s third largest tenant after EDEKA and REWE.
Commenting on the acquisitions, James McEvoy, Head of Acquisitions for Greenman, said: “By acquiring these, recently unloved, centres and extending our relationship with Kaufland we look forward to solidifying these centres’ position in their catchment for the long term”.
For this transaction Greenman OPEN’s advisors were Mayer Brown (legal advice and due diligence) and Duff & Phelps (technical due diligence).
Explaining its focus on food, the company said that the German food retail sector is “so stable that e-commerce has failed to take a bite out of it and Walmart gave up.”
The German market is well established and very concentrated. Just five grocers hold 74% of the market, two of which are leading food discounters. The dominance of the discounter has resulted in very low operating margins across the sector with Edeka, Germany’s leading full food retailer, estimating its margin to be 1.5%. These factors have reduced the pressure to innovate and ensured that the e-commerce sector remains small.
RPA Perspective Other factors which have limited the rise of online retail vary from strict regulations on the delivery of perishable goods which makes deliveries more expensive than textiles to the high per capita concentration of food stores in the country meaning you’re never more than a short walk, drive or cycle away from your local store, lessening the consumer demand for e-commerce. That AmazonFresh only offers its service in three German cities shows the difficulty it’s facing breaking into a very mature market.
The German food retail property market is a stable and predictable asset class, consistently accounting for 30% of the country’s total retail property transaction volume.
With a 6-7% increase in rents consecutively over the last two years, investors can look to German food based retail properties for attractive and solid income returns in one of the most stable retail sectors, in the world’s fourth largest economy.
