Cordea Savills has reached a first close of €70m (£55.3m) for its European Retail Fund after attracting investments from four German institutional investors.
The fund has a target size of €500m, and will initially focus on Germany, the UK and the Nordics.
With gearing of 50%, the fund how has €140m to spend on assets. The fund is aiming for a 7% internal rate of return and a 5% annual distribution, and will focus on shopping centres, retail parks and high street retail property.
Thomas Guetle, the fund’s director, said: “The retail sector has outperformed offices in each of the target markets over the past 10 years to the end of 2011. We anticipate retail will outperform as a sector over the next five years in the majority of western European economies. German investors, especially, are traditionally underweight in retail property but surveys indicate their allocations are rising, so this fund will meet their appetite for this sector.”
Ian Jones, Cordea Savills’ portfolio manager, said: “Income is a major driver of returns in the current environment and the level of income is higher in retail than the office sector measured on a pan-European basis.
“We also see the advantage of investing across the retail spectrum. In this way, we can achieve more attractive risk-adjusted returns by combining higher-yielding segments, such as Swedish retail warehousing, with traditional high street retail, for example in major German cities.
“An additional benefit is the ability to access a greater range of investment opportunities, leading to the potential to achieve higher returns.”
sophia.furber@estatesgazette.com
