Hermes is launching a €250m (£184m) retail joint venture with Redevco as it seeks to reduce its exposure to UK real estate.
The 50:50 jv will target shopping centres, retail parks and high street properties in France, Germany, the Benelux countries and the Nordics. It will focus on core-plus and value-add opportunities and lot sizes of €10m-€60m.
Chris Taylor, Hermes’ head of private markets, said his firm had picked Redevco because “it’s all about aligning ourselves with the best-in-class local manager, one that can offer unique insight into the retail sector in order to help us on the ground.”
Hermes has £7bn invested in real estate, 85% of which is in the UK. Taylor said the Redevco deal would help to deliver on a strategy to reduce that to 70%.
The jv will focus on delivering rental returns instead of short-term capital growth. “Long-term, we would expect income to generate 70% of the returns and be a key driver,” said Taylor. “We’d expect the long-run IRR to be 7%-8%. I’m convinced the opportunity is vast.”
Redevco will manage the assets. Its chief executive, Andrew Vaughan, said the jv was hoping to deploy the funds within 12-24 months, and agree a first deal before the end of the year.
“It’s not a seeded portfolio. We’re starting from scratch,” he said. “But we think we can find opportunities. There are big structural changes in retail coming over the next five years.”
The jv will also take on “conservative leverage” to increase its firepower.
Taylor said the jv could end up investing more than the initial €250m. “I see no reason why not if it’s going well,” he said.
Click here to listen to an interview with the new jv
