Macquarie Global Property Advisors' latest fund has completed its first transaction in Europe, but it is not the opportunistic ground-up development or high-stakes property repositioning one might assume. The global property fund acquired a European office portfolio, with the intention of leasing a majority of the space back to its original owner, Sony Europe.
The deal involved the Australian banking giant scooping up eight office and warehouse properties in the UK, Italy, the Netherlands, Belgium, Switzerland and Germany for €121.1 million ($148.2 million). Sony will lease back around 65 percent of the properties.
“It's more of a private equity transaction because there is quite a bit of upside,” said Alex Jeffrey, a managing director with Macquarie in London. “It has the potential to deliver opportunity-style returns.”
While sale and leaseback deals have usually been viewed as more of a core or core-plus strategy, Jeffrey points to two factors that will help juice returns: the fact that 35 percent of the portfolio will be available for re-lease and the opportunity to reposition certain assets in the portfolio.
It is Macquarie's first sale and leaseback deal in Europe and the first transaction out of the firm's second European vehicle, MGP Europe Fund II, which closed last year.
Jeffrey notes that a number of the properties are in markets that have suffered in recent years but where Macquarie sees the chance for improvement. The group will look at where the buildings can be refurbished or re-branded as multi-tenant properties. “Each [property] is known as the Sony building in its market,” he says.
There are also opportunities for repositioning, Jeffrey says. One property in Cologne, Germany, for instance, has been leased by Sony to a third-party distributor. Jeffrey says that only around 25 percent of the property is being utilized, a figure that could be increased up to 45 percent. When the lease comes up for renewal, Macquarie could possibly convert the property into a larger logistics facility or a retail center.
Jeffrey notes that there are a number of additional deals that the firm is currently evaluating as part of its second fund, which closed last year on $1.3 billion. The firm is looking at single-asset transactions, repositioning, upside through leasing, portfolio deals, ground-up development and traditional private equity deals involving property companies.