Leaving the shop

The sale of the majority of German assets out of its European Property Investors fund comes as the firm warns real estate investment in Europe could be in for some tough times.

London-based Curzon Global Partners sold 51 German retail assets in prime city center and out-of-town locations to UK investor aAIM for more than €900 million ($1.2 billion)—giving the firm a 3x return for its largest fund, European Property Investors (EPI).

EPI bought the bulk of the German properties in two separate transactions in 2005 when it acquired 35 stores leased to home improvement chain Praktiker and 16 fashion stores leased to SinnLeffers.

In a statement, the firm said that the properties, called the Gemini Portfolio, totals 400,000 square meters of retail space and is 55 percent let to PraKtiker, 42 percent to SinLeffers with the remaining three percent let to Droguerie Muller.

EPI raised €769 million when it closed in 2004. Unlike many of the funds managed by Curzon and its affiliate AEW Europe, which tend to be core-plus, EPI is further up the risk spectrum with a target return of 16 percent, as opposed to less than 13 percent for its other funds. The vehicle's strategy has been to invest in value-added and opportunistic transactions in the retail, office and logistics sector in Europe.

“We've been heavily invested in Germany and we remain committed to investing in that country,” Ric Lewis, chief executive of Curzon, said in a statement announcing the sale. “The transaction was to return to market weighting for the EPI Fund and our European portfolio in general.”

In June, Lewis told PERE that Curzon was generally selling assets ahead of its business plan.

The sale comes at a time of flux as liquidity problems wreak havoc in the market. Two days after the firm released details of the German transaction, Lewis said in a second release that property investment in Europe is set for a “rougher ride.”

“Even with all the money around in the system, equity won't be able to replace debt in the market as it's just not as fast moving,” he said. “Our sense is that after a decade of strong absolute returns, property is in for a somewhat rougher ride that will need to be navigated very carefully.”

The firm said “shock waves” from the sub-prime mortgage crisis in the US could stifle investment activity in Europe for the remainder of the year and lead to casualties among the highly-leveraged players as banks tighten credit lines.

Curzon managing director and head of research and strategy, Simon Martin, said he thought the market could return to conditions in the late 1980s and early 1990s where “everybody is waiting for the end of year valuations to come in.” “Activity simply dries up in the final quarter,” he said.

Doughty makes Blythe purchase
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Aberdeen outbid in Norway hotel battle
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Quinlan sells Prague office for €90m
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Carlyle beat on London deal
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