MGPA has led its first overseas investment following a sub-advisory agreement with Orlando-based investment manager CNL Financial Group to source deals in Europe and Asia for its retail investors.
The Europe and Asia-focused firm advised CNL in its agreed $5.2 million acquisition of the Giessen Retail Center, a retail property in Giessen, central Germany, on behalf of its Global Income Trust, one of two non-traded real estate investment trusts they advise which can make investment outside of the US.
The purchase of the 34,000 square foot property, let to six national and multi-national tenants, was a small transaction. However, MGPA’s chief executive officer Simon Treacy described the deal as the start of a “snowball” that should precipitate an increasing number of similar transactions for the income-producing assets REIT and the other REIT benefiting from the sub-advisory agreement, the Global Growth Trust, which is expected to provide investors with capital growth.
He told PERE: “Hopefully what we’ve seen with this transaction is a snowball being pushed down the mountain. Given an increasing capital raising in America in the REITs market we predict these REITs could eventually grow in size, considering part REITs sponsored by CNL which has assets worth billions of dollars.”
In 2011, MGPA diversified its product offering from its primary focus on traditional private equity real estate, blind-pooled, commingled funds. The tie-up with CNL last July was followed by its first separate account, a $250 million mandate from a Canadian investor in Europe, and the launch of a fund aiming to coral up to €500 million solely from German institutions for investments in Asia.
Despite the enlarged repertoire, Treacy insisted the deals sourced by MGPA for the two CNL REITs would not result in any overlap in strategy with the firm’s flagship opportunity fund series which remain its priority. Typical future deals are expected not to be much larger than €20 million in value, while the transactions of MGPA’s opportunity funds are often of a much larger scale, sometimes reaching hundreds of millions of dollars in value.
He said: “These won’t be deals anywhere near the size of our Europe funds. They’ll generally be smaller.” Moreover, MGPA expects to source large numbers of transactions rather than large transactions. Treacy said: “It would be very rare there would be a conflicted where we’d have to consider the allocation of the deal.” The firm will not be co-investing in the assets either, he said.
“The CNL initiative is important to leverage the extensive platforms we have in Europe and Asia. This deal should show people in Germany that buy these types of properties,” he added.
For its part, CNL praised the transaction for offering its investors with their first access to Germany’s resilient property market, particularly its retail sector. Describing the debut deal as a “bite sized chunk that fits” with the investment strategy of its income-focused REIT, chief financial officer Steve Shackelford, said: “It always takes a little time to happen but I think we’ll now see more deals coming out of Europe and Asia for both of these REITs.” He added: “We particularly like Germany, the region where this property resides and the value retail segment and MGPA has a lot of experience in that space.
While CNL’s other REIT, Global Growth Trust, has a smaller possible allocation to investments made outside of the US, Shackelford said a debut international investment originated via the sub-advisory arrangement with MGPA could happen during the first half of the year.