MGPA plugs into fresh capital source via REIT sub-advisory role

The mandate, which entails providing due diligence, acquisition, and brokerage services mainly on Asian and European properties for the newly restructured Global Growth Trust and Global Income Trust, gives the private equity real estate firm a fresh capital source to execute deals.

Private equity real estate firm MGPA has struck an agreement with US firm CNL Financial Group to provide investment advisory services to two global property REITs.

MGPA, which has $10 billion of assets under management in Europe and Asia, will provide due diligence, acquisition, and brokerage services mainly on European and Asian properties for Global Growth Trust Inc and Global Income Trust Inc, both of which were created in the last two years to buy property in the US and internationally.

The deal sees MGPA become sub advisor to the two non-traded REITs in return for fees, while the main sponsor remains Orlando, Florida-based CNL – one of the largest privately owned real estate investment and alternatives firms in the US.

Though investors – or more accurately shareholders – in the two REITs are US retail investors that CNL has brought in via its extensive US network of broker-dealers, the new arrangement nevertheless gives MGPA a new capital source to buy assets in its two investment regions.

The firm informed existing investors in its Europe and Asia opportunity funds on Friday, the same day as CNL notified the US Securities and Exchange Commission of changes to the structure of the two REITs.

MGPA told investors and staff: “This will enhance the growth of MGPA’s platform and assist in increasing the pipeline of opportunities for all MGPA’s funds and other mandates.”

Bringing in MGPA as sub advisor is not the only change that has been made to the two global REITs.

Originally, CNL established them with Macquarie Infrastructure and Real Assets Inc (MIRA), a subsidiary of Australia’s Macquarie Group which owns a stake in MGPA. However, the Macquarie and CNL name has now been dropped after the Australian group sold its interest to CNL in the last few days, and the REITs have been renamed Global Growth Trust and Global Income Trust accordingly.

In an SEC filing on Friday, CNL said the decision to buy MIRA’s stake was made to improve efficiency.  “Given the operational efficiencies that are produced with only one sponsor, CNL and MIRA have determined that it is in the best interest of our company and our stockholders that management, administrative and investment responsibilities be functionally realigned while maintaining our investment objectives and policies.”

MIRA continues to have a role, though. Under the new arrangement, CNL would continue to buy assets in the US and Canada as the single sponsor, while MIRA becomes a sub-advisor scouting property in Australia. New partner MGPA becomes a sub-advisor to buy property in Europe and Asia.

The two REITs differ in that Global Income Trust aims to provide shareholders with income, with up to 60 percent of assets outside the US, and it only made it first investment a few weeks ago with the acquisition of a distribution centre in Texas.

In contrast, Global Growth Trust is aiming to provide capital appreciation for shareholders by building up a global portfolio, up to 30 percent of which could be outside the US, and it has been buying assets for longer. Its most recent deal was announced on 23 May when it entered into a joint venture to build a multifamily residential development in South Carolina.

Though it is unclear how large the two REITs could become, an offering brochure suggests the maximum capital raised from investors would be $1.5 billion with a minimum investment by a single retail investor being $5,000 for individuals or $4,000 for qualified plans.

MGPA’s new role has emerged in the same week it announced a deal in Europe to buy a portfolio of 26 retail properties from Develica Deutschland Limited in Germany on behalf of MGPA Europe Fund III.

The properties, mainly located in western Germany, concentrated in the Hesse, Baden-Wuertemberg and Bavaria districts provide a combined total net lettable area of 41,200 square metres, with 21 food retail properties, of which 11 are supermarkets including the leading German retailers Edeka and Rewe and 10 are discounter units. The remaining 5 units are occupied by a DIY retailer, automotive retailer and textiles retailers. The assets will add further to MGPA’s existing German retail portfolio comprising 135 Aldi stores.