MSREI makes ‘big box’ investment in Germany

The real estate investment management arm of Morgan Stanley has added to its investments made in partnership with Hamburg-based retail property developer and investor Redos Real Estate with the acquisition of 11 home improvement stores let to retailer ‘toom’.

Morgan Stanley Real Estate Investing (MSREI) has increased its exposure to Germany’s retail real estate market with the joint acquisition of 11 ‘Do it yourself’ stores in Germany alongside Hamburg-based retail property developer and investor Redos Real Estate.

The partners announced they had acquired the stores, comprising 1.4 million square feet of lettable space, from Martkauf Group, a subsidiary of Germany’s largest supermarket retailer EDEKA. No purchase price was disclosed although PERE understands that the partners bought the portfolio for about €100 million.

Located in Western Germany, the stores are let on long leases to the toom DIY chain. According to the partners, their tenant has consistently reported solid growth in sales over the past years after upgrading the stores and introducing measures including late opening hours.

The acquisition is the third ‘big box’ retail investment by MSREI in Germany in the last two years and the third between the platform and Redos bringing the total invested by the partners in the country to approximately €500 million.

Head of Germany Thomas Hartl described the segment of the country’s retail market as attractive for producing decent yields while offering also a decent hedge against inflation “which is particularly valuable in the current environment,” he said.

The acquisition comes two years after MSREI and Redos announced they had formed their partnership with the debut investment of 23 retail properties, mostly in Bavaria, from a group of private investors in a deal believed to be worth approximately €150 million.

MSREI's investments via the JV with Redos have been made on behalf of its Morgan Stanley Real Estate Fund VII Global fund, its latest global opportunity fund which originally attracted $4.7 billion but was reduced in size to $4 billion at the turn of this year as part of an agreement with its investors to extend its investment period.

Law firm Latham & Watkins advised MSREI and Redos while the deal was brokered by Jones Lang LaSalle.