Bayerische Versorgungskammer (BVK) has bet big on real estate in recent months. Germany's biggest public pension fund manager previously told PERE it is aiming to double its indirect real estate investments globally within four years.
It also has been bolstering direct real estate exposure too, most recently in Asia.
In October, Alpha Investment Partners, the real estate investment management business of Singapore property company Keppel Land, received €250 million in equity from BVK in a bid to address an underweight allocation to the Asia Pacific region. CBRE Global Investment Partners, the joint venture platform of Los Angeles-based CBRE Global Investors received €250 million, and Hong Kong-based Arch Capital received €200 million in equity for a range of Asian risk and return strategies as well.
BVK has now set its sights closer to home. The Bavarian institution and the European arm of Houston-based developer-cum-fund manager Hines has teamed up to launch a €1.3 billion separate account program to invest in European high street retail.
The strategy, which has seen BVK commit around €660 million in equity to Hines, will focus on acquiring and managing core-plus, value-add and development retail assets in prime locations on high streets in major markets across 20 countries in Europe.
“As a business we are committed to growing our exposure to the high street retail market. It is a sector which offers attractive fundamentals, and there are good opportunities to source value-add assets in strategic locations for long-term investing,” commented Norman Fackelmann, department head of real estate investment management at BVK.
Hines has already acquired the first asset for the separate account with the purchase of a building on Oslo's Karl Johans gate, the premier high street in Norway. The building has been secured as a sale and leaseback from Landkreditt Bank for €52 million.
The asset will be typical of the strategy, according to Lars Huber, co-chief executive and Peter Epping, managing director at Hines Europe.
“The sweet spot is for the single block that has retail on a few floors and other uses on top,” Huber told PERE . “The classic case is buy a building with five or six stories and retail is only on the bottom. You then push retail where there was previously office and the ground floor where it was previously storage.”
Coincidently, a strong appetite for high street retail was reflected at a seminar in January held in London by professional services firm PWC and property association Urban Land Institute. Among the 550 sector professionals polled for the groups' annual Emerging Trends in Real Estate report, 72 percent picked high street retail as the sector of choice.
“High street retail is going through a structural shift, there seems to be a lot of potential for rental growth and therefore overall investment returns,” said Epping.
And while the pair said that in many cities the secondary streets are often suffering, they countered that in central locations demand for prime retail is growing very strongly.
Part of Hines' investment thesis is to focus on attracting the biggest retail brands. They said the threat of e-commerce is actually a boon for certain high streets.
The rationale was that big brands want to be present in the best high streets and they want bigger space to display all their products so the customer can feel the product line – even if the final purchase is online. Subsequently, there is increasing competition between the major retailers for the best space on the high street, and as such, value on the high streets is growing.