Russian giant launches real estate platform – exclusive

Russia’s largest publicly-traded holding company Sistema has established a direct real estate investment arm.

The Russian holding company chaired by Vladimir Evtushenkov has launched a pan-European direct real estate investment platform.

Sistema, which is the largest publicly traded diversified holding company in Russia with around $19 billion in assets under management, has established the Sistema Capital Partners (SCP) platform to invest Sistema's capital outside Russia and the CIS.

The platform has also been opened up to third-parties which can co-invest alongside Sistema, although Sistema will aim to retain a meaningful stake in the assets.

The co-investment structure will see SCP secure a pipeline of investments which are then introduced to the third-party co-investors after deal completion in a bid to cut down on the syndication tail of traditional club deals.

“Sistema Capital Partners has the ability to secure a pipeline of proprietary deals that it then opens up to other institutional and high net worth investors, which have a hands-on approach in keeping control of their investments,” said Marjorie Brabet-Friel, chief executive at SCP.

SCP will target private equity returns in the mid-teens for Sistema and its co-investors, according to Brabet-Friel, with a four-year hold period for the properties.

SCP plans on working with local operating partners to invest the capital, and has already secured its first deal, a €125 million German retail portfolio. For that deal, 40 percent of the acquisition price was paid in equity.

“The German acquisitions kick-start Sistema Capital Partners' investment program, which will target assets in the most liquid international real estate markets, beginning in Europe,” added Brabet-Friel.

The portfolio of 21 properties acquired comprises 606,000 square foot of space located on the principal shopping streets of the following mid-sized German cities: Bremen, Gotha, Cuxhaven, Flensburg, Celle, Schwerin, Merseburg, Flensburg, Mönchengladbach, Düren, Gelsenkirchen, Delmenhorst, Dinslaken, Minden, Oberhausen, Gießen, Essen, Gelsenkirchen, Gladbeck, Bad Homburg vor der Höhe and Hagen.

Tenants include retailers C&A, H&M, Peek & Cloppenburg, among others, while the average vacancy rate for the buildings is about 3 percent.

Sistema is a major shareholder of companies, mainly located in Russia and the CIS, in telecommunications, aerospace, banking, retail, media, tourism and healthcare services.