Following the launch this week of its European Food Retail Fund, Savills Investment Management has announced the acquisition of 38 supermarkets in Denmark.
The Savills IM European Food Retail Fund received capital commitments of EUR109m from six German institutional investors at first closing and the fund is aiming for a final target size of at least EUR750m.
This first investment includes 38 supermarkets in urban centres with a total value of c. EUR140m. The assets are all currently occupied by food discounter REMA 1000 Denmark on a 15-year fixed-term.
The acquisition is a sale-and-lease-back deal based on a yield of 5%, which is in line with the core/core-plus fund’s target of generating a distribution yield of at least 5%.
Looking forward, while the main fund strategy is to acquire further supermarket portfolios, with lot sizes usually starting at c. EUR50m, the fund may also acquire neighbourhood centres, mixed-use urban properties, and specialist retail centres if they have a food retailer as an anchor tenant and at least 70% of the rental income comes from food/grocery and basic services tenants.
After this first transaction in Denmark, the geographical investment focus will be on Benelux and France. The fund will also look for assets in Southern Europe (Italy, Spain, Portugal), the UK and Ireland as well as Germany and Austria. The German allocation is set at a maximum of 15%, as the fund is primarily aimed at German institutional investors, who are looking for diversification into other European countries.
Food and discount retail have been two of the better performing retail segments through the pandemic. Savills IM’s own Outlook 2021 investor survey show that food retail is the only retail segment where investors want to increase rather than decrease their exposure. Supermarkets tend to have long-term and inflation-linked leases and by providing daily essentials they seem to show good resilience in recessions and have been less affected by the rise of e-commerce.
Ian Jones, Director of Investment at Savills Investment Management said, “This is the first transaction for our new flagship grocery fund, which will be investing in food retail across Europe. There is significant appetite for this sector among our investor base and we look forward to further significant transactions in 2021.”
Henrik Burkal, CEO REMA 1000 Denmark, “It has been an absolute pleasure to complete this transaction with the international investor Savills Investment Management and their advisor Capital Investment, which we see as a recognition of REMA 1000 and shows that food retail is a very solid and resilient investment object.”