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Sistema, Corestate JV buys German retail assets for €105m

The overseas investment arm of Russian conglomerate Sistema has continued its assault on German high-street assets, this time teaming up with Zug, Switzerland-based private equity real estate firm Corestate Capital.

13 December 2016

A joint venture between Sistema Capital Partners (SCP), the Luxembourg-based overseas real estate investment arm of Sistema, Russia’s largest publicly traded diversified holding company, and Corestate Capital, the Switzerland-based private equity real estate firm, has acquired two German high-street assets for a total of €105 million.

The properties are located in Flensburg and Lübeck, two affluent mid-sized cities on Germany’s Baltic coast, and were acquired from two separate but undisclosed vendors.

The property in Lübeck is located in the city center and is close to the main train station, while the property in Flensburg is based in the pedestrianized zone of the city. The two assets, according to SCP, have a combined lettable area of 368,000 square feet and are home to tenants such as Saturn, TK Maxx, McFit and Holmes Place.

The double purchase takes SCP’s German high-street acquisitions beyond €350 million since its formation in 2015. In December last year, SCP also acquired a 21-strong portfolio of German high-street assets, comprising 606,000 square feet, across a host of mid-sized cities including Bremen, Essen and Gelsenkirchen for €125 million.

“SCP and Corestate were early to spot the opportunities in high-street retail in mid-sized German cities and the latest investments are larger and more prime in character than those previously transacted by our joint venture,” said Marjorie Brabet-Friel, SCP’s chief executive. “These properties are located in the dominant retail destinations of their local markets and offer scope for active asset management, fitting squarely with our value-add strategy of targeting highly liquid assets in economically strong locations.”

According to a spokesman, Corestate will co-invest in the purchases as well as co-manage the German assets acquired by the JV.

“Retail in mid-sized German cities often serves a large catchment area as a magnet for an entire region and properties in pedestrian zones in these centers are particularly attractive investments,” said Sascha Wilhelm, CEO of Corestate. “Our in-depth local knowledge of the German market, combined with Sistema’s expertise, have proved to be a successful combination in identifying and securing these type of investment opportunities,” he added.

Sistema, which has around $19 billion of assets under management, established SCP in 2015 to invest its capital outside Russia and the Commonwealth of Independent States (CIS) alongside capital from global institutional and high net-worth investors. The platform was also opened up to third parties such as Corestate, which could co-invest alongside Sistema.

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