30 Apr Investment opportunities for MEREP 3
Following the successful final closing of the MEREP 3 fund at €310 million last month, our managing partners Sylvie Geuten-Carpentier and Axel Despriet look ahead to the value-add investment and development opportunities for the fund…
How many investments have been made so far by MEREP 3?
Axel: To date, the fund has made eight investments totaling €107 million, which represents around a third of capital committed so far. Including debt financing, this gives the fund a total firepower of up to €1 billion to invest in convenience real estate projects across Europe, targeting grocery-anchored retail parks, multi-let light industrial, self storage and urban logistics opportunities.
Despite the current uncertain global economic outlook with regard to trade, the fundamentals of convenience real estate remain strong, supported by constrained supply and positive NOI growth, with proven performance across a range of different economic cycles.
We expect to see more distressed off-market assets become available as some owners come under pressure to sell, and this creates opportunities for value-add investors like Mitiska REIM. We remain highly selective in underwriting new investments and, by doing so, this will enable MEREP 3 to retain sufficient dry powder to seize potential distressed assets while ensuring a comfortable pace of equity deployment moving forward.
What type of value-add investment situations are you looking for?
Sylvie: We look for four key types of opportunities which our value-add investment approach can capitalize on. The first is dislocated opportunities in resilient retail – these are typically retail sites which are underperforming and where the owner does not have the capital to invest or the expertise to turn around these assets.
A good example of this is Europa Centralna retail center in Gliwice, Poland, which was acquired by the MEREP 3 fund in March 2023 in partnership with local partner, JB Development. This site comprises a retail park with a gross leasable area (GLA) of 39,700m2 and galleria of 27,300m2, making it the largest retail scheme in the area. Lacking a grocery anchor since Tesco ceased operations in Poland in 2019, we see this site as an opportunity through active management, optimizing the tenant mix and reformatting spaces, to create a modern, successful and sustainable retail center for the city and surrounding region.
The second investment situation we look for is repurposing and retrofitting older assets to reposition them to become go-to retail destinations. An example in the MEREP 3 fund is Trefbox Venlo retail center in Venlo, the Netherlands, which was acquired in November last year in partnership with Everglow Real Estate. The value-add program has already begun for this asset and is designed to realize the full potential of the site by renovating, repurposing and rebranding the center. Originally built in 1973, the center will be transformed into a state-of-the-art convenience retail hub for the city and wider cross-border catchment area.
Axel: The final two value-add investment situations are in the convenience real estate sectors of self storage and light industrial.
By feeding the growing need for self storage, we aim to capitalize on a sector of real estate which is expanding but underserved. We see a big opportunity by targeting assets which currently underperforming vacant or obsolete, by repurposing existing buildings such as retail showrooms, industrial buildings and offices. Our partnership in the MEREP 3 fund with STORO is targeting these sites and rolling out STORO’s innovative self storage concept across major Belgian cities.
For multi-let light industrial and urban logistics, we are looking to cater for a new generation of light industrial demand. This market is also underserved by modern and sustainable space, and the combination of high demand from businesses for Class A units and the current low vacancy rates in existing stock makes this sector a compelling investment case. An example of how we are seizing this opportunity with MEREP 3 is the joint venture partnership that Mitiska REIM has formed with Chancerygate in Portugal to acquire and develop multi-let projects in the Lisbon and Porto districts.
Across all these value-add investment situations, sustainability is a key element, with all sites targeting BREEAM certifications of “Very Good” or above as part of the renovation plans.
What about new development opportunities for retail parks?
Sylvie: In addition to value-add investments, MEREP 3 is also pursuing new retail park developments in both Western and Central Europe.
An interesting opportunity we‘ve identified in Central Europe is the expansion of leading supermarkets such as Lidl, Kaufland and Billa across this region, in addition to international retailers such as Kik, Tedi and Action. Mitiska REIM already has close relationships with these retailers and our partnerships to develop retail parks in Bulgaria with Park Lane Developments, and with OPC in Slovakia, are designed to capitalize on this trend by bringing new brands and modern retail infrastructure to locations across these markets.
How do you source opportunities?
Axel: We’re always on the lookout for new opportunities, either existing buildings suitable for renovation, expansion or redevelopment, or urban infill sites for new ground-up developments.
We work closely with an expanding network of operating partners across Europe – this partnership model gives us a local presence in each market for sourcing new investments and teams on the ground for asset management and development.
We continue to build a pipeline of potential opportunities and are always open to approaches from new partners or owners of land or existing assets across our European markets.
Past performance is no guarantee of future results. Investment in MEREP 3 is open to professional investors only. MEREP 3 is a private AIF under the Belgian 2014 AICB Law. Mitiska REIM is a licensed alternative investment fund manager under the Belgian 2014 AICB Law. Mitiska REIM acts in its capacity as fund manager (AIFM) of MEREP Light Industrial, MEREP 3 and FRP, and fund advisor of FRI and FRI 2.