EXPO REAL: Hermes is launching a €250m (£184m) retail joint venture with Redevco as it seeks to reduce its exposure to UK real estate.
The 50:50 jv will target shopping centres, retail parks and high street properties in France, Germany, the Benelux countries and the Nordics. It will focus on core-plus and value-add opportunities and lot sizes of €10m-€60m.
Hermes has £7bn invested in real estate, 85% of which is in the UK. Chris Taylor, Hermes’ head of private markets, said the Redevco deal would help deliver on a strategy to reduce that to 70%.
The jv will focus on delivering rental returns and not short-term capital growth. “Long-term, we would expect income to generate 70% of the returns and be a key driver,” said Taylor. “We’d expect the long-run IRR to be 7%-8%. I’m convinced the opportunity is vast.”
Redevco will manage the assets. Redevco chief executive Andrew Vaughan said the jv was hoping to deploy the funds within 12-24 months, with a first deal before the end of the year.
“It’s not a seeded portfolio, we’re starting from scratch,” he said. “But we think we can find opportunities. There are big structural changes in retail coming over the next five years.”
The jv will also take on “conservative leverage” to increase its firepower. And Taylor said the partnership could end up investing more than the initial €250m. “I see no reason why not if it’s going well,” he said.
