Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/122387
changing slightly, because there is such a limited supply of primary properties, so the market is shifting to primary, secondary and tertiary — or as O'Donnell puts it: "Secondary definition has become wider, because primary definition has become narrower." In simple terms, there is a good end of secondary, a middle, and a poorer end, O'Donnell says. "With prime yielding 5 percent, there is an argument that says to buy secondary at 8 percent," he said. "Even if secondary drifts to 7 percent, that's more compelling than expecting 5 percent to become 6 percent. A number of institutions are targeting the better end of secondary." Redefine also has significant retail exposure in Germany and Switzerland. "We are not currently looking to expand in Switzerland, because it has become too expensive," said Peter Katz, Redefine's executive director for Europe. "Instead, we may sell and lock in some very nice gains. Yields on prime property in Switzerland run 2.5 percent to 3 percent, while secondary locations are about 5.5 percent." If London defines the primary market in the U.K., just a handful of cities do so in Germany —Berlin, Frankfurt, Hamburg and Munich among them. "Going forward, we are positioning ourselves on more trophy buildings, on High Streets and crown At the moment there are enough distressed assets through sellers not being able to refinance old loans, which are presenting good opportunities. shopping centers," said Katz. "At the moment there are enough distressed assets through circumstances involving sellers not being able to refinance old loans, which are presenting good opportunities." These prime properties are not physically distressed, just financially distressed, Katz points out, and yields are in the 5.5 percent to 6 percent range. As Jones Lang LaSalle notes, there has been a lot of interest in Poland, one of the stronger European economies over the past half decade. Shopping center transactions in Poland increased by 30 percent last year from the year before, says Goodings. "Most of the investors have been cross-border, institutional. Yields have edged downward over the past year and are now around 6 percent, the keenest they have been in some time," she said. The largest single shopping center transaction in Poland last year was a Lodz shopping plaza called Manufaktura that sold for €390 million, according to Jones Lang LaSalle. A shopping center called Renoma, in Wroclaw, sold for €188 million. Some investors have turned away from Poland as prices have climbed. And what of Southern Europe and its sun-drenched countries that are among the most economically busted on the Continent? "Spain has become a hot topic," said Goodings, though she adds that there have not been many transactions. There are buyers emerging for Spain and elsewhere, O'Donnell says. "You just have to manage expectations, because of the economic risk and wide range of views between fair value and quoting." One company that did pull the trigger in Spain was Rockspring Property Investment Managers, of London. "We bought the most dominant retail park in Spain," boasted Jo De Clercq, a Rockspring partner, though without specifying. That power center is located some 60 kilometers (about 40 miles) south of Madrid. "The center we bought was recently built and leased," De Clercq said. "Therefore the rents were very low by current and historic terms. On top of that, the yield was discounted, so we are getting a good product at low capital value. Things have to go really wrong for us to lose money." SCT A fund mAnAged by morgAn StAnley Acquired moScow'S metropoliS mAll from cApitAl pArtnerS, the KAzAKh developer thAt opened the property in 2009, for €943 million ($1.2 billion). 208 SC T / m a y 2 0 1 3