Greenman prepares to enter French food retail space with initial €100m commitment

Greenman prepares to enter French
food retail space with initial €100m
commitment
18 Feb 2021 | by Julie Cruz

The Irish firm is in the process of obtaining regulatory approval

   •   What Greenman is looking to commit €100m of capital on behalf of its
       new French food retail real estate fund this year
   •   Why The Irish firm expects significant growth in the market, with a
       number of SLB agreements
   •  What next Greenman is in the process of obtaining regulatory
      approval
Greenman, the owner of Germany’s largest property investment fund
focused on food retail, is now looking to replicate its success, with the
launch of a similar fund in France and an initial €100m of equity to allocate
to the new market this year, React News can reveal.

The Dublin-headquartered retail specialist has formed a French asset
management unit, Greenman Arth, with the intention of becoming France’s
leading grocery real estate investment fund manager. It is currently in the

process of obtaining approval from French financial regulator AMF to set up
a so-called SCPI vehicle, CEO Johnnie Wilkinson told React News in an
exclusive interview. The French asset manager is run by Abhishek Jha,
former deputy CIO of Klepierre.

“The total transaction volume for food retail property was about €4bn in
Germany last year and only around €700m in France,” Wilkinson explained.
“The reason why we are not seeing €3bn of deals is because many of the
French retailers own their real estate. But as they are currently facing some
difficulties, they will want to de-leverage their balance sheets by entering
sale-and-leaseback agreements. We believe that this is going to have a big
impact on the market.”

Greenman is planning to announce the first acquisitions on behalf of its
debut French fund in the next few months.

Ambitious expansion plans

The Irish company, which was founded by Wilkinson in 2005, is not
planning to stop at France. It is also hoping to crack the Polish market as it
offers similarities to Germany, making it easier to implement a comparable
model, according to Wilkinson.

“They are paying their rent in euros so we don’t have a currency risk and the
yield is higher. Poland is going to be a very significant player in Europe in the
long term,” noted the CEO. “A lot of the grocery retail in Poland has been
taken up by French retailers, especially Carrefour and Auchan, so a larger
part of our growth is likely to be delivered through sale-and-leaseback deals
with hypermarkets as these retailers try to reduce the size of their
portfolios.”

Greenman will start with a smaller initial portfolio of about €20m in Poland.

Johnnie Wilkinson founded Greenman in 2005

Greenman OPEN: the flagship fund

When Wilkinson formed the company more than 15 years ago, the idea was
to own and manage German income-producing real estate. In 2008,
Greenman launched its first Luxembourg-domiciled, Germany-focused real
estate fund.

Greenman’s open-ended OPEN fund has proven very resilient during the
pandemic, collecting about 92% of rent on average and raising an additional
€115m of equity from new investors last year. The investment vehicle
currently has almost €900m in AuM and is set to reach almost €1.2bn by the
end of the year, according to its CEO. This year, Wilkinson expects 50% of
acquisitions to come from framework agreements and the other 50% from
relationship with existing project developers.

Last month, the company entered into a €46m agreement with German
developer Schroder Holding to buy seven new standalone EDEKA
supermarkets. This was the second developer framework deal signed by the
fund in the past year. Located in East Germany, the properties are pre-let to
supermarket chain EDEKA on 15-year leases and are set to be delivered

between 2021 and 2023.

“In Germany, everybody goes to the likes of Lidl, Aldi, Edeka and Rewe to
pick up their food. The transaction volume of online retail is very low and
will remain very low,” Wilkinson said.

The CEO noted that competition for food retail assets has intensified in
Europe’s biggest economy, with a number of new entrants, but he added
that large portfolios have not yet come to the market. Wilkinson does not
foresee larger transaction volumes until at least the third quarter of 2021.

“In terms of pricing, we are not seeing any discounts in Germany. Whatever
is sold is being sold for slightly higher prices and slightly lower yields than
this time last year,” Wilkinson told React News.

Last month, Greenman agreed to buy seven new standalone EDEKA supermarkets for €46m

Focus on technology

Even though food retail has remain resilient, the way we shop is evolving
and Greenman is determined to adapt its stores to changing consumer

habits.

In October 2020, the retail specialist made its first investment in a
technology business, participating in the latest fundraising round for Irish
drone delivery business Manna. Greenman has set up subsidiary Greenman
Partners to invest in technology businesses which are relevant to the
grocery and real estate sector.

“We’ll definitely be buying our food in a different way in 2030, so we want
to make sure that our properties remain relevant throughout our 10-15 year
lease contracts. We don’t want our tenants to say at the end of the
contract: ‘It is an old building that doesn’t suit me anymore as my model has
changed. So I’m gone.’ We want to be part of the conversation as to how
the distribution of food changes.”

One of the big areas that Greenman is focusing on is artificial intelligence,
which will help predict people’s movements in store or determine which
customers are returning to a specific store, Wilkinson believes. The
company will lead some research with an Irish university this year to
determine how to use artificial intelligence data. It has also set itself some
targets.

By 2025, Greenman plans to generate 5% of income from the provision of
services – compared to 100% of income being currently delivered through
rents.

“That 5% can be the use of the data, whether that’s selling it to the retailer,
whether that’s using it to support the growth, the consumer, or whether it’s
reducing input costs for us in the building,” said Wilkinson.

Additionally, Greenman is considering a range of ESG initiatives, such as
installing solar panels and selling electricity to tenants or implementing
vertical farming technology to produce fresh fruit and vegetables on site
and therefore reduce the carbon footprint.

“We’re talking about a properly large-scale production of vegetables, salad

crops, basil etc,” Wilkinson told React News. “We are hoping to introduce a
vertical farm into one of our German stores as a trial this year.”