First Property Group buys up Lidl branches in Romania

Lidl operates in 28 countries in Europe, including Romania and the Netherlands (pictured) Photo: DennisM2

First Property Group has invested over €10 million in Romania’s commercial property market, acquiring a portfolio of Lidl supermarkets.

The deal, which totalled €10.5 million, was made in conjunction with a club of investors, acquiring nine regional branches from the company for the Group.

The net operating income being generated by the properties is currently €1.16 million per annum, equating to a yield on purchase costs of around 11 per cent per annum.

The investment was part funded by equity of approximately €4 million, of which the Group invested €1 million, pari passu with other investors. The remaining equity was invested by a family office and other third parties. The weighted average unexpired lease term of the portfolio of properties exceeds seven years.

The rest of the funds were provided by the Group as a bridging loan with a view to this being refinanced by a bank in the next few months.

“I am very pleased by the investment made by our clients and ourselves in this portfolio of Lidl supermarkets,” said Ben Habib, Group Chief Executive.

The figures arrive as Romania enjoys rising levels of interest and investment in its real estate.

“Romania is one of the CEE countries with the most notable growth rate in investment volumes and evidence of a shift in investor sentiment towards the country,” said Colliers in a report from last year.

Transactional activity saw a 4-fold increase in 2014, with investment volumes totalling €1.2 billion.

Knight Frank, meanwhile, entered the Romanian commercial property market in 2009, forming an association with The Advisers. Last year, the agency formally tied the knot with its Bucharest-based partners, who became a fully branded Knight Frank business.

At the time, its own report hailed 2014 as the most successful year for the Romanian commercial property market since the global crisis, with 2015 expected to follow suit.

Lidl is described by Habib as a “leading retailer in Romania with a stated intention to grow its business in the country”. Indeed, Lidl opened 15 new stores in 2014.

“These supermarkets are well located for their purpose,” he added.

The forecast annual pre-tax profit from the investment is circa €720,000 per annum, of which the Group’s share would be circa €180,000 per annum, equating to a pre-tax rate of return on equity of around 18 per cent per annum. The Group will, in addition, earn management fees of some €100,000 up-front and €125,000 per annum.