Wereldhave, the Dutch listed real estate investment company, has agreed to buy six prime French shopping centres for €850m from Unibail-Rodamco, financed by a €550m share sale and the drawdown of €150m of existing bank facilities.
This marks the entry into the French retail market for Wereldhave with the purchase – if approved by shareholders at an EGM in Amsterdam on 28 November – reflecting a 5.5% net initial yield and cementing France as Wereldhave’s fourth core retail market, after the Netherlands, Belgium and Finland.
Wereldhave said the size of the portfolio – which will be immediately earnings per share (EPS) accretive – offers the opportunity to immediately reach critical mass in the French retail market.
The scale of the €550m proposed rights issue has been sized to enable Wereldhave to keep within its stated group-wide 30% to 40% LTV.
The syndicate of lenders financing the six shopping centres – all located in major French cities – are to be from the group which participated in Wereldhave’s €300m revolving credit facility at the end of March.
The RCF consortium comprised: ABN Amro, Barclays Bank, BNP Paribas, ING Bank and the Royal Bank of Scotland, while the margin on the facility is below 120 basis points over Euribor.
All participating banks in the financing are also fully underwriting the proposed rights issue. Wereldhave has made a non-refundable deposit of €17m to be forfeited in case the rights issue is not approved.
The remaining €150m for the transaction, which is expected to close in December, will be drawn from available cash resources.
Dirk Anbeek, CEO of Wereldhave said in a statement: “Entering the French market with the acquisition of these mid-sized centres makes a lot of strategic sense for us, despite the well-known macro-economic situation in the country. At the end of the day, it is the quality of the portfolio in a micro-environment that is key to its long-term success.
“The centres we intend to acquire have proven to be resilient, even in the recent years of economic downturn. Our focus in the coming year will be on integrating this new French retail portfolio, while at the same time continuing to work on further strengthening our portfolio in our existing markets.”
In a presentation outlining the proposed portfolio acquisition, Wereldhave indicated that the decision reflected the net positive balancing of property fundamentals and macro considerations including concerns over future reforms, government debt, unemployment and labour market forecasts.
Ultimately, the attraction of an entry in Europe’s second largest economy, which has a growing population, high savings rate bodes well for investment in targeted retail property, the Wereldhave presentation implies.
The shopping centres have an average size of about 33,750 sq m, and an average footfall of 7m visitors per year, while the average occupancy rate is 91%. The net annual rental income was €46.4m, as at July.
They shopping centres comprise:
- Meriadeck in Bordeaux;
- Côté Seine in Greater Paris;
- Saint Sever in Rouen;
- Docks 76 in Rouen;
- Docks Vauban in Le Havre; and
- Rivétoile in Strasbourg.
The tenant base is well diversified with the 10 largest tenants – including H&M, E. Leclerc, Zara, Auchan, Mango and Sephora – reflecting 25%, or €12m, of the annual rent roll.
Almost half of all leases (48%), by annual income, expires in 2019 or beyond, with 17% of income in staggered expiries up until 2017.
Wereldhave’s business plan for the shopping centres includes maximizing occupancy, attracting new anchor tenants, improving footfall levels, extending the good hall as well as exploring the feasibility of mall extensions.
The ambition is to increase the NIY by 20 bps in 2016 and by a further 20 bps in 2017 as result of re-tenanting and re-programming.
Kempen & Co and J.P. Morgan are acting as financial advisors to Wereldhave on the acquisition.
J.P. Morgan Securities plc and Kempen & Co will act as joint global co-ordinators and joint bookrunners on the intended rights issue with ABN AMRO Bank N.V. and ING acting as joint bookrunners.
Cushman & Wakefield are acting as commercial advisors, Freshfields Bruckhaus Deringer and Baker McKenzie as legal advisors and Hill+Knowlton Strategies as communications advisors to Wereldhave on the acquisition.