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Nuts and bolts of EUR 1 bln deal

Eurobuild CEE 05 December 2017
Nuts and bolts of EUR 1 bln deal
M1 in Marki near Warsaw

POLAND Chariot Top Group (Chariot) is buying a retail portfolio from Ares, AXA and Apollo Rida for app. EUR 1 bln. Some of these properties will then be transferred to EPP for EUR 692 mln.

The parties to the agreement have now revealed more details of the transaction ‘Eurobuild CEE’ reported in November. Chariot, acting through its subsidiaries, has signed a preliminary agreement to acquire the EUR 1 bln portfolio including 28 retail properties from investment funds managed by Ares Management, Axa Investment Managers – Real Assets and Apollo-Rida. The portfolio consists of nine M1 shopping centers, twelve hypermarkets, four Power parks and three stand-alone DIY stores. The properties have 704,000 sqm of gla. The acquisition is to be partially financed through a EUR 635 mln bank loan. The portfolio can be extended by around 56,000 sqm due to app. 285 ha of land.

When the deal is closed, Chariot is to sell twelve properties with a combined 446,500 sqm to Echo Polska Properties (EPP) for EUR 692 mln. The properties are to be sold to EPP in three stages with four M1 centres in Czeladź (52,800 sqm gla), Kraków (49,600 sqm), Zabrze (52,800 sqm) and in Łódź (38,400 sqm) to be handed over on the acquisition of the portfolio by the consortium.

The second sale, which shall be completed in 1.5 years, will cover three more M1 centres: in Radom (37,000 sqm), Częstochowa (29,900 sqm), and Bytom (28,200 sqm) as well as three power parks: in Kielce (35,700 sqm), Olsztyn (32,500 sqm) and in Opole (20,700 sqm).

Two additional assets, including an M1 centre in Poznań (45,400 sqm) and a power park in Tychy (22,700 sqm), are to change hands by the middle of 2020.

EPP is to finance the first stage of the deal with 62 pct bank debt and the redeployment of capital from the completion of previously announced office sales as well as a share placement made to funds managed by Oaktree and LVS II Luxembourg II for EUR 112.5 million of EPP shares.

Redefine’s stake in EPP will be diluted to around 35 pct the company has undertaken to invest a further EUR 40 mln to restore their holding to circa 40 pct. In the short term the acquisition results in a small increase in EPP’s LTV from 51 pct to 54 pct but the company remains committed in the medium term to reducing its LTV to below 50 pct.

All the properties which are to be bought by EPP are single level, fully leased, and grocery anchored and are situated next to motorways with sites that total over 195 ha. All of the centres are anchored by Auchan hypermarkets as well as a variety of international and domestic brands such as MediaMarkt and fashion retailers, TK Maxx, H&M and C&A. The average rental rate across the portfolio is a low EUR 9.10 per sqm per month and the average rent to sales ratio is below 9 pct. The entire portfolio is subject to a master lease from Metro AG which expires in April 2024. The transaction will boost EPP’s annual portfolio footfall 61pct from 76 million to 122 million.

“We had a unique opportunity to acquire a highly diversified and attractive portfolio of assets,” said Maciej Dyjas, the managing partner at Griffin Real Estate. “The transaction was however structured in such a way, that we had no choice but to acquire the entire package.”

Auchan acquired from Metro the ‘Real’ supermarket business in Poland in 2014 and the 28 properties that will now be owned by the consortium and EPP represent approximately 35 pct of the number of stores that Auchan has in Poland. “The acquisition perfectly fits our long-term strategy to build a national retail champion,” says Hadley Dean, CEO of EPP, commenting on the deal. As a result of the completion of the deal, in mid 2020 EPP’s property portfolio is to include 27 retail properties with almost 1 mln sqm of retail space in total with a value of app. EUR 2.4 bln.

Chariot Top Group is an SPV created and co-managed by Griffin Real Estate and is 37.5 pct held by PIMCO, 37.5 pct held by funds managed by Oaktree Capital Management and in 25 pct owned by Redefine Properties.

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