When US property giant Security Capital Group began scouring Europe for investment opportunities it found an obvious target in quoted Belgian company Bernheim-Comofi
It is in many ways the perfect match. The diverse range of property businesses run within the Belgian company are precisely the areas of the industry in which US group Security Capital has rapidly built up expertise and critical mass in its home market: office development, self storage, parking, securitisation and asset management.
And the negotiations to acquire control of the company were aided by the fact that 80% of the shares were owned by three Belgian institutions: Groupe Bruxelles Lambert, Royale Belge 1994 and Compagnie Nationale à Portefeuille. Talks started in November last year, and by June, the deal was done.
Security Capital’s international vehicle SC Global Realty bought the shares for an undisclosed amount, and launched a public offer for the remaining equity. With all but a tiny minority capitulating to the BFr 3100 offer, a compulsory purchase followed to give SC Global Realty 100% control of the company.
Bernheim-Comofi is to be delisted from the Belgian stock exchange and pumped full of US-backed capital in order to grow from its current combined equity and debt of around $480m.
Todd Mansfield, managing director of SC Global Realty, says the objective is to build Bernheim-Comofi into at least a $1.6bn operation before possibly seeking to float it again.
“We see this company as a platform for long-term growth,” he says. If the share tender had not been successful, SC Global Realty would have continued to run the company as a publicly-listed entity, but taking it private gives the new owner more flexibility, less paper work and less expense.
“We just find as a general statement that in the early growth phase it’s a lot easier to do things as a private company,” says Mansfield. The existing management, led by managing director Jean-Francois van Hecke, will remain in place, with several Security Capital directors joining the board as non-executive directors.
The aim is to build up the businesses that Bernheim-Comofi has established, and to extend the pan-European reach of the company.
Bernheim-Comofi had already modelled itself as a European rather than Belgian property company, focusing on niche markets, says van Hecke.
The backing of Security Capital will enable it to build its presence in those markets more rapidly. “I think they will be a strong support to our strategy,” he says.
The development subsidiary Immobilière Bernheim Outremer is described by the company as “the cornerstone” of Bernheim-Comofi, and is active in four countries: Belgium, Germany, the Czech Republic and Hungary.
Its annual development programme is around 50,000 m2, according to van Hecke. In Budapest, it is building a 13,000 m2 office scheme, while on the outskirts of Brussels, it has recently sold a 46,000 m2 business park to UK fund Standard Life, which it is developing as part of six-strong consortium over the next three years.
Bernheim Asset Management, the securitisation part of the business, has some BFr 28bn of indirect real estate assets under management, through real estate certificates and the Sicafi closed-end investment fund Befimmo. Last year these assets generated a rental income of around BFr 2.3bn.
Bernheim-Comofi achieved something of a landmark when it spun off the core of its commercial investment portfolio into the BFr 5.5bn Befimmo at the end of 1995, creating the first commercial property Sicafi.
Bernheim-Comofi’s stake in Befimmo has decreased from 33% to 13% as further share issues have taken place; at the end of March, the value of the Befimmo portfolio had increased to BFr 10.8bn.
The growth was aided last year by the acquisition of five companies from the Swedish Prifast group, valued at BFr 3.3bn.
The holding in Befimmo will continue to be strategic to Bernheim, says van Hecke. From the time of its launch, until March 31 this year, Befimmo had produced a total return of 41%, equivalent to an annual average of 16.5% net.
The car parking business, Interparking is one of the largest in Europe, with around 102,500 spaces.
It operates in Belgium, France, Germany, Austria, Spain and Switzerland. After tax, it generated a cash-flow of some BFr 800m last year.
Less profitable in the immediate term is the self storage business, started in 1996 and which trades in Europe as Access Self Storage. Last year, the storage activity ran up start-up losses of BFr 63m. By the end of last year, Access had some 26,000 m2 of space; by the end of this year, an additional 46,500 m2 will have been added, with the development of further sites in France and Germany.
In France, it is establishing sites in Paris, Lyon, Bordeaux, Montreuil and Courbevoie, while in Germany, it has developments in Düsseldorf, Frankfurt and Berlin. “This is a business that we find very attractive,” comments Mansfield. In the US, Security Capital is a principal shareholder in the self storage Real estate investment trust, Storage USA.
The final strand of the Bernheim-Comofi business is site assembly. In 1997, 56 sites were sold for a total of BFr 77m, while a further 120-odd sites were in the pipeline, being prepared for the market.
Security Capital was not only aided in its negotiations by the structure of the shareholding, however. As van Hecke expresses it, discussions were “simplified by the fact that we have got our act together in the last two or three years”.
Strategically this has meant identifying and focusing on its core businesses. Operationally, it has meant streamlining the structure of the company. And in accounting terms it has meant consolidating nearly 100 disparate subsidiaries.
“We are convinced that our value lies more in our capacity to generate, distribute and apply our know-how in a strategic and operational manner, rather than in the accumulation of real estate assets; that the ultimate goal is long-term success through growth in added value rather than through a turnover that can at times be ephemeral, or through short-lived business opportunities,” said van Hecke and company president Thierry de Rudder in their 1997 report to shareholders.
Spoken like true Americans.
Financial Highlights
|
(BFr m) |
1993 |
1994 |
1995 |
1996 |
1997 |
|
Consolidated cash flow |
429 |
422 |
496 |
251 |
773 |
|
Consolidated net profit |
443 |
400 |
426 |
-160 |
317 |
|
Total dividends |
259 |
279 |
295 |
295 |
296 |
|
Consolidated equity |
4361 |
4470 |
4586 |
4132 |
4144 |
|
Gross dividend per share (BFr) |
87.5 |
94.3 |
100 |
100 |
100 |
|
Stock market capitalisation (31/12) |
5243 |
5332 |
5420 |
4992 |
4874 |
Group Activities
|
(BFr m) |
1995 |
1996 |
1997 |
|
Development |
|||
|
turnover |
– |
– |
250 |
|
Securitisation |
|||
|
amounts paid out |
1,600 |
1,765 |
2.146 |
|
securities of underlying real estate assets |
19,907 |
21,686 |
28,276 |
|
Parking |
|||
|
number of car parks operated |
189 |
211 |
218 |
|
number of parking places |
86,321 |
100,683 |
102,500 |
|
Interparking cash flow |
600 |
659 |
816 |
|
API cash flow |
98 |
124 |
146 |
|
Interparking turnover |
2,772 |
3,080 |
3,687 |
|
Self-storage |
|||
|
turnover |
– |
– |
42 |
|
Land parcelling |
|||
|
turnover |
93 |
49 |
77 |
