Unibail-Rodamco entered the German market in June by signing an agreement to acquire a stake in shopping-centre specialist mfi AG. The Franco-Dutch retail real estate investor will pay €297m to Perella Weinberg Real Estate Fund I to acquire a 51% stake in a holding company that controls 90.4% of Essen-based mfi, currently valued at €1.1bn.
In the same deal, Unibail spent a further €86m to buy 50% of one of Germany’s biggest shopping malls, Ruhr-Park, at a 4.8% yield. Unibail and PWREF will maintain joint control of the centre.
Both acquisitions, amounting to a total of €383m, received a positive feedback from analysts and market operators. Shortly after the deal was announced by Unibail, JP Morgan Cazenove said it judged the transaction as positive overall. According to the investment bank’s European real estate equity research team, the new acquisitions will enhance stability in the buyer’s portfolio and improve its growth outlook.
Positive strategic step
A few days later, rating agency Fitch marked the acquisition by Unibail, which it rates A/Stable, as a “positive strategic step for the group”, saying it would underpin its current ratings. According to the agency, the purchase of Ruhr-Park is a “logical and low-cost move” for the group, as the mall has a significant presence in one of the “largest and highest potential retail markets in Europe”.
Fitch also said the sum paid by Unibail for the shopping mall acquisition and the stake in mfi is modest compared with the firm’s liquidity position, which is among the strongest in the EMEA region’s REIT sector “with over €3.3bn of undrawn committed facilities and cash”, the agency said in a report. Both Fitch Ratings and JP Morgan Cazenove do not expect the group’s 2012 financial results to be affected negatively by the German acquisitions.
Unibail’s expectations appear to be just as positive as those expressed by market experts. As the company announced the transaction, its management board chairman and chief executive officer Guillaume Poitrinal said the deal represented “an exceptional opportunity to penetrate one of the largest and most attractive property markets in Europe”. He added: “The synergies between mfi AG’s growing German portfolio and great management skills and Unibail-Rodamco’s know-how and international presence should deliver outstanding returns.”
Mfi has five centres and four schemes across Germany and is also active in management, leasing and development for 20 assets. It owns 351,785 m2 of existing properties, has a pipeline of 145,877 m2 and manages a further 721,150 m2 for third parties. In the past six years, the amount of space it owns and manages grew by 14%. Ruhr-Park, which covers 110,629 m2, is managed by mfi.
Unibail said it would pay €316m on closing the deal, which is expected in this year’s third quarter after completion of due diligence procedures, and the remaining €67m by 30 June, 2014.
The Franco-Dutch investor said its entry into the German market was driven by the country’s strong macro-economic fundamentals, including the highest GDP in the euro zone. Germany’s low domestic debt and unemployment, as well as expected growth in salaries, will also help to boost consumption, according to a note released by Unibail.
“The German market is one of the most sought-after markets for retailers and offers one of the lowest shopping centre densities in Europe, with 130 m2 of gross lettable area per 1,000 inhabitants compared with 249 m2 of GLA per 1,000 inhabitants on average in Europe,” it says.
According to the group, 78% of international retailers are looking to enter or expand within the German market, which is considered a top priority by premium operators. Last October, Unibail-Rodamco surveyed 45 international retailers, and the top three German cities they mentioned for expansion were Munich, Hamburg and Frankfurt. Düsseldorf, Cologne and the entire Ruhr region were also among the most sought-after areas, followed by Berlin, Stuttgart, Hanover and Leipzig.
With the acquisition of mfi, Unibail will gain control of the Pasin Arcaden mall in Munich, the Gropius Passagen centre in Berlin, the Paunsdorf Center in Leipzig and Gera’s Arcaden mall, along with Ruhr-Park, in Bochum.
The company owns two shopping centres that are under construction in Leipzig and Recklinghausen, which are due to be opened in September this year and in the first half of 2014, respectively.
Three more development projects are located in Mönchengladbach, Fulda and Osnabrück. These schemes are expected to be completed between the second half of 2014 and the end of 2016.
