Allianz-led consortium buys Polish mall

A consortium led by Allianz Real Estate has acquired Immofinanz's Silesia City Center in Katowice in the largest Polish transaction so far this year.

The partnership is investing €412 mln in the purchase of the flagship retail complex, in a major vote of confidence in Poland's real estate market.

According to well-informed market sources, German institutional investor Allianz Real Estate is teaming up with a Chinese party to take a majority interest in the major regional scheme, which is fully let with nearly 360 shops.

Retail specialist ECE Projektmanagement is also taking part in the acquisition with a ‘healthy equity stake’ and will retain the management of the mall, sources said.

All parties kept details of the acquisition structure confidential.

According to Immofinanz, the purchase price of €412 mln exceeds the book value and also makes the deal the largest in the CEE region (excluding Russia) in 2013. The transaction is expected to close in September 2013.

Success story
Immofinanz CEO Eduard Zehetner said Silesia City Center is one of Immofinanz's most notable success stories to date in the retail sector. The shopping mall was bought by the group’s former CEE unit Immoeast in 2005 from Hungarian developer Trigranit.

According to PropertyEU data, Immoeast forked out €170 mln for the project, which opened its doors in 2006. A strong trading performance prompted the group to extend the scheme by another 20,000 m2 a few years later. The new retail space, opened in 2011, was fully pre-let and involved a development cost of €50 mln. The scheme is currently one of the five largest malls in Poland with some 89,000 m2 of selling space.

Having spent some €220 mln on the asset, developer Immofinanz is making a €190 mln gain from the sale of the centre. ‘The Silesia sale underscores the start of recovery in the investment market in Eastern Europe, and further confirms our valuations in Eastern Europe,’ commented Zehetner.

The company will use the proceeds to finance new developments in its core markets including Poland, where it recently announced plans to build Tarasy Zamkowe, a new shopping, entertainment and recreation centre in Lublin.

The acquisition - Allianz’s first shopping centre investment in Poland - is part of the group’s strategy to focus on large and dominant malls across Europe, said Stefan Brendgen, CEO of Allianz Real Estate Germany. It follows a 12-month negotiation process between the parties, he added.

‘This is a complex asset with 260 tenants and a complex partnership structure. It was also important for us to know more about the Silesia area. A deal in Warsaw would be fairly straightforward but if you go to another city you want to do your own research,’ he noted.

Allianz was advised by Jones Lang LaSalle in the transaction. Immofinanz was not represented.

Brendgen said the group is very ‘optimistic’ about Poland, having spent €600 mln of equity so far in this market. ‘We made two big office purchases last year and we are complementing our presence with a major retail centre,’ he said, adding that a further acquisition is likely to be made by the end of the year.

Brendgen: ‘We will be careful going forward because some of the prices that you see seem to be too high or inflated. We are looking for the needle in the haystack.’

The deal further cements Allianz’s partnership with ECE Projektmanagement, which is the centre management partner for Allianz’s shopping centre portfolio in Germany. Allianz Real Estate has also recently teamed up with ECE to build the Skyline Plaza mall in Frankfurt.

The German insurer acquired an 80% stake in the complex in 2011 from CA Immo Deutschland and Hamburg-based ECE for €360 mln. CA Immo and ECE have each retained a 10% stake in the shopping mall which is due to open in autumn 2013.

CEE rebound
Immofinanz’s Zehetner said the Silesia City Center transaction is an indication that investment activity is picking up in Poland. ‘The interest of investors is returning, a trend that is also supported by general market indicators. We are optimistic that we will be able to conclude further sales in this region during the current financial year,’ he added.

Property experts are forecasting an investment volume of over €2.5 bn for this year in Poland, in line with 2012’s level which, at €2.7 bn, was the highest annual figure recorded since 2006.

‘We have increased our H1 investment volume forecast from €1 bn to €1.5 bn and expect the total 2013 volume to exceed €2.5 bn,’ Brian Burgess, head of Savills Poland, recently said. According to Savills data, retail assets are selling at the lowest yield levels for the market, at approximately 5.75% for the best, central Warsaw shopping centres, and 6.00% for leading regional city shopping centres.