ANALYSIS: Corio sale puts Dutch property in international shop window

The acquisition of a heavily discounted shopping centre portfolio in the Netherlands from retail specialist Corio by US investor Mount Kellett Capital Management illustrates the growing foreign interest in Dutch property.

The sale by Dutch retail specialist Corio in January of 10 regional shopping centres in the Netherlands to US venture capitalist Mount Kellett Capital Management and a French investor is a further sign of the growing foreign interest in value-add Dutch property.

Mount Kellet and its joint venture partner acquired the 10 small-to-medium sized shopping centres at a discount approaching 30%. Corio sold an 11th centre - Les Portes de Cheuvreuse in Coigniéres near Paris - to an unnamed buyer as part of the deal, bringing the total sale price for the 11 assets to €213 mln.

According to PropertyEU estimates, the deal reflects an average gross initial yield of 12.4%. Independent valuations of the assets in mid-2013 put the gross initial yield at which the individual shopping centres could have been sold at 9%. But given the opportunity for Corio to carry out a large part of its disposal programme in one go, the company appears to have settled for a substantial portfolio discount.

Disposal programme
Former Redevco chief Jaap Blokhuis, who joined Corio last March to speed up the planned sale of the traditional retail centres, is the driving force behind the disposal programme. However, the pace at which the non-core shopping centres are being sold off means Corio has had to make concessions on the price. The €213 mln price tag marks a 27% discount to the book value at 30 June 2013, when the 11 malls were valued by DTZ Zadelhoff, CBRE and Jones Lang LaSalle at nearly €292 mln.

The 11 assets have a total leasable area of 120,800 m2. Corio said that after finalising these disposals, it is ahead of schedule on its disposal programme in the Netherlands and France. The sale has also helped the company increase its occupancy rates and reduce its leverage. Corio is selling off smaller assets to concentrate on owning and operating larger shopping centres - dubbed Favourite Meeting Places - which are dominant in their catchment area. Since year-end 2012, the relative size in value of the Favourite Meeting Places in Corio's portfolio has increased to around 91% from 83%. Including these transactions, Corio has sold 26 projects for a total €545 mln to a variety of buyers since the start of the programme.

Diverging prices
The latest deal illustrates the appeal of Dutch property for foreign players with deep pockets, who see an opportunity to buy at attractive initial yields. It also underscores the current sharp divergence in prices in the Dutch retail market. Wereldhave recently paid a gross initial yield of 5.8% for the Vier Meren shopping centre in Hoofddorp near Amsterdam, a price which reflects the anticipated growth in visitor numbers to the area over the next few years.

Corio reported rental income of €26.45 mln from the 11 centres in 2012. The most valuable asset in the portfolio is Les Portes de Cheuvreuse (36,000 m²) near Paris which opened in 2010. It is followed at some distance in the Dutch section of the portfolio by the Corio Center in Heerlen (18,400 m²) and Kopspijker/Stadsplein/Kolkplein (17,700 m²) in Spijkenisse.

Newcomer to Dutch market
Mount Kellet is a newcomer to the Dutch market. The US opportunistic investor, which was founded in 2008 by two former Goldman Sachs partners, works together with Sectie5 Investments in the Netherlands, a retail fund manager set up by Bart Bearda Bakker, Jeroen van Valen and Gerben Vreugdenhil. The joint venture has been agreed for a period of five years.

Market sources say the Americans stand a good chance of realising strong value growth at the Dutch centres in the coming years. Despite the negative reports about the Dutch retail market, the 10 centres in question have reasonable occupancy rates. Corio reported an occupancy rate of 99% and 92% respectively for the Corio Center (Heerlen) en Kopspijker (Spijkenisse) at end-2012, for example. The centre with the lowest occupancy 82%) was the Kerkstraat in Tegelen.

The 10 Dutch shopping centres being sold are:

- Aarhof (9,400 m2) in Alphen aan den Rijn
- Reigerbos (12,500 m2) in Amsterdam
- Slangenburg (1,500 m2) in Dordrecht
- De Hovel (5,400 m2) in Goirle
- Corio Center (18,400 m2) in Heerlen
- Meubelplein (13,800 m2) in Leiderdorp
- Kopspijker/Stadsplein/Kolkplein (17,700 m2) in Spijkenisse
- Kerkstraat (2,800 m2) in Tegelen
- City Passage (7,400 m22) in Veldhoven
- Belcour (6,900 m2) in Zeist

ABOUT MOUNT KELLETT
Mount Kellett is a multi-strategy investment firm which focuses on opportunistic and special situation investments globally across asset classes, industries and geographies. The firm has approximately 115 employees with offices in New York, Dallas, Hong Kong, London, Mumbai, and Mauritius. The firm closed its first fund, Mount Kellett Capital Partners, in December 2009 and currently manages approximately $7 bn. Mount Kellett was founded in 2008 by Mark McGoldrick and Jason Maynard, both former Goldman Sachs employees. McGoldrick was the co-founder and head of Goldman Sachs Global Special Situations Group from 1997 to 2007. Maynard, who heads Mount Kellett’s Asia business, was previously the head of the Goldman Sachs Asian Special Situations Group. Nick Weber, head of Mount Kellett’s European business, was previously the co-head of the Goldman Sachs European Special Situations Group.

By Paul Wessels,
senior editor PropertyNL