Carlyle's Freeport gets equity injection from SWF

Freeport, the retail outlet operating unit of Carlyle Europe Real Estate, has received financing backing from an unnamed Middle Eastern sovereign wealth fund. The funding is in the in the low three-digit million range.

The deal highlights the trend to tap alternative sources of lending at a time when traditional bank financing is scarce and expensive.

'The new credit line replaces an existing bank facility and will be used primarily to finance the existing business, allowing the company to secure a long-term future and to take advantage of opportunities in the European outlet mall sector,' Iestyn Roberts, CEO of Freeport, told PropertyEU in an interview.

Following the refinancing, Freeport has also created a new entity, Freeport Retail, which will provide specialist outsourced asset management services across Europe.

Freeport Retail has already secured the management of its first third-party owned centre with the takeover of Ringsted Outlet near Copenhagen, which is owned by TK Development and The Miller Group. The company is also currently in negotiations on a number of other opportunities across Europe, where 'it sees strong potential to create value and improve income through active asset management'.

'We are mostly targeting the big Western European markets - Germany, France, Spain and Italy - and we are also looking at China, where we already provide advisory services for the management of two designer outlets in Beijing and Guangdong,' Roberts added.

In Continental Europe, Freeport Retail is partnering with French out-of-town developer Compagnie de Phalsbourg to launch a major outlet centre at Villefontaine near Lyons while in the German city of Duisburg, the company has joined with Dutch builder German Development Group to develop a new outlet scheme which has already received the go-ahead of the city council. In Bratislava, Slovakia, Freeport is managing the operations for local developer Realiz, which intends to start the construction phase in January 2012.

'We believe that there is a gap in the market, and thus an opportunity for us to provide professional management services,' Roberts noted. 'We see a number of situations in which local developers do not have the team or the specialist skills to operate retail outlets on a professional level. We have successfully turned Freeport's operations around, transforming it from a loss-making to a profitable business in challenging economic conditions, and we believe we can apply these skills to third-party owned assets.'

Freeport has seen profitability increase each year since its acquisition by US private equity group Carlyle in 2007. The London-based operator reported a record 22% increase in net income in the year ended June 2011, largely as a result of asset management initiatives which increased occupancy levels in virtually all of its operated outlet centres. Average occupancy across the portfolio stands at over 98%, with Kungsbacka in Sweden having reported the strongest income growth over the past 12 months, up 35% year-on-year.