Carmila 'most likely' to be listed in the future, says CEO

Carmila, the new shopping centre landlord created by French retail giant Carrefour, will most likely go public in the future, according to newly-appointed CEO Jacques Ehrmann.

Although the company will remain unlisted for the time being, Ehrmann did not rule out an initial public offering for the future.

‘We will remain private for the time being but once we will have proved that our business model works and is profitable, it is highly probably that the company will become public,' he said.

Speaking to PropertyEU in an exclusive interview, Ehrmann said the company is looking to increase its gross rents and portfolio value by 50% every three years as part of its parent group’s plan to gain back control of strategic Carrefour-anchored shopping centres across Europe.

‘The next few years will be about growth,’ the 54-year old manager said. ‘We estimate that there are roughly €16 bn of shopping centres in these three European countries that we do not own, and around a quarter of them change hands every five years. Our plan is to acquire a share of 20 to 30% of these investment assets in the near future.’

TURNAROUND STRATEGY
The creation of Carmila reflects a new strategy launched by Carrefour Group’s CEO Georges Plassat to increase control of the hypermarkets the group operates by owning and managing the surrounding sites and retail areas. This is a major turnaround for the French-based food retailer, which over the past decade had sold the shopping centres adjacent to its hypermarkets to finance the international expansion of its core business.

‘By giving up control of the sites, we were not able to introduce a coordinated strategy across the portfolio, while renovations and extensions were not sufficiently done or in any case were not done on a large scale. At the same time new malls opened in the surroundings resulting in commercial problems for the hypermarkets and the shopping centres,’ Ehrmann explained. ‘Carmila is our response to all these challenges.’

FUTURE PLANS
According to market experts, the launch of Carmila was a smart move in that it allowed Carrefour to regain control of the assets with a limited investment. While Carrefour has retained the relative majority of Carmila, with a stake of 42%, it has reduced its capital expenditure by allowing eight institutional investors in the new company’s capital.

‘For us, this structure made sense from a financial point of view because we wanted a realignment of interest but we did not necessarily have to own 100% and a joint venture would help us finance our business model,’ explained Ehrmann. ‘This is a profitable business so it was easy to attract investors to this project. We started negotiations with Klépierre regarding the seed portfolio, we came up with a business plan, and investors responded positively.’

The new retail property company was financed with roughly €1.8 bn in equity while a consortium of banks provided a further €900 mln in debt, giving the company significant firepower for acquisitions. ‘We intend to continue to buy assets on the market in order to further develop our portfolio,’ commented Ehrmann. ‘We have the financial strength to do that and, if we need further capital, we have already agreed in principle on the terms for a capital increase.’