DEAL IN DEPTH: Morgan Stanley closes on Auchan Italian assets

Morgan Stanley Real Estate Investing has completed the acquisition of a majority stake in a €635 mln portfolio of 15 retail assets across Italy, as tipped by PropertyEU in June.

The US investor is taking a 60% stake in the assets, in an off-market deal valuing the entire portfolio at €635 mln. According to well-informed market sources, the acquisition is being financed by lender Goldman Sachs with leverage of between 55 and 60%, in one of the largest loans provided in Europe by a single bank in recent months. The deal reflects a gross yield of over 8%.

The assets were sold by Gallerie Commerciali Italia, a fully owned unit of retailer Auchan's property arm Immochan, which is retaining a 40% stake. Immochan will also provide property and leasing management services in relation to the assets.

PropertyEU reported in June that MSREI was in advanced talks to acquire the properties, which include 13 shopping centres and 2 retail parks with a total area of 200,000 m2 in the cities of Turin, Cuneo, Mazzano, Vicenza, Padua, Ancona, Senigallia, Porto Selpidio, Grottammare, Pescara, Giugliano and Catania.

MSREI and Auchan had been in negotiations since last autumn regarding the assets, and a preliminary agreement was signed in August.

Immochan said the sale is part of its expansion strategy in Italy and abroad, where it is developing a total of 700,000 m2 of space representing an investment of over €2 bn in the coming three years. In Italy, Immochan just completed the extension of Casamassima and will inaugurate at the end of November the extensions of the Mestre and Vimodrone shopping malls.

GCI owns a total of 46 retail centres in Italy, largely anchored by Auchan hypermarkets.

Auchan took full control of Gallerie Commerciali Italia in January last year, after acquiring the remaining 49% stake from US retail REIT Simon Property Group.

'With this purchase, Morgan Stanley has taken a long term view on the market, and is betting on the recovery of the property sector,' said Paolo Bellacosa, head of capital markets at CBRE, which advised the buyer. He reckoned that the transaction confirms a trend of renewed interest in the Italian property market on the part of international capital sources. 'However,' he added, 'the prices that we are seeing are quite far from historic values and seem to take into account the risk related to the country's macro-economic situation.'

Activity picks up

Italy has seen a revival of investment activity in the past months, led by international players with an opportunistic approach. Last month, US-based investor Blackstone has closed the acquisition of the Franciacorta Outlet Village for a discount of nearly 20% to market value.

The deal amounts to €126 mln, reflecting a yield of nearly 10%.

The asset in Rodengo Saiano near Brescia was sold by Aberdeen Asset Management which inherited it from Degi at the time of the acquisition of the German unit in late 2007. According to PropertyEU's research data, Degi Grundwert-fonds invested €204 mln to buy the asset in January 2007. The complex is currently owned by the Degi Europa open-ended fund in liquidation and was last valued at €156 mln at end-March 2013.

Similarly, Da Vinci - Rome's largest retail park - traded for just over €130 mln or a gross yield of nearly 9%. International financial services group GWM acquired the 58,000 m2 asset from developer AIG/Lincoln. Earlier this year, AXA Real Estate completed the purchase of Bodio Center in Milan from Aberdeen while Simon Property acquired a 50% interest in McArthurGlen, which has a large exposure to Italy with a total of five factory outlets in the country.

Also in Milan, Qatari investors have purchased a large interest in the massive Porta Nuova mixed-use development site in the largest property deal so far this year.