Eurocommercial is poised to acquire Woluwe shopping centre in Brussels for €468 mln, reflecting an initial yield of just under 4%.
The Dutch-listed European landlord announced at close of business on Monday that it had entered into exclusive negotiations and due diligence to buy the asset from AG Real Estate.
Eurocommercial said that the acquisition complemented the company's commitment to continually upgrade its portfolio of high quality shopping centres, and diversified its country exposure by re-entering the Belgian market via a tax efficient REIT.
'The Brussels retail real estate market and economy are very attractive with the strong fundamentals of high levels of disposable income and good population growth,' said Eurocommercial’s CEO Jeremy Lewis. 'The tenant base of Woluwe is broad and international and includes many familiar names with whom Eurocommercial already has strong relationships, making the centre a natural fit for our €4 bn portfolio of shopping centres.'
Shopping centre
Woluwe was first developed in 1968 and is the best-known shopping centre in Brussels. It is situated in one of the wealthiest suburbs of the city and is served by its own metro station and buses. A tram line is opening next year, with a stop directly outside the centre.
The shopping centre attracts 6.5 million visitors each year, and has an estimated catchment population of over one million people with a very low current retail density of around 385 m2 per 1,000 people.
The tenants include international brands Zara, H&M, Superdry, Calvin Klein and C&A. Eurocommercial intends to buy 23,000 m2 of lettable area including the public mall, parking levels and surrounding land, thus giving it full strategic control. Dependent on planning consent, Eurocommercial intends to add an additional 10,000 m2 which it will own.
The real estate arm of Belgian insurer AG separately owns the Inno department store of 12,000 m2 on three levels, the Match supermarket of 2,100 m2 and five other shops.
Portfolio
Belgium will initially represent 11% of Eurocommercial's €4 bn portfolio following the purchase of Woluwe. This will rise to 12% after the planned sales and completion of the developments and extensions at C4 and Halmstad in Sweden.
Eurocommercial expects to sign the purchase agreement by the end of November, with completion and payment in the first quarter of 2018. Eurocommercial is advised on the transaction by the corporate finance team of Belgian bank Degroof Petercam. CBRE and JLL are acting for the vendors.
Asset rotation and finance
The purchase will be partly funded through Eurocommercial’s established asset rotation programme, which has generated €100 million in 2017 so far, with the now completed sales of 74 rue de Rivoli in Paris (at a net yield of 3%) and Mellby Center in Sweden. Further sales of properties will follow in Italy, France and Sweden.
Dutch banks ABN Amro and ING are jointly providing an 18-month loan facility. Half of the financing will convert to a seven-year mortgage loan, at an all up fixed interest rate expected to be under 2%, thus ensuring that the acquisition is earnings accretive from day one, Eurocommercial said.
The acquisition will initially increase Eurocommercial’s loan to value ratio to around 47%. However, the asset rotation programme already under way is expected to ensure that the loan to value ratio will return to a little above 40%. Under current conditions, Eurocommercial expects to be able to maintain its present level of dividend.
