EXCLUSIVE: LBO France-led JV offloads €1b resi package

Stephanie Casciola, head of real estate funds at LBO France, talks to PropertyEU about the sale of the Selec portfolio in France.

LBO France and Deutsche Asset and Wealth Management’s real estate investment business (formerly RREEF Real Estate) sold the joint 7,600-property strong portfolio valued at over €1 bn.

Casciola told PropertyEU that the company received a unsolicited offer for the Financière Selec assets during the portfolio refinancing process completed in March 2013.

Natixis participated as lead arranger with BNP Paribas acted as placement agent in the €620 mln refinancing which represented the largest debt restructuring seen in France this year. Around 60% of the debt was placed to institutional investors through a securitisation vehicle.

'This is an off-market sale. The buyers came with an offer while we were refinancing the assets, and before we even launched the tender process,' said Casciola of LBO France, an independent private equity fund manager with €4 bn under management.

The buyer was Powerhouse France, a new investment vehicle organised and managed by TwentyTwo Real Estate on behalf of consortium comprising Luxembourg-based Massena Partners and funds advised by US-based Farallon Capital Management. They financed the deal on a 50-50 equity basis.

TwentyTwo Real Estate was founded in 2012 by Daniel Rigny,a former partner at Perella Weinberg.

This acquisition represents the company’s first transaction and is also the largest residential portfolio deal closed in France in the past three years, according to PropertyEU's research.

The Selec portfolio, originally composed of 10,200 homes let to energy group EDF on a 12-year lease, was acquired by LBO France in 2006 in a 54% - 46% joint venture with RREEF. Around 25% of the properties have been sold in small transactions since then. The lease with EDF was renewed in 2010 for another 12-year period, renewable again after 12 years.

'2012 was the end of a cycle for these assets so we decided to refinance and divest the remaining portfolio,' Casciola added. Proceeds from the sales helped deleverage the portfolio, which, at acquisition, was financed with €960 mln of debt.

The portfolio currently comprises 7,600 assets spread across over 400 locations in France and used by EDF employees working in the group's nuclear plants.

Daniel Rigny, founder of TwentyTwo Real Estate said the acquisition represented a 'rare' opportunity to acquire long-term inflation linked assets providing attractive risk-adjusted returns and an attractive cash flow for our investors. 'This transaction exemplifies TwentyTwo Real Estate’s ability to identify and execute sizeable investment opportunities with tailor-made capital structures across Europe.'

He added that France would be an area of particular focus for the company due to attractive acquisition opportunities emerging from the current macro-economic situation. 'We look forward to making a number of similar income-generating opportunities in the near future, utilising our strong local knowledge, presence and track record to take full advantage of current market dynamics on behalf of our partners and investors.'

Powerhouse France was advised by Hogan Lovells, GGSM and KPMG, and Farallon by Herbert Smith.
LBO France was advised by Wragge & Co and Etude Monassier & Associates. Deutsche Asset & Wealth Management was advised by Freshfields and Etude Lazaygues.

The transaction will give a significant boost to France's residential investment market, which has seen volumes plunge in the recent past in view of the abolition of the Scellier Act tax incentives for new homes.

The law, which introduced tax breaks for buyers of new housing by year-end 2012, was a big driver of residential investment being behind an average of 70% of housing transactions in the country.