EXCLUSIVE: Pimco-backed GWM in talks to buy Turin mall

London-based GWM Group, backed by US asset manager Pimco, is in negotiations to acquire the 8Gallery shopping centre in Turin's Lingotto district in Northern Italy from CBRE Global Investors.

GWM wants to pay just over €60 mln for the mall, while CBRE GI is hoping to get in the region of €80 mln, according to well-informed market sources.

CBRE GI inherited the 21,500 m2 asset with the acquisition of ING Real Estate which bought it in 2006 for around €92 mln, or a gross yield of 5.5%. Last year, CBRE GI entered talks with Europa Capital but negotiations fell through due to the gap between the vendor's and the buyer's expectations.

The mall includes 90 shops, 14 restaurants and an 11-screen multiplex cinema as well as 4,000 parking spaces.

8Gallery is one of a string of assets put up for sale by CBREGI in Italy. The group is already seeking a buyer for the I Petali shopping centre in Reggio Emilia. The mall is managed by Multi Development and provides nearly 28,000 m2 of gross lettable space. It was bought by ING REIM (today CBREGI) in March 2008 for €91 mln.

In Genoa, CBRE GI has just sold the Fiumara shopping centre to German insurance group Allianz and Dutch financial group ING for a price around €150 mln.

The scheme, located near the city's famous aquarium, provides around 25,000 m2 of retail space across 120 retail units over three levels and includes an Uci multiplex as well as a 15,000 m2 amusement park. ING and Allianz signed the preliminary agreement at end-2013.

GWM has been very active in Italy over the past few months. It recently bought two office buildings located in Milan via its Pegasus real estate fund in a lease-and-saleback deal from French car maker PSA Peugeot Citroën and last year acquired the Da Vinci Market Central at Rome airport for around €130 mln from AIG Lincoln. The 56,021 m2 retail park, which is the largest in Italy, is now 70% owned by Pimco and 30% by GWM.

GWM and Pimco plan to amass a €1 bn retail portfolio in Southern Europe within the next three years. Pimco is investing €350 mln of equity in the venture, with GWM committing up to €200 mln and the other half coming via leverage. They are focusing on shopping centres, retail parks and factory outlets in both key cities in Spain and Italy as well as secondary locations and distressed assets. The venture aims to provide a leveraged return of up to 16%.

BACK IN THE GAME
Spain and Italy have undergone something of a resurgence in the past six months and are no longer regarded as the bêtes noires of Europe. 'It's fascinating,' said Michael Rodda, head of EMEA retail capital markets investment at Cushman & Wakefield. 'After the UK, France and Germany, Spain is now the next most liquid market in Europe. There are also an increasing number of bidders for retail assets. A year ago, we would have been surprised to get two bids on a shopping centre in Spain - now, we might have as many as 10 bids. Financing is increasingly available and increasingly competitive, which is fuelling investor interest,' he added.

Spain and Italy are rebounding now because the general consensus is that rents will not fall further. 'The view is that rent levels are unlikely to fall any further, which gives a lot of comfort,' Rodda noted. 'There is a depth of investors -loaded tanks of capital, if you will, including European funds and US private equity players, who are now looking at the market,' he added.

Investors are targeting distressed retail assets because they can grow income and turn them around, looking to exit in four-to-five years with a good return, Rodda said. 'There are a lot of big investors like Pimco looking at the retail space. The successful investors will be those who can take a practical view of the usual deal issues, such as reps and warranties which will give them a better chance at pushing their deals through,' he added.

Retail yields in Italy are similar to those in Spain, at around 6% for prime yields and 10% for distressed assets.