Jelmoli mulls property IPO as EUR 2bn deal collapses

Swiss retailer Jelmoli said on Thursday that it may float its real estate portfolio following the collapse of a EUR 2 bn sale of the properties to an Israeli consortium. An IPO will be one of the options the Jelmoli board will put to an extraordinary shareholders' meeting at the end of November. The shareholders will also be asked to elect a new board and a successor to Walter Fust. He resigned as the chairman of the retail group due to the failure of the proposed sale of 88 properties to a consortium made up of Delek Global Real Estate (DGRE), Delek Belron International (DGRE's parent company) and the Igal Ahouvi Group.

A Jelmoli spokesperson emphasised that the company did not want to 'offload' the portfolio at any price and another option for the portfolio would be for the retailer to hold on to its property assets. News of the collapse of the deal came as the German state of Hesse announced it was putting the sales process for its Leo III portfolio of public buildings on ice until 2008 due to the credit crisis. Hesse had hoped to raise at least EUR 400 mln in a sale and leaseback operation.

Jelmoli issued a strongly worded statement on Thursday accusing the consortium of being in breach of the share purchase agreement reached in July. 'In the interest of its shareholders, Jelmoli will therefore consider all available legal and other measures,' the Swiss company warned. Given the strategic reorientation of the Jelmoli group, new members of the board of directors would be proposed, it added.

The statement was a response to DGRE's announcement that the consortium was not going to complete what would have been the largest real estate portfolio transaction in Swiss history as attempts in September to renegotiate the price had come to nothing. 'This decision has been reached primarily due to the change in, and continuing uncertainty of, the global commercial property market, which the consortium feels has not been adequately reflected in an adjustment to the price of the portfolio. DGRE believes this decision to be in the best interests of its shareholders,' DGRE said in a statement.

DGRE was a very active investor in European real estate this year. Back in July, around the time the Jelmoli deal was first announced, DGRE said it had acquired four major office property portfolios in Europe for about EUR 202 mln. DGRE has financed most of these acquisitions with fixed-rate long-term debt of around EUR 172 mln, together with about EUR 30 mln of equity, resulting in an average loan to value of 85%.

The Royal Bank of Scotland agreed to sell 47 hotels operated in the UK by the Marriott chain to a consortium led by Delek Belron International for EUR 1.6 bn. Delek Belron acquired a 17% stake.

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