London-listed Kennedy Wilson Europe Real Estate (KWE) has acquired a portfolio of 16 supermarkets in Spain.
London-listed Kennedy Wilson Europe Real Estate (KWE) has acquired a portfolio of 16 supermarkets in Spain.
The investment volume of €85.5 mln was funded by KWE's cash resources and reflects a yield on cost of 6.9%.
The 11 Carrefour and five Dia supermarkets were sold by a joint venture between French institutional investors managed by AEW Europe.
Portfolio
The portfolio comprises 55,150 m2 of lettable space across seven high street stores and nine big box stores across Spain with a concentration around the Madrid and Barcelona regions.
The stores are 100% occupied by Carrefour and Dia on triple net leases, generating a day one net operating income of €6 mln with 85% of the NOI from Carrefour and 15% from Dia. The portfolio has a weighted average unexpired lease term of 5.4 years (23.4 years to expiry) with all the leases expiring at end-December 2038. There are six yearly rolling tenant break options and upward-only rent review provisions. The next break option is at end-December 2020.
Tenants
Carrefour is Europe’s largest retailer and Spain’s second-largest supermarket. It operates 10,860 stores across 33 countries and has a market capitalisation of €18.6 bn. Spain is Carrefour’s second largest market by footprint with 582 stores.
Dia is Spain’s fourth largest supermarket chain. It de-merged from Carrefour Group in 2011 and is listed on the Madrid Stock Exchange. It operates 7,306 stores globally of which 4,781 stores are in Spain where it has the second-largest market share with 7.9% of sales.
Comment
Mary Ricks, president and CEO of Kennedy Wilson Europe, said that this was KWE's largest purchase to date in Spain and lifts its holdings in the country to €137 mln or 3.9% of the total portfolio.
'The portfolio benefits from a strong geographic concentration around the affluent areas of Madrid and Barcelona regions, where circa 70% of the income is generated along with the robust tenant covenants of Carrefour and Dia providing secure income streams. The attractive value of this portfolio is further cemented by the blended circa 570 basis points premium to the respective corporate bond yields of Carrefour and Dia of 1.2% and 1.1%, when compared to our going-in yield of 6.9%.
“The prime high street units are 29% under-rented at today’s estimated rental values. This coupled with our ability to grow rents through the CPI index-linked leases as the economy recovers and Spanish consumer spending improves and the re-setting to market rents through upward only rent reviews every six years will deliver another lever to create value.'
Savills advised KWE and CBRE advised AEW Europe.