#Mapic2014 Klépierre climbs the ladder

Klépierre is set to consolidate its position as the second-biggest listed retail specialist in Europe following the takeover of Corio.

Klépierre’s move into its new headquarters on Carré Edouard VII in the 9th arrondissement of Paris in September this year marks the culmination of a streamlining programme that moved into a higher gear after US mall giant Simon Property Group took a controlling stake in the French REIT in spring 2012.

In the past two-and-a-half years, the Paris-listed property company has shed the remaining assets in its office portfolio – including its own splendid headquarters next to the luxury Peninsula Hotel on Avenue Kléber.

This famous artery is one of the 12 avenues leading out of the Arc de Triomphe and is lined with grand examples of the buildings favoured by urban architect Baron Haussmann which changed the face of Paris in the second half of the 19th century.

Recently revamped by its Qatari owners, the Peninsula Hotel also has an American connection as the location where George Gershwin wrote ‘An American in Paris’ in 1928. But there is no room for sentiment and nostalgia in the European retail property business – or excessive pomp and grandeur.

As consumers across Europe continue to tighten their belts, every last eurocent counts and
Klépierre has its work cut out for it trying to squeeze out like-for-like annual rental increases of 2%. Moreover, the company’s imposing former head office no doubt fetched an attractive premium on its sale in June 2013.

Financial details were not disclosed, but at the presentation of its 2013 earnings report, the company said that the Paris offices it sold in that year generated on average an 11.2% premium over the last appraisal value. This is significantly higher than the 6% premium it captured for shopping centres sold in that year in France and Norway.

Pure-play retail specialist
Following its latest office disposals, Klépierre has become a pure-play retail specialist and from September this year it has rented its 7,000 m2 head office in downtown Paris near the St Lazare station from another French REIT, Société Foncière Lyonnaise. That move signals just how far it has come since it acquired a portfolio of 160 Carrefour galleries in 2000-2001 which marked the beginning of the French REIT’s internationalisation and expansion into Europe.

Earlier this year, Klépierre finalised the sale of a large portion of that portfolio to a consortium led by its former owner in a deal valued at €2 bn. The small and medium-sized galleries no longer fit in with the company’s focus on dominant shopping centres. But Klépierre is not entirely relinquishing its stake in the Carrefour portfolio, the company’s CEO Laurent Morel told PropertyEU in an interview. ‘We haven’t sold all of the assets. We have kept the nine biggest ones that are key to our strategy. This is strategic for Carrefour as well as for us.’

Retail as a destination
First announced in December, the sale of the Carrefour portfolio is the biggest recorded so far this year in the European retail property sector after the takeover of Corio.

The transaction sees French retail giant Carrefour join forces with eight institutional investors to acquire the €2 bn portfolio consisting of 126 small to medium-sized retail galleries covering 476,000 m2 in France, Spain and Italy. To manage the portfolio, Carrefour has created a new specialised company – Carmila – headed by CEO Jacques Ehrmann. The net cash proceeds of the Carrefour disposal come to €1.5 bn, which Klépierre is using to repay €1.3 bn in debt with short maturities (2014 and 2015) and restructure the current hedging portfolio to optimise its financing costs.

The deal reduces the group’s loan-to-value ratio to 40%. Klépierre has generated an ‘exceptional’ return on the Carrefour assets, Morel conceded. ‘It was a question of arbitrage. We had brought to this portfolio what we could bring in terms of our services and we can now realise more growth from our destination retail assets than from convenience stores.’

Click on the attached pdf below for the full interview with Laurent Morel

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