Redevco pulls out of Poland, Italy and Nordics

Private equity group Redevco plans to withdraw from non-core countries including Poland, Italy and the Nordics, in particular Sweden, Andrew Vaughan, the company’s new CEO, told PropertyEU in an interview. The Amsterdam-based investor-developer has already jettisoned China. Late last year, Redevco sold its 50% stake in a joint venture with a Chinese firm to develop a shopping centre section in the city of Wuhan.

The company is also pulling out of logistics and offices as part of its strategic reorientation. Following the streamlining, Redevco will still be active in 11 countries across Europe, Vaughan noted. ‘We started in 1999 as a company 100% focussed on retail and now we’re going back to a 100% focus on retail. In the early 2000s, we added offices and logistics to our portfolio but over the past years, the performance of our retail portfolio has been better.’

Logistics and offices currently account for just over 10% of the total portfolio after peaking at around 20% in 2005. Vaughan said the strategic shift had been prompted by the volatile macro-economic environment. ‘We are repositioning the portfolio in reaction to external changes in the world. There’s a lot happening out there and the world is going through tough times at the moment.’ In addition to the financial crisis, the retail industry is undergoing major structural changes, he added. ‘The retail industry is in a transformational stage. We need to make sure the portfolio remains future proof.’

Redevco is currently in the process of exiting China, Sweden, Poland and Italy and Vaughan said he expected the offices in these countries would be closed by end of the year. ‘We aim to withdraw from countries where we don’t have a critical mass. By critical mass we mean that we have a portfolio of approximately EUR500 mln per country. In Italy, we have a team of four in Milan managing a portfolio of three buildings worth a combined EUR50 mln. We don’t have a critical mass in that country.’ The same applied to Poland and Sweden, he added.

Redevco set up its Nordic office in 2005/06 in a rising market, Vaughan said. ‘The market dynamics now are different.’

The withdrawal from China marks a major turnaround of Redevco’s previous strategy, but Vaughan said the strategic shift should not be interpreted as a denunciation of emerging markets in Asia. ‘We only had one development project in China, in Wuhan, and we have now sold our stake to the joint venture partner Shui On Land. This is not a conclusion about the Asian market at all. At this moment, we’re just not interested in developments in high-risk, emerging markets at the riskier end of the spectrum. We managed our Chinese project from our offices in Hong Kong and Amsterdam, but we don’t believe the returns would have compensated the risks that we were taking. I wouldn’t be surprised though if we go back, not as a developer but as an investor. When will we go back? There are no concrete plans but I think we’re talking about five years rather than 10.’

The full interview appears in the April edition of PropertyEU. Click on the following link to subscribe: