Club Med Completes 225 Million Euro Sale Leaseback of Four Mountain Villages

Reuters - November 2, 2005

French resort operator Club Mediterranee (CMIP.PA) has sold four vacation villages to property investment firm Gecina for 225 million euros ($270 million) in a deal that will return it to breakeven for the first time in five years, it said on Wednesday. The deal comes as a number of French companies take advantage of a short-term tax break to divest property assets, lightening their balance sheets in the process.

Club Med, which pioneered fun-in-the-sun holiday villages in the 1950s, said the deal would cut its debt by 175 million euros, produce a capital gain of 40 million euros and bring it to breakeven in net profit terms over its 2005 financial year for the first time since 2001. It has agreed to lease back the villages on 12-year renewable contracts with a net rent equivalent to 7 percent of the overall deal.

The deal follows a 1 billion euro agreement in March between Accor, Europe's biggest hotelier, and real estate firm Fonciere des Murs (FERP.PA) covering leases on 128 hotels. The flurry of activity stems from France's decision last year to cut the capital gains tax to 16.5 percent, from 30 percent before, until 2007 for companies selling real estate assets to listed French property firms, known as SIICs.

"The emergence of SIIC activity in hotels is hotting up, and with the capital gains tax incentive, we expect to see new deals, notably with Accor in the future," said Vicki Lee, a leisure sector analyst at UBS. Accor (ACCP.PA), which owns 29 percent of Club Med, has put 10 of its upscale Sofitel hotels up for sale. Sphere: Related Content