PropertyEU - October 19, 2007
French retail company Casino plans to unlock the capital tied up in its food store properties that no longer offer strong development potential. The move, which marks a new phase in Casino's property management strategy, is aimed at funding projects in France and abroad. The company said that it will transfer 255 urban and semi-urban supermarket properties in France, representing a total of 170,000 m2 of retail sales area to a new vehicle called AEW Immocommercial.
AEW was one of the first five companies authorised by the French securities regulator (AMF) to operate as an 'OPCI' (property investment mutual fund) on 11 October. The group sees the OPCI as an opportunity to enhance the value of its property assets. OPCIs are the latest in the line of tax-friendly vehicles created in France to promote investment in property stocks, after the SCPIs (non-trading property investment companies) and SIICs (REIT-style structures). They are managed by independent portfolio management companies which must also be licensed by the AMF.
The investors in AEW Immocommercial will comprise a consortium of institutional investors managed by AEW Europe, and other investors, including Casino which will hold 10% to 18% of the vehicle's capital. The move follows the sale and leaseback of Casino's head office and warehouses in 2005 and 2006.
In another innovative move for retail property, the rents paid by Casino to AEW Immocommercial will be variable and calculated as a percentage of the stores' retail sales, without any guaranteed minimum and without any indexation on the French construction cost index, the company said. Averaging 3% of net retail sales, the total rent for 2008 will be around EUR 25 mln. The leases will be for an initial 12-year term, renewable four times. AEW Immocommercial will have initial assets of EUR 455 mln, including transfer taxes, of which 30% will be financed by a bank loan.
Saint-Etienne-based Casino said also that it has sold six hypermarket properties, seven supermarket properties and six warehouses on La Réunion Island to Generali for EUR 266 mln, including taxes. Casino said that it was to transfer the properties, which are owned by Vindemia, to a new vehicle, Immocio OPCI, which was also authorized by the AMF on 11 October. The company received then an offer from the Generali Group for Immocio's entire capital.
Vindemia will lease back the assets from Immocio under 9-year commercial leases with a renewal option. The initial rents would total about EUR 18 mln per year, representing around 2.5% of net sales for the hypermarkets and 1.6% for the supermarkets. The leases would be indexed on the French construction cost index. Vindemia will continue to own the land and the car parks on the hypermarket sites. The transaction will provide Vindemia with additional resources to speed up the development of its food retailing business and strengthen its market leadership.
Casino expects to complete the transactions before the end of the year.
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