Eroski Seeking EUR 300 Million Sale Leaseback of Supermarkets Across Spain

Property Week - May 8, 2009

Spanish retailer prepares sale and leaseback of up to 150 supermarkets.

Eroski is preparing to sell and lease back between 100 and 150 supermarkets, which could net the Spanish retailer more than €300m.

The supermarket operator is approaching a range of investors about the portfolio, which consists of ‘urban supermarkets’ in Spanish city centres.

It is thought that the portfolio, which does not include any hypermarkets, could be broken up into smaller lot sizes, which would be easier to finance and could attract a variety of buyers such as institutional and private investors.

The final lease terms that Eroski will offer to investors are likely to be long institutionally-friendly leases of between 20 and 25 years.

Large sale and leasebacks are becoming increasingly common in Spain as occupiers try to release equity from their property portfolio to create cash pools to carry out corporate acquisitions.

Eroski in particular is thought to be keen to raise cash to reduce its debt levels after the purchase of the Caprabo supermarket chain in 2007.

It also wants to raise funds in readiness of future acquisitions as it seeks to increase its market share in Spain. It is already one of the top three hypermarket operators in the country and the number one supermarket operator in the Catalunya region.

Any potential transaction with Eroski would be structured as a straight sale and leaseback rather than a joint venture partnership.

It already has one joint venture partnership with Sol Zakay’s Topland, which in November last year bought a 15-strong retail portfolio from Eroski in Spain’s biggest hypermarket sale-and-leaseback transaction. Eroski signed 25-year leases with fixed rental increases.

Topland paid €361m – a yield of around 6% – for the portfolio, comprising 13 hypermarkets and two shopping centres in the Basque area of Spain. It provided equity for 30% of the first purchase and the remaining 70% comes from a consortium of banks: La Caixa, Banco Bilbao Vizcaya Argentaria, Banco De Sabadell, Banco Espanol De Credito, Banco De Vasconia and Caja Madrid.

The transaction with Topland was structured as the first phase of a potential three-part sale-and-leaseback agreement between the two parties, in which Topland would buy more than 50 Eroski properties.

Spain’s property market, which has been badly hit by the global financial crisis, has experienced a rapid repricing similar to that in the UK and is attracting investors who want to buy at the bottom of the market.

Cushman & Wakefield advised Eroski on its transaction with Topland and it is thought that Cushman has now been instructed to act for Eroski on an exclusive mandate.

All parties declined to comment. Sphere: Related Content