Global investor AXA Investment Managers - Real Assets (AXA IMRA) has swooped on two major retail deals in Paris, acquiring a 75% stake in shopping centre Italie Deux from Hammerson for €473 mln, and spending €203 mln on a stake in Passage du Havre from Eurocommercial Properties.
Italie Deux, the second largest shopping centre in Paris and a dominant retail and leisure destination in the 13th arrondissement on the left bank, comprises 130 units across 61,000 m2 of space, plus a 4,500 m2, 1,000 seat theatre. With over 12 million visitors a year, key brands include Printemps, Fnac, Zara, Sephora and Carrefour.
An extension of the centre known as Italik, which will extend its retail offering on to avenue d’Italie, is currently being progressed and is due to complete in spring 2020, adding 6,400 m2 of new GLA across 12 new retail, catering and leisure units, which are already 41% pre let, together with a coworking facility. Hammerson has also sold 75% of this development, and has agreed to completing the extension for £18 mln (€20 mln), as well as other committed refurbishment works.
According to Hammerson, the disposal reflects a 4.1% net initial yield and represents an 8.5% discount to December 2018 book value, and marginally below end of June 2019 book value.
The new joint venture follows the creation of Hammerson's first partnership with AXA IM - Real Assets in 2014 at Cabot Circus in Bristol. As with that scheme, Hammerson will continue to manage the French property.
Passage du Havre
AXA IMRA has also formed a new joint venture with Eurocommercial Properties, having agreed to acquire a 50% stake in a prime mixed-use property complex for €203 mln. Located in the 9th arrondissement, the property is composed of three adjacent mixed-use assets occupying a corner block across rue St-Lazare and rue du Havre.
Retail accounts for the majority of space (65%) in the 23,850 m2 asset, while offices (25%) and residential (10%) are incorporated to the upper floors of the six-storey buildings. There is also a four-storey underground carpark offering 150 spaces. The flagship Passage du Havre property, with 40 retail units, is the largest of the three buildings at 20,390 m2.
AXA IMRA said that the retail lets were anchored by a well-known French superstore and fully let to a diverse mix of tenants, whilst offering longer-term revisionary potential, including the flexibility of possible repositioning options.
Both assets will be jointly managed by the vendors, working alongside AXA IMRA. Both transactions are expected to complete by the end of 2019, with the acquisition of Italik due to close 18 months after the extension opens in September 2020.
'These transactions provide us with an almost unique opportunity to secure access to two prime central Paris retail destinations, on behalf of clients, both of which would otherwise rarely come to market,' said Antoine Mesnage, head of acquisitions France at AXA IMRA.
'Both the Italie Deux shopping centre and the ‘Passage du Havre’ retail led mixed use asset benefit from superb central locations, high footfall, and offer opportunities to create value, including leasing vacant space,' Mesnage added.
Hammerson said that the transaction takes its total disposals in 2019 to £456 mln and over 90% of its £500 mln target for the year. This follows the sale of £33 mln of retail park assets in the first half of the financial year.
The Italie Deux element of the transaction is expected to complete in autumn 2019 and the proceeds will be used to reduce debt and build further balance sheet strength, Hammerson said. Following the deal, Hammerson’s net debt stands at £3.1 bn on a pro forma basis.
'This transaction provides an opportunity to realise substantial disposal proceeds whilst also retaining an interest in a high quality European destination with a long term partner,' said David Atkins, Hammerson chief executive.
'Our number one priority is to reduce debt and build balance sheet strength. This transaction means we have reached over 90% of our 2019 disposal target. We are in advanced negotiations on additional asset sales and the creation of this joint venture once again highlights the appetite for investors to partner with skilled sector specialists,' Atkins added.
John O’Driscoll, European head of transactions at AXA IMRA added: 'This transaction provides us with a fantastic opportunity to secure access, on behalf of clients, to a prime central Paris retail destination. Italie Deux is a major, well anchored shopping centre with an attractive catchment and strong track record of performance located in a key global city.
'While we have seen a build-up of increasingly negative sentiment toward the retail sector where all assets, regardless of their operational performance and other compelling fundamentals, are viewed similarly, we believe that shopping centres with characteristics such as these will maintain their relevant position in the retail universe over the long term.'