IREIT Global acquires 17 retail properties across France for EUR76.8 mil

Felicia Tan
4-min read

The acquisition is expected to be accretive to the REIT’s DPU by 2.0% on a pro forma adjusted FY2022 basis.

IREIT Global 8U7U has acquired 17 retail properties across France for a total purchase consideration of approximately EUR76.8 million ($112.2 million). The acquisition is estimated to cost the REIT a total of EUR90.9 million including fees and taxes.

On May 31, the REIT’s wholly-owned subsidiary, FIT 2 SAS, entered into a call option agreement with DKR Participations, a French société par actions simplifiée managed by Tikehau Investment Management. IREIT’s manager is jointly owned by Tikehau Capital and SGX-listed City Developments Limited (CDL).

The consideration amount represents a 1.7% discount to the average of the two independent valuations of EUR78.1 million of the new properties, which are part of the retail parks (out-of-town) asset class.

“We are delighted to be acquiring an attractive portfolio of Retail Parks (Out-of-Town) properties located in well-established regional retail areas. In this macroeconomic environment marked by high inflation, the proposed acquisition is in line with our strategy of strengthening our exposure to index-linked assets in established European markets, supported by a strong blue-chip tenant,” says Louis d’Estienne d’Orves, CEO of the manager.

“The retail parks (out-of-town) segment has outpaced the broader retail investment market. Their success is expected to continue due to their attractive yields for investors and lower rental costs for tenants, compared to other asset classes. In addition, the popularity of hard-discounters, discounters and outlet stores in France has risen exponentially to reach an estimated total revenue of approximately EUR12.0 billion in 2023, which augurs well for this resilient asset class. Also noteworthy is that the tenant, B&M Group, has been occupying the properties since 2005 on average,” he adds.

The properties have a total gross lettable area (GLA) of 61,756 sqm (664,736.052 sq ft). They are fully leased to B&M France SAS, a wholly-owned subsidiary of B&M European Value Retail. The group is a leading European discount retailer that has been listed on the London Stock Exchange since 2014.

The properties have an overall occupancy rate of 100% and a weighted average lease expiry (WALE) of 6.8 years by gross rental income (GRI) as at March 31. Out of the 17 properties, 13 of them are freehold while the rest of the four are leasehold.

The acquisition is expected to be accretive to the REIT’s distribution per unit (DPU) by 2.0% on a pro forma adjusted FY2022 basis. It is also expected to be accretive to IREIT’s net property income (NPI) yield of 7.9%.

“This yield-accretive portfolio is in line with our strategy of diversifying our portfolio beyond the office sector and expanding our presence within Europe to enhance long term steady returns to unitholders. We will continue to leverage on the expertise of our joint sponsors – Tikehau Capital and CDL to identify potential yield-accretive acquisition opportunities in Europe that will strengthen our portfolio in scale and diversification,” says d’Estienne d’Orves.

The retail parks (out-of-town) market in France is said to offer one of the highest prime yields in the broader retail market at around 5.0% in 4Q2022. According to a report by Savills, the asset class has also witnessed a record investment value of approximately EUR2.1 billion in 2022, which is an increase of approximately 75% compared to the five-year average.

Upon the completion of the acquisition, IREIT’s portfolio will comprise 44 retail properties with the proportion increasing from 24.9% (95,500 sqm) to 35.3% (157,256 sqm) of the REIT’s total GLA of approximately 446,038 sqm.

The acquisition is expected to be financed through a combination of the net proceeds from a non-renounceable underwritten preferential offering of new units as well as external bank borrowings and borrowings from Tikehau Capital. The acquisition fee is to be paid in the form of acquisition fee units to be issued to the manager.

Units in IREIT closed at 35 Euro cents on May 31.

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