Corio acquires €1.3 billion of part of Multi portfolio (EU)
Monday 29 March 2010
|Following Corio’s announcement of 18 December 2009 regarding the possible acquisition of part of Multi Corporation’s portfolio, Corio has entered into an agreement with Multi under which Corio will, subject to customary conditions, acquire an operational portfolio, consisting of four shopping centers in Germany, Spain and Portugal for a consideration of €662 million, and a development portfolio consisting of five projects in Germany (subject to German merger clearance for two projects), requiring a total expected investment of approximately €660 million. The total expected investment in relation to the transaction is therefore approximately € 1.3 billion.|
Forum Duisburg is one of four operational centers acquired.
Upon closing, the transaction will be funded through a combination of a follow-on offering of new ordinary shares (the ‘Offering’) and Corio’s existing bank facilities. The Offering will launch today and it is Corio’s aim to raise up to €600 million, of which approximately €450 million will be used to partially fund the acquisition and the remainder will be used for other, existing and future pipeline projects and for general corporate purposes. APG Algemene Pensioen Groep N.V. (‘APG’), acting in its capacity of Dutch pension fund asset manager, has entered into a commitment to participate in the Offering, pro-rata to its current holding of approximately 36.8%. The prospectus for the admission to trading of the new shares offered in the Offering will be available at www.corio-eu.com and in printed form at the offices of Corio and the Managers as of Thursday 25 March.
Gerard Groener, CEO of Corio, said: ‘This transaction gives Corio the opportunity to add continental Europe’s largest consumer market to its portfolio and in addition team up with Multi, the leading shopping centre developer in Europe. Our increased Pan-European presence together with the newly formed Multi partnership will position Corio uniquely for future growth opportunities’ Transaction overview For the German assets in which Multi currently owns 100%, Corio will acquire a 94.99% interest, with Multi retaining the remaining 5.01% interest. In Spain and Portugal, Corio will acquire a 100% interest.
For the two German projects in which Multi does not own 100%, Corio has a call option (and Multi a put option) to acquire Multi’s interest, subject to German merger clearance. The four operational shopping centers, two in Germany (Forum Duisburg and Centrum Galerie Dresden), one in Spain (Espacio Torrelodones) and one in Portugal (Espaço Guimarães), will be acquired for a total consideration of € 662 million on a cash and debt-free basis, representing a net initial yield of 6.7%.
In addition, Corio will acquire five development projects in Germany. For two of these projects, Schloßstraße (Berlin) and Quartier an der Stadtmauer (Bamberg), Corio will enter into a turn-key development arrangement, whereby the ownership will be acquired upon completion of the project at a pre-agreed net initial yield. The development of Schloßstraße will be funded through existing bank facilities and a loan from Corio amounting to €60 million. The development of Quartier an der Stadtmauer will be fully funded through a loan provided by Corio.
For Arneken Galerie (Hildesheim), Königsgalerie (Duisburg) and a further project which will be included in Corio’s variable waivable pipeline, Corio will (for Arneken Galerie and the variable waivable project subject to exercise of the put/call option and merger clearance) acquire ownership of the existing developments. The future development costs of these projects will be financed through a combination of existing bank financing and Corio loans. At completion of these projects, Corio will equally share the development profit with Multi on the basis of a third party appraised market valuation, to be performed post opening.
All the funding of development projects by Corio will be charged at pre-agreed funding rates, reflecting the risk and stage of development associated with the respective projects.
With respect to the 5.01% interests that Multi will retain, Corio will provide a loan for 90% of such interests to Multi and will have a call option to acquire these interests within five years. Multi will provide a 100% rental guarantee for two years post closing of the transaction for the operational shopping centres and for two years post opening of the turn-key development projects. For the profit sharing projects, Multi will provide a 50% rental guarantee for two years post opening.
All asset and property management services for operational shopping centres will be carried out by Corio, except for Guimarães, where Multi will continue to provide these services. As part of the transaction, Multi’s local German centre management organisation, consisting of 22 employees, will be transferred to Corio upon closing of the transaction. This organization will be integrated into Corio’s existing organization and form the basis of a new German business unit. With respect to the provision of marketing and reletting services, Corio and Multi will consider to enter into a joint venture after closing of the transaction.
Corio and Multi will each have a reciprocal right of first offer on any new German development project for a period of five years. In addition, the transaction provides Corio with an option to acquire two further development projects, Forum Roma (Rome) and Espacio Cañavaral (Madrid), within two years. The transaction with Multi is conditional upon customary and certain asset specific closing conditions, including Corio having obtained financing for the transaction. In addition, German merger clearance is required for the projects in which Multi currently does not own 100%. It is anticipated that the transaction (except for the two development projects which are subject to the put/call arrangement) will close in April 2010.
With this transaction, Corio will add a new home market to its existing Pan-European coverage and will now be present in the four largest continental European consumer markets. Together with the other two home markets, Corio will now be able to serve 340 million consumers across Europe. The size of the transaction allows Corio to immediately build, through the transfer of Multi’s experienced centre management organisation, a local business unit in Germany in line with Corio’s existing business model. Corio believes that this transaction is a unique opportunity to create a leading platform in Germany with some of the best assets available in the market. The stability of the German market is expected to give Corio an even stronger basis to pursue future growth opportunities.
The key strategic highlights are summarized below:
•Excellent quality assets, new and mostly based in city-center locations directly linked to the downtown high street, gaining access to a strong footfall;
•Attractive timing in the real estate cycle;
•Substantial benefits from the long-term experience and investment that Multi has dedicated in creating the German platform;
•Strong partnership going forward between Corio and Multi, combining development, management, leasing and investment activities.
In addition, this transaction adds two further shopping centers in Spain and Portugal, which, together with the German assets, will increase Corio’s proportion of retail in its portfolio to approximately 95%.
In line with Corio’s strategy to build a sizeable, ‘pure play’ retail portfolio, the transaction is expected to further enhance the profile of Corio as a Pan-European real estate company. Furthermore, a broader asset base across the largest European retail markets will give Corio a better position to service retailers.
Portfolio & pipeline
Following the acquisition, Corio’s current operational portfolio will increase from approximately €5.9 billion as of 31 December 2009 to €6.5 billion in value and the fixed committed pipeline increases from approximately €0.7 billion as of 31 December 2009 to €1.1 billion.
Funding of the acquisition
At closing of the transaction (including the projects subject to the put/call arrangement), the expected amount to be paid (including working capital adjustments) for the operational assets and sunk costs of the development projects, together with the Schloßstraße loan, is approximately €781 million. Corio will fund this amount in part from the net proceeds of the Offering and the remainder through existing bank facilities.
The remainder of the total investment amount is expected to be paid between 2010 and 2014. Corio i
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