Eurocommercial Properties N.V. (ECP) yesterday announced the acquisition of two retail properties in Sweden and one in France for a total cost of €151 million.
The larger of the two Swedish properties marks ECP's first investment in Göteborg (Gothenburg), the second largest city in Sweden, with a population in the greater city area of 890,000.
The property, named '421', is a newly developed major retail centre with a floor area of 33,048 m² located in the Högsbo-Sisjö area, which has become the most important decentralised retail location in southern Göteborg. The primary catchment of the centre has a population of 105,000 inhabitants. The broader catchment, which includes central and southern Göteborg suburbs together with the municipality of Mölndal, totals 485,000 people.
The property is anchored by ICA, the leading Swedish hypermarket group, who have a store of 11,700 m² and Media Markt (5,750 m²), the largest electrical retailer in Europe who have recently entered the Swedish market. The other tenants are all major chains and include H&M, KappAhl, Skopunkten, Lindex, Dressman, Cubus, Intersport, Bolagret, Hemtex and Barnens Hus.
The price of '421' was SEK 811 million (€88 million) showing a net initial yield of approximately 5%. Average rent levels in the centre are around SEK 1,300/m² from which good growth can be expected over the coming years.
ECP has also signed an agreement to buy a retail park of 15,000 m² adjoining one of its existing properties in a major Swedish provincial city. The agreed price is SEK 175 million (€19 million), representing an initial net yield of 5.75 %. Further information on the acquisition will be announced following completion.
These two acquisitions bring ECP's assets in Sweden to €481 million, or 23% of the total portfolio. This will rise by a further €60 million when the extensions of Norrköping and Skövde are completed next year.
In France ECP has acquired a site in western Paris, with the benefit of all necessary planning consents, upon which is being erected a substantial retail park which is 100% pre-let to a range of first class retail groups. The property will have a lettable area of 20,000 m² and is expected to be completed in December this year.
ECP will pay for the building in stages as the work proceeds under the 'vefa' (vente en l'état de futur d'achèvement) system and the total price will be €44 million giving a net yield of 5.4%. Rents on the retail units average 120/m², an extremely competitive level in the Paris region. Further information on the transaction will be provided on completion.
ECP will, on completion of this property, have 727 million invested in France or 34% of the entire portfolio. The balance, as already noted, being 23% in Sweden, together with 38% in Italy and 5% in the Netherlands. Retail properties represent over 92% of the portfolio.
Commenting on the acquisitions, ECP's Chief Executive Jeremy Lewis said, "Property markets are at an extremely interesting point in the cycle. On the one hand interest rates have risen significantly so that net property yields make it difficult to show an immediate margin over funding costs, but on the other hand institutional demand for high quality long-term investment property is as strong as ever, keeping prices high.
"The improving economic climate in western Europe and its upward pressure on inflation - part of the reason for higher interest rates - can also of course be the justification for an expectation of higher retail spending and thus rents in the better shopping centres in France, Italy and Sweden.
"Our response to this conundrum is to purchase properties in markets where we have the expertise and experience to make accurate judgements on rental growth so that investments add to earnings either immediately or within a very short period. The three property acquisitions noted in this release show an overall initial net yield of 5.2%, comfortably above ECP's fu