Kennedy Wilson Europe Real Estate Plc (LSE: KWE) an LSE listed property company that invests in direct real estate and real estate loans in Europe, has completed the acquisition of a Spanish portfolio of 16 supermarkets, including 11 Carrefour supermarkets and five Dia supermarkets from a joint venture between French institutional investors managed by AEW Europe. The purchase price of the portfolio was €85.5 mln, reflecting a yield on cost of 6.9%. The acquisition was funded from the Company’s cash resources.
The 16 supermarkets comprise 593,600 ft² (approx. 55,147 m²) of lettable space across seven high street stores and nine big box stores across Spain with a concentration around Madrid and Barcelona regions.
The stores are 100% occupied by Carrefour and Dia on triple net leases, generating a day one NOI of €6 mln with 85% of the NOI from Carrefour and 15% from Dia. The portfolio has a WAULT of 5.4 years (23.4 years to expiry) with all the leases expiring on 31 December 2038 with six yearly rolling tenant break options and upward only rent review provisions at this time. The next break option is at 31 December 2020.
Carrefour is Europe’s largest retailer and Spain’s second largest supermarket. It operates 10,860 stores across 33 countries and has a market capitalisation of €18.6 bln. Spain is Carrefour’s second largest market by footprint with 582 stores. Carrefour is rated Baa2 with a positive outlook by Moody’s.
Dia is Spain’s fourth largest supermarket. It de-merged from Carrefour Group in 2011 and is listed on the Madrid Stock Exchange. It operates 7,306 stores globally of which 4,781 stores are in Spain where it enjoys the second largest market share with 7.9% of sales. It is rated Baa3 with a stable outlook by Moody’s.
Mary Ricks, President and CEO of Kennedy Wilson Europe, commented: “This exciting acquisition represents KWE’s largest purchase to date in Spain and brings our Spanish ownership to €136.8 mln or 3.9% of the total portfolio.
“The portfolio benefits from a strong geographic concentration around the affluent areas of Madrid and Barcelona regions, where c. 70% of the income is generated along with the robust tenant covenants of Carrefour and Dia providing secure income streams. The attractive value of this portfolio is further cemented by the blended c. 570bps premium to the respective corporate bond yields of Carrefour and Dia of 1.2% and 1.1%, when compared to our going-in yield of 6.9%.
“The prime high street units are 29% under-rented at today’s ERV’s. This coupled with our ability to grow rents through the CPI index-linked leases as the economy recovers and Spanish consumer spending improves and the re-setting to market rents through upward only rent reviews every six years will deliver another lever to create value.”
Savills advised KWE and CBRE advised AEW Europe.
Source: Kennedy Wilson Real Estate plc
