Singapore-listed IREIT Global has agreed to acquire a portfolio of 17 retail properties across France for €76.8 million ($82 million), as the Europe-focused trust continues to diversify its holdings beyond the office sector.
Classified as out-of-town retail parks, the freehold assets span 61,756 square metres (664,736 square feet) of gross lettable area and are fully leased by British discount chain B&M, IREIT’s manager said Thursday in a release.
The seller is a French real estate vehicle managed by Tikehau Investment Management, a unit of Paris-based private equity firm Tikehau Capital, which co-sponsors IREIT with Singaporean property giant City Developments Ltd. The transaction marks the €950 million trust’s second foray into France, following the 2021 acquisition of 27 retail parks leased by sporting goods vendor Decathlon for €110.5 million ($177 million).
“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,” said Louis d’Estienne d’Orves, CEO of the trust’s manager.
Resilient Asset Class
The portfolio’s acquisition price of €76.8 million represents a 1.7 percent discount to the €78.1 million average of two independent valuations, IREIT said. The expected net property income yield is 7.9 percent, and the weighted average lease expiry by gross rental income is 6.8 years.
Upon completion of the deal, the enlarged portfolio in France will comprise 44 retail properties, with the proportion rising from 24.9 percent of the trust’s total GLA of 446,038 square metres to 35.3 percent. The REIT also holds five freehold office properties in Germany and five freehold office properties in Spain.
The trust’s manager pointed to out-of-town retail parks’ strength during the COVID-19 pandemic, citing their accessibility, open-air format and value-for-money brands.
“Their success is expected to continue due to their attractive yields for investors and lower rental costs for tenants, compared to other asset classes,” d’Estienne d’Orves said. “In addition, the popularity of hard discounters, discounters and outlet stores in France has risen exponentially to reach an estimated total revenue of approximately €12 billion in 2023, which augurs well for this resilient asset class.”
Investor Group Grows Trust
In April 2020, Tikehau Capital joined forces with City Developments Ltd and the family office of Singapore billionaire Arvind Tiku to take a controlling stake in IREIT Global via transactions with mainland property tycoon Tong Jinquan.
Less than a month later, the investment group appointed d’Estienne d’Orves, an executive director of Tikehau Capital, to his post as CEO of IREIT Global Group. D’Estienne d’Orves had joined Tikehau Capital’s real estate team in 2018 after 11 years at AXA IM Real Assets, where he served as the firm’s co-head of European transactions for special situations.
In April of this year, IREIT clinched a 15-year lease with a German federal government body to take up 6,200 square metres of office space and 1,400 square metres of storage space at the trust’s Darmstadt Campus, representing 25 percent of the total lettable area at the property.