PropertyEU - AXA teams up with Apollo to buy Italian listed retail fund at 28% discount

AXA Real Estate has joined forces with US private equity group Apollo Global Management to acquire the remaining portfolio of Prelios’ Olinda Fondo Shops for €303 mln.

AXA Real Estate and Apollo’s European Principal Finance Fund II have signed a binding agreement to buy the remaining 26 assets in the listed closed-end fund, which is approaching maturity and is in liquidation mode. AXA and Apollo have agreed to close the deal before the fund’s maturity date of year-end 2014.

The price represents a 28% discount on the fund’s open market value per year-end 2013. A portion of the price - or €8 mln - is conditional upon the achievement of certain lease conditions on some of the assets.

Olinda - Fondo Shops is a real estate mutual fund managed by Prelios’ asset management arm and listed on the MIV of the Borsa Italiana stock exchange.

Launched in 2004 with €743 mln of properties, the fund specialises in retail and leisure assets and has generated an average return of 5% over the past years. With debt of €220 mln, it currently owns €420 mln worth of properties including stores, retail facilities and multiplex cinemas, primarily located in the regions of Piedmont, Lombardy, Veneto, Friuli Venezia Giulia, Emilia Romagna and Lazio. The portfolio has a total gross lettable space of 280,000 m2 with a vacancy rate of 12% and a gross yield of 5.6%.

Investment bank Lazard advised Prelios on the sale.

Prelios Sgr said in a statement that the fund unitholders will receive a first equity reimbursement of at least €85 per unit after the approval of the 2014 annual report. Olinda’s units were valued at €106.4 at year-end 2013, reflecting a 71.6% discount to NAV, but the units' trading price rose by 52% to €161.5 in the first quarter of 2014.



AXA Real Estate has been a first mover back into the Italian real estate market with the acquisition last year of the Bodio Center for €64 mln, or a yield of 10.5%. The European investment manager recently acquired the U10 office property in Milan for €44 mln as well as a 7,154 m2 property at Milan’s Via Tazzoli for €20 mln.

With capital gradually coming back to the long moribund Italian property market, a number of closed-end funds approaching maturity have been looking to liquidate assets. However, listed closed-end vehicles have no easy way out as their units are trading at an average discount of 38% to net asset value (compared to a peak of 57% in October 2012).

Market experts estimate that there are 26 closed-end funds in Italy approaching maturity by 2021, representing in total some €6 bn of assets. Around €1.1 bn is expected to come for sale this year from three retail funds in liquidation. Another five funds are expected to offer €1.2 bn worth of properties in 2015 and six funds another €1.4 bn in 2016.

According to adviser CBRE, an additional €1 bn of assets will be put on the market by the German open-ended funds in liquidation such as SEB ImmoInvest and CSAM IMMO. 'The bulk of the product offer in the coming months and years will come from the real estate funds as well as the banks,' commented Paolo Bellacosa, head of capital markets at CBRE Italy.

Demand is also picking up. CBRE estimates that foreign investors made offers representing at least €4 bn of capital for portfolios as well as single assets currently on the market.

Rome-based IdeaFimit recently turned down an offer from US private equity group Blackstone for its Atlantic 1 closed-end fund, currently in liquidation. Blackstone had presented a bid of €335 per fund unit, valuing the entire fund at around €175 mln. This represented a discount of roughly 35% to the fund’s net asset value per unit of €505, or €263 mln in total.

Meanwhile, asset manager Beni Stabili Gestioni Sgr's Italian Real Estate Fund (IREF) has launched the disposal of a value-add portfolio of five office and logistics properties for a 30% discount to the assets’ acquisition price before the financial crisis. Launched in 2004, the vehicle comes to maturity at year-end 2015

Last updated: 11/07/2014 16:39