Accelerate will acquire a portfolio of 9 well located retail warehouse properties tenanted by OBI GmbH & Co. Deutschland KG’s applicable subsidiaries for an aggregate acquisition value of €82.1 million at a blended acquisition yield of 7.0% based on contractual rentals.
OBI is the largest specialist do-it-yourself retailer in Central and Eastern Europe (“CEE”) with total revenues of over €4 376 million and EBITDA of over €265 million.
In the first quarter of 2016 the Accelerate board of directors approved a plan to invest in CEE by acquiring Euro or Euro linked real estate.
The strategy is underpinned by a defined investment philosophy to develop and acquire single tenant net leased properties that are strategic to blue-chip multinational or large regional tenants in countries that meet defined minimum investment criteria and that are considered core markets to such tenants (specialist focus within an established and defensive asset class and exposure to blue-chip investment grade tenants).
Austria has one of the highest GDP per capita figures in Europe with above average growth forecasts and low political risk. Slovakia is one of the fastest growing economies in Europe with rising real wage growth, rising disposable income, strong domestic private consumption and strong manufacturing and industrial activity.
Accelerate has incorporated a Netherlands domiciled subsidiary (“Accelerate Europe”) through which Accelerate will acquire the Portfolio. Accelerate Europe has been integrated seamlessly into Accelerate’s existing operating, investment, governance and reporting structure, including the retention of a committed and experienced local management team with significant local knowledge, experience, networks, relationships, deal flow and presence in the region. Management have significant experience in property development, property acquisition, property asset management, tenant relations, finance, treasury, reporting and risk management having concluded in excess of €2.5 billion in property transactions across CEE. This significant experience and local knowledge provides access to networks and off-market acquisition and development opportunities and avoids the setup costs and pitfalls of investing in a new market.
Accelerate will seek to create an independent listing for Accelerate Europe (subject to market conditions) on a recognized stock exchange once the appropriate scale and asset/country diversification is achieved.
The Portfolio generates net operating income of €5.7 million and includes 9 big-box DIY retail stores (6 in Austria and 3 in Slovakia) tenanted by OBI, the largest DIY retailer in the CEE with a weighted average lease expiry of 12.9 years. The portfolio is characterised by coveted locations with good access, exceptional visibility and situated in established retail nodes within a large catchment area or close proximity to retail that is complementary to DIY. Included in the Initial Portfolio is the flagship and largest OBI store in Austria. The flagship store has an independent valuation of €41 million and accounts for 47% of the Initial Portfolio.
Independent valuations have been completed by CBRE which indicate the significant off-market nature of the Transaction as the Initial Portfolio is priced at a 6.7% discount to market value (€5.9 million discount). The simple warehouse construction and loading capabilities provide opportunity for conversion to other value retail / logistics if required.
All leases are guaranteed by OBI with escalations at 75% of Austrian CPI once a threshold of cumulative Austrian CPI of 10% is achieved.
In order to align local management with the interests of shareholders, Accelerate Europe have introduced a long term share incentive scheme which encourages key individuals responsible for Accelerate Europe to “outperform” and to create shareholder value in a “paid for performance” manner. The scheme includes both retention and performance elements with value creation achieved through capitalisation rate compression.
The board of directors of Accelerate is satisfied that the aggregate value of the Initial Portfolio as shown above is in line with the directors own assessment of the aggregate value of the portfolio and the purchase price being paid by Accelerate.