AXA Investment Managers – Real Assets a global leader in real asset investments and the leading(1) real estate portfolio and asset manager in Europe, announces that, on behalf of clients, it has agreed acquire significant stakes in two prime retail assets in trophy locations in Paris for €676 million in aggregate. The transactions comprise the acquisition for €473 million of a 75% stake in Italie Deux, Paris’ second largest shopping centre, from Hammerson plc, and the €203 million acquisition of a 50% stake in a prime mixed-use property complex, which includes the iconic ‘Passage du Havre’ retail centre, from Eurocommercial Properties.
THE HAMMERSON JOINT VENTURE
AXA IM – Real Assets, acting on behalf of clients, has agreed to acquire a 75% stake in the Italie Deux flagship retail and leisure destination in central Paris for €473 million, from Hammerson in a new joint venture. At 61,800 sqm and comprising c. 130 units spread over the basement, ground and one upper floor, Italie Deux is the second largest shopping centre in Paris and a dominant retail and leisure destination in the French capital’s 13th arrondissement. With over 12 million visitors per year from a large affluent catchment, Italie Deux’s footfall grew 5.4%(2) in 2018. Having been fully renovated in 2013, the asset also benefits from its central position in part of a larger complex, under separate ownership, that comprises a hotel, offices and residential buildings. In addition, the centre has excellent accessibility with three Metro lines directly outside the property, as well as easy access to the Périphérique ring road and underground parking for 1,500 cars units.
Producing annual sales of around €310 million, Italie Deux is anchored by a number of strong retail brands as well as leisure and entertainment attractions including a variety of popular food and beverage units and a 4,500 sqm 1,000 seat theatre. An extension of the centre known as Italik, which will extend its retail offering on to avenue d’Italie, is currently being progressed and is due to complete in spring 2020, adding 6,400 sqm of new GLA across 12 new retail, catering and leisure units, which are already 41% pre let, together with a coworking facility, as well as creating an attractive new façade for the existing centre.
AXA IM – Real Assets is confident in the potential to create further value at the asset, in particular through enhancing its food and beverage offering. A project to modernise all common lighting within Italie Deux was recently completed, which included fitting new movement sensors installed to maximise efficiency, has significantly improved annual energy consumption of the centre.
THE EUROCOMMERCIAL PROPERTIES JOINT VENTURE
AXA IM – Real Assets, acting on behalf of clients, has formed a new joint venture with Eurocommercial Properties, having agreed to acquire a 50% stake in a prime mixed-use property complex, for €203 million. Centrally located in the 9th arrondissement in the heart of Paris’ Haussmann-Saint Lazare commercial district, the iconic property is composed of three adjacent mixed-use assets occupying a corner block across rue St-Lazare and rue du Havre. Retail accounts for the majority of space (65%) in the 23,850 sqm asset, while offices (25%) and residential (10%) are incorporated to the upper floors of the six-storey buildings. There is also a four-storey underground carpark offering 150 spaces, which is a rarity in the area. The flagship ‘Passage du Havre’ property is centrally positioned and is the largest of the three buildings at 20,390 sqm. It features a renowned commercial arcade comprising 40 highly visible retail units and anchored by a leading French superstore. The assets have been acquired in prime condition and are fully let to a diverse mix of tenants, whilst offering attractive longer-term revisionary potential to enhance the income profile, including the flexibility of possible repositioning options.
The substantial property boasts one of the best locations in central Paris, opposite the Gare Saint-Lazare train station which sees almost half a million travellers per day and which the Passage du Havre is directly connected to via its own underpass. Its accessibility is set to further improve with the opening of a new station at Haussmann St-Lazare, as part of the Grand Paris Project, which will be served by the RER E suburban line. As well as being one of the city’s leading retail destinations in its own right, with the renowned Grands Magasins on boulevard Haussmann located close to the property, the mixed local environment is equally popular amongst office and residential occupiers on account of its excellent transport links and historic appeal.
Both assets will be jointly managed by the vendors, working alongside AXA IM – Real Assets’ teams of in-house local experts. Both transactions are expected to complete by the end of 2019, with the acquisition of Italik due to close 18 months after the extension opens in September 2020.
Antoine Mesnage, Head of Acquisitions France at AXA IM – Real Assets, commented: “These transactions provide us with an almost unique opportunity to secure access to two prime central Paris retail destinations, on behalf of clients, both of which would otherwise rarely come to market. Both the Italie Deux shopping centre and the ‘Passage du Havre’ retail led mixed use asset benefit from superb central locations, high footfall, and offer opportunities to create value, including leasing vacant space.”
John O’Driscoll, European Head of Transactions at AXA IM – Real Assets, added: “Over the past couple of years we have seen a build-up of increasingly negative sentiment toward the retail sector where all assets, regardless of their operational performance and other compelling fundamentals, including location, are viewed similarly. Assets like Italie Deux and ‘Passage du Havre’, benefit from significant public connectivity, have the highest footfall and, as a result are where retailers want to concentrate their presence in order to directly connect their brand with their consumers. There is no doubt that there will be winners and losers as retail and consumer habits continue to evolve, but we have a strong conviction that assets like these, if correctly managed, will maintain their relevant position in the retail universe over the long term. We are also very pleased to extend on extend our relationships with both Eurocommercial Properties and Hammerson, both of whom we have successful existing joint ventures with.”
Jeremy Lewis, CEO of Eurocommercial Properties, commented: “We are delighted to have entered into a further joint venture with AXA IM – Real Assets, one of the world’s most important and experienced institutional real estate investors, with whom we have built up an excellent and mutually rewarding working relationship over the past years.”
David Atkins, Hammerson Chief Executive, said: “Italie Deux is a high quality, strategically-located venue in the heart of the French capital. Our second joint venture partnership with AXA IM – Real Assets and this significant investment demonstrates the continued underlying strengths of our flagship European destinations. With an attractive line-up of retail and leisure brands and the Italik extension, we are confident that Italie Deux has a strong future.”
1 Source: INREV/ANREV Fund Manager Survey – May 2019 – in terms of assets under management
2 Source: Hammerson plc website