One of the biggest transactions of the year in the Czech real estate market is about to take place. Negotiations for the sale of the OC Letňany shopping centre are supposedly ongoing in Prague. After six years, the German owner of the shopping centre is considering selling the property, writes HN.cz, as confirmed by two sources from the Central European M&A market.
Negotiations on the sale of the Letňany Shopping Centre (OC Letňany) have reportedly been ongoing already for some time. However, it is not a public offer, as a reliable source told HN.cz. According to another source, German investors are now selling off the assets. OC Letňany is owned by a fund managed by the German financial colossus Union Investment through the Luxembourg company VGV Property Investment. "Due to the high performance of the centre and its highly attractive location, we receive offers from time to time," admits Fabian Hellbusch, Director of Marketing and Communications at Union Investment, to HN, and continues, "However, we are not considering a sale at the moment and there is no active sales process." According to the newspaper, similar statements are common in such transactions. This is especially true at a time that does not favour giant deals.
"I would be surprised if the sale would take place now," said the second of HN's sources, adding that the investors are demanding a higher rate of return (the share of the annual rent on the price). However, a higher required rate of return means a lower price. Experts say that the rate for shopping centres has increased from around five to six per cent. "However, the price correction mainly reflects higher financing costs, which are currently significantly higher than a year ago," Lenka Šindelářová from the investment department of the real estate and consulting company 108 Agency points out. Due to different price expectations of investors and sellers, transactions are currently being delayed. According to Šindelářová, the centre is one of the most important and largest shopping centres in the Czech Republic. "Letňany fulfils the idea of trophy property in the Central European context. There are only a few similar centres in Prague: Metropoli Zličín, Westfield Chodov, Nový Smíchov and perhaps even Palladium," Šindelářová says.
However, the property may be interesting for investors. "It is a successfully established shopping centre of an attractive size," says Zdenka Klapalová, Managing Director of Knight Frank, adding that Tesco is a key tenant, and the cinema is a major attraction for visitors. "There will always be interest in an established shopping centre with good footfall, a good tenant mix and good accessibility," notes Josef Stanko of Colliers.
According to the experts, those interested in Letňany will be mainly from abroad. According to Klapalová, it may be, for example, an investment fund that is active in the markets of Central and Eastern Europe. "Several recent transactions have shown us that those interested in Czech shopping centres are located, for example, in Slovakia or Poland. However, Czech real estate funds are also always looking for new opportunities," Stanko adds. Even in the current situation, Šindelářová believes that this is an interesting investment opportunity. The price should be in the order of billions of crowns.
Germany's Union Investment bought the centre in 2016 from the retail chain Tesco. A year earlier, the latter was also considering selling part of its business in Central Europe due to the huge losses of the entire British group. In the end, Tesco decided to sell off its Czech properties, including Letňany. "At that time, the centre was sold for around €200 million. Since then, rents have risen, so a price of around €250 million may not be far from reality," says a real estate source who did not wish to be named. In crowns, the amount would be around 5.8 billion, which would represent one of the largest transactions on the domestic real estate market this year. After all, the largest transaction in the first three months, amounting to around a quarter of a billion euros, was the purchase of 60 supermarkets and ten retail parks under the Vendo brand in the Czech Republic and Slovakia from German firm Trei Real Estate. The investment was made by the Prague-based Plan B Investments group.
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