Gazit-Globe Ltd. (NYSE: GZT; TASE: GZT; TSX: GZT), a multi-national real estate company, controlled by chairman Chaim Katzman, will acquire all the shares in Norway’s second largest commercial real estate company, Sektor Gruppen, for $1.62 billion, in cash about $700 million, and by the assumption of debt. The deal will take place through Citycon, Gazit-Globe’s Finnish subsidiary.
The largest shareholders in Citycon are Gazit-Globe (42.8%) and Canadian fund CPPIB (15%), which have undertaken to inject capital according to the proportion of their holdings in Citycon. A banking syndicate has made undertakings for the remaining capital, so that Gazit-Globe’s share of the capital injection will be $250 million. Together with the capital injection, Citycon has reached understandings with Sektor Gruppen’s lending banks for a $275 million bridging loan to cover the balance of the debt, which will include, among other things, two bond series on the Oslo stock exchange.
Sektor Gruppen owns shopping centers with supermarket anchors. The main properties of the company are located in Oslo, Stavanger, and Bergen. As of now, Sektor Gruppen owns 20 commercial centers, 17 of which it owns completely, with an aggregate area of 4 million square feet and a 97% occupancy rate. The company also manages 2 million square feet of other commercial properties. The company’s properties generate $150 million, reflecting a 5.4% net operating income (NOI) ratio in 2014. The company’s current owners are Swedish real estate fund NIAM; Sektor Gruppen chairman Peter Stordalen, who owns the largest hotel network in Scandinavia and a leading real estate firm in Norway; and the Johannson and Varner families, who own the largest retail and clothing chains in Norway , respectively.
The acquisition will make Citycon, managed by CEO Marcel Kokkeel, the largest Nordic public company in its field, and the third largest in Europe. The company, which has a $1.8 billion market cap on the Finnish stock exchange, own 59 commercial properties with supermarket anchors in Finland, Sweden, Denmark, Estonia, and Lithuania with an aggregate area of 9.4 million square feet. The average occupancy rate for its properties is 96%, and its annual rent return amounts to 6.3% of the value of its properties. As of the end of the first quarter of 2015, the company’s properties were worth $3.1 billion with a 40.8% LTV ratio, making the net value of its properties $1.83 billion.
The deal is slated for final signing this July, following which the value of Citycon’s properties will jump 35% to $4.8 billion, with a net asset value of $2.5 billion. Citycon’s portfolio of properties in Norway will account for 32% of its total asset value of 27% and of its NOI, while the proportions of Finland and Sweden will drop from 51% and 39% to 35% and 26%, respectively. The acquisition will also make Europe’s share in the annual NOI (including Atrium) of Gazit Globe, Citycon’s parent company, 48%, greater than the 46% accounted for by the Western hemisphere (US, Canada, and Brazil). The proportion accounted for by Israel will shrink to 6%.
“This deal once again proves that the Gazit-Globe group is a significant player in the global commercial group market, and also proves its abilities to enter new and attractive territories with high entry barriers, while we’re enhancing the value of our asset portfolio and the cash flow resulting from it, ” said Chaim Katzman, following the deal, which will make Norway’s share of Gazit-Globe’s properties 7%.