Covivio, through its subsidiary Beni Stabili, has closed today the disposal of a portfolio of non-strategic assets in Italy, including the building Excelsior in Milan and two office properties located in Turin. The price of €220.5 million is in line with last June book value (implying a net exit yield of approx. 4%[1]). With this disposal, the company crystalizes the value creation realized during the 1st half of the year following the re-letting of the asset in Milan, while increasing by ca. 2 pts the exposure to Milan offices, up to 72%[2].
Excelsior is a high-street retail building, located in the heart of Milan just behind the Duomo. Last July, Covivio has successfully signed a new lease agreement for approximately 5,000 m² with Hexagon, which is expected to replace the existing main tenant during the course of 2019, after a complete refurbishment of the building. Hexagon, part of the Percassi Group, is a vehicle dedicated to the development of Victoria’s Secret stores franchised network in Italy, France and Spain. Excelsior is expected to host Victoria’s Secret largest flagship store in Italy.
This disposal successfully finalizes the asset management cycle for this property acquired in 2006: the building was reconverted from a cinema/theatre into high-street retail and was recently re-let with a significant rise in rent. This increase, which has been reflected in the H1 2018 asset value, allowed Covivio to fully benefit from the positive momentum of Milan’s high-street retail real estate market.
The other assets of the portfolio consist of two multi-tenant office buildings located in the center of Turin. The assets total over 44,000 m² of GLA and are almost entirely let.
This transaction confirms the strategy to focus on Milan offices through a proactive capital rotation policy based on the disposal of mature or non-strategic assets (retail and assets outside Milan) and the reinvestment of the proceeds into new properties or development projects in strategic locations in Milan, with attractive yields as well as strong value creation potential.
[1] Based on rents adjusted for the impacts of the new lease agreement signed on the Excelsior asset in Milan
[2] On the Group share porfolio value
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