Carrefour to unlock value from €24bn real estate portfolio

The French hypermarket group appears to have capitulated to demands by shareholder Colony Capital to release value from its vast property estate by spinning off pan-European vehicle, Carrefour Property, in 2008.

Carrefour, the hypermarket giant in which Los Angeles firm Colony Capital and French billionaire Bernard Arnault own a near 10 percent stake, appears to have handed the investors a partial victory by agreeing to sell French, Italian and Spanish stores into a publicly listed European property vehicle.

Alongside half yearly results today, the world’s second largest retailer revealed plans to spin off a Carrefour Property sometime in 2008 subject to market conditions.

The newly created vehicle will own around 280 hypermarkets and 540 supermarkets in France, Italy and Spain representing 60 percent of its total property portfolio valued at €20-24 billion ($27-33 billion).

Carrefour will retain ownership of the majority of the vehicle by value. However €3 billion of capital will be opened up to third party investors.

Los Angeles based Colony is not expected to take part as a buyer in that sale. Instead as a significant shareholder in the company it stands to gain from share buybacks and perhaps future moves by Carrefour to free up capital from its estate.

Carrefour says proceeds from the IPO and other divestments will be returned to shareholders mainly via share buy backs to “maximize shareholder returns.”
Private equity real estate capital firm Colony has been agitating the Carrefour board to unlock value from its real estate portfolio much like it did with French hotel group Accor in which it owns 10 percent of all shares.

In March it teamed with Arnault to buy a 9.1 percent stake for around €4 billion and two months later strengthened its hand when head of European operations, Sebastien Bazin, was granted a seat on the board of the supermarket group. A representative of Arnault also took a seat.

Carrefour said in its announcement it is maintaining control of its assets. This appears to be at odds with calls by Colony head Tom Barrack earlier this year when he reportedly said the chain should sell and lease back its property in order to fund further expansion. Colony did not release any statement in response to Carrefour’s news.