translated from Spanish: Cencosud: opening of the real estate arm returns to the desk of Paulmann

the possibility of opening the market its real estate arm has become for Cencosud in doing that is on the agenda and which is regarded askance, which always worthwhile in the work of the holding retail who fights the sceptre to be the most important in Latin America.
It is not the only outstanding promise. Controlled by Horst Paulmann Elephant Group has several commitments that meet you at the market, even more so after the departure of its corporate general manager, Jaime Soler, who will leave the post in September, after a long career by the German entrepreneur and, even have been profiled as his possible successor.
The Executive setting in Cencosud leaves some questions in outdoor, including how they deepen their digitization and will compete with the arrival of new brands like Ikea, also how much accelerator will go on the sale of assets with poor performance, as the of some cities, mostly in the North of Brazil.
But certainly the most relevant is if Paulmann will give you the let an initiative that, despite relying on the financial management of Cencosud and not corporate arm, Soler has supported, being even to soon leave the company: meet the Word open part of the pro piety in the bag, but forming an independent company where join real estate assets.
The idea was already on the table until the summer of 2017, when it was officially in the freezer. BTG, along with JP Morgan and Merrill Lynch, were contracted from 2015 to analyze the opening of its real estate arm and analyze the feasibility and the impact of the operation, but everything is was turning, because Paulmann was not willing to put the final signature to the project forward to a following stage, as the formation of society, actions and key registration, search of investors.
Then the calculations pointed to that company that will draw together the real estate assets of the group, including the Costanera Center, would open up to 25% of the property. Preliminary estimates of market spoke of a levy of up to US $1,200 million, double what, in an historic operation for the last decade, marked the opening of Mall Plaza (which placed nearly 12% of its property).
“It is not yet time,” were the words that then Paulmann used to avoid deepening the idea. But the scenario could be a turnaround, then began to sound between several operators in the market that the idea be dusted desks in Cencosud and which, pressed – in part – by the market, the entrepreneur has again the theme in agenda, knowing that this time can not go back. That – say sources-, because it would show a lack of seriousness that might not be evident for the second time. “The issue is certainly on the table,” adds a connoisseur.
In favour is that the collection of the IPO of the real estate arm of the Group would restructure all its debt, leaving the firm completely clean. The Administration, still in the hands of Soler, has been partisan push the idea, although the seen good end Paulmann has it. Excited by the new spirit which takes the idea, the traders have already played at the door of the entrepreneur. “All want to stay with the business and have to offer their services to the office of Paulmann”, said a manager of the area.
Despite the fact that the subject is not approved, other retailers observe carefully the strategic move that can make Paulmann. “It is, on the one hand, the precedent of the opening of Mall Plaza, which worked well. On the other hand, which now comes a Falabella capital increase by $800 million. I.e., if the Group decides to do so must be at the time right, but neither can wait too long and seem that as his health worsens, the position of other retailers favors”, is an Executive in the sector.
“It is not yet time,” were the words that then Paulmann used to avoid deepening the idea. But the scenario could be a turnaround, then began to sound between several operators in the market that the idea be dusted desks in Cencosud and which, pressed – in part – by the market, the entrepreneur has again the theme in agenda, knowing that this time can not go back. That – say sources-, because it would show a lack of seriousness that might not be evident for the second time. “The issue is certainly on the table,” adds a connoisseur.
Paulmann has a special appreciation for the real estate sector. In fact, has been involved in first person to your project star, its “chiche”, the Costanera Center, where an office is set up, every detail of their remodeling goes through its approval, and respect which his current obsession is to achieve the necessary permissions to open the new stage that includes a hotel and offices. Has offered to buy buses of the Transantiago, as part of them mitigations for unlock them demands of them authorities, that is looked flexiblizadas then that the Comptroller General you gave the approval for provide them capital to the municipality of Providencia, so that they may determine the timing of expenses. But the solution still don’t see definitive light.
The definitive signature at the opening of its real estate arm subsanaría fully two promising group: on the one hand, that of the exit bag, but also, on the other, the raise $ 1 billion from the sale of surplus assets to restructure its debt made by the same Soler, who committed the turnover on Cencosud Day October 2017. But the fundraising front the total committed still is low, considering that the last and more recent operation is the sale of the control of your business financial to Scotibank in Peru, by $ 100 million.
The business about the business of shopping malls, this consists of real estate investment, development and project management. Revenues come mainly from rents charged for the use of their facilities to – Paris, Jumbo, Easy – related companies among others and to third parties for commercial premises. Until 2017, the company owned 54 shopping centres in Chile, Argentina, Peru and Colombia, a total area of sales of 2.026.942 meters.
Feller Rate Agency, in June of this year, said in a report that the company presents high occupancy rates in malls: “in this respect there is occupation rates above 90% in Chile, Argentina and Peru, according to the industry they belong However, in the case of Colombia this decreases to 34.4%, due to the ownership structure of these malls”.
The area real estate of Cencosud is reported as centers commercial in their States financial. While it is not the business segment that brings higher revenues, it is the lower expenses and the best utilities. Last year, this area generated him cencosud total revenues by $635.799 million, with earnings of $574.576 million, exceeding several times the item of supermarkets (with earnings of $213.300,7 million), ($100.453,1 home improvement segment million), financial business ($113.271,8 million) and Department ($25.101,9 million). In 2017, the company obtained close to $440 billion consolidated profits.
This process occurs in the midst of a strong change in the retail industry in regards to the behavior of the consumer, increasingly more accustomed to buying on the internet.
In this regard, the company realized keep track of this transformation in his memory for the year 2017, stating that “retail has become considerably in recent years, driven by the changes that has led to the development of the internet, the” technology and digitization. Today, the traditional sale (offline) is being challenged by the e-commerce; increasingly important sales channel. Develop online sales channels, however, involves challenges, both economic and operational. The focus must always be on the consumer and their transformations. Companies need to be able to understand how evolving consumer value equation for success. Required speed in adapting the equation where the logistics changes and technology come to play a much more important role”.
In the market, this is an operation which is expected some time. There are investment banks that have become to be contacted to restart the process, but in the industry is a fact that there is the rumor that Paulmann returned to loading by open market its real estate arm.
A Senior Executive of the market and that is dedicated to corporate finance, argues that operation makes total sense, as Cencosud transa 11 x EV/Ebitda, while the malls do so at 17 x. And while the shift to online consumption poses a threat, the value of real estate assets is that are imperishable, for what they are worth are the grounds, regardless of its use.

Original source in Spanish