“The spin-off of shopping centers is connected with streamlining the administration and operation of this part of our company’s assets,” said Teska spokesman Václav Koukolíček without further details.
Separation into a special company is usually part of the usual procedure for the sale of real estate. It is not the given center or other real estate that is sold, but the company in which it is parked. Tesco did the same in previous cases, and a similar approach was used last year by the wholesale chain Makro.
The last five remain
According to the project published in the Commercial Register, the Chrudim hypermarket, the Silesia Opava shopping center, the Karlovy Vary Fountain, the Třebovice Gallery in Ostrava and the Eden shopping center are being prepared from the main company Tesco Stores.
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The latter is the largest, comprising more than a hundred stores. Even before the outbreak of the pandemic, however, Eden belonged to a more settlement-type center and did not aspire to the forefront in terms of attendance. Especially in the first years he fought with empty seats. A year ago, twelve units were empty.
In previous years, the Tesco retail chain got rid of most of the shopping centers it owned. The five listed are the last.
“We do not have any other shopping centers of this size, but we still own a number of smaller retail parks,” adds Koukolíček. He also points out that Tesco remains the owner of most of the premises of its stores and has the rest leased on a long-term basis.
The shops will remain in the property
Similarly, two years ago, the Tesco chain sold a shopping center in Pilsen on Rokycanská třída, which is now owned by the Trigea real estate fund, the SICAV. Other large transactions of the British chain included the sale of the Máj department store on Prague’s Národní třída to Amádeus Real or the Letňany shopping center.
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Even if the chain sells the center, as Teska’s spokesman pointed out, it will mostly remain the owner of the store. Somewhere it is also a remnant of the times when these shopping centers were owned by the French chain Carrefour.
For example, in Prague’s lucrative Nový Smíchov center, Tesco backed off from the first floor four years ago and halved its sales area, mainly at the expense of non-food goods. However, even then it remained the owner of the part on the ground floor, where the store continues.
Worse economic results
With the sale of Teska’s shopping centers, not only will operational worries and costs be eliminated and he will be able to focus on his key food sales, but he will also receive a significant financial contribution.
“These transactions are usually carried out in order to obtain funds for further investments, such as demanding concept changes or further expansions,” says Radim Pařík, a former long-term manager of Schwarz Group companies. On the other hand, in this group, which includes Lidl and Kaufland, it is common for companies to buy property shops.
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Tesco recorded worse economic results a year before the coronary crisis. For the last known financial year ending February 2020, it earned almost 43 billion crowns, down 3.6 percent year on year. Profit fell to half a billion from 2.5 billion last year.
“The decrease in profit in the past financial year was caused by two factors. The first was increased investment in customers, for example by reducing non-promotional prices on selected products and own-brand products. The second was the revaluation of assets in terms of their value to achieve the planned goals, “explains Koukolíček. According to him, the revaluation of assets is only an accounting operation without an impact on the company’s cash flow.
Unsuitable time for sale
The question remains whether now is the right time to sell. Shopping centers have been partially closed for most of the past year, some tenants are solving existential problems and almost all want better rental conditions. All this is reflected in the evaluation of real estate. But Tesco couldn’t count on that. According to the Commercial Register, the considerations on the allocation of shopping centers are older than the beginning of the coronary crisis. The expert opinion and awards relate to the last February of 2020, but were not published until March this year.
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According to experts, there are now greater differences between the individual formats on the market from the point of view of investors. “While shopping centers remain mostly closed and the difference between price expectations of buyers and sellers is more pronounced, on the other hand, there are retail parks that enjoy higher popularity and investor interest than ever before,” said Katarina Brydone, head of investment at CBRE .
Retail parks proved to be more resilient during a pandemic, similar to supermarkets or discount stores. In the retail park, there is usually one grocery store and around several stores with an assortment such as a drugstore, pharmacy, or some clothing or electronics. However, the shops have a separate entrance from the outside, which is an advantage in pandemic times.
In the area of retail parks and supermarkets, investor demand has been growing since last summer, adds Brydone. “In shopping centers, we generally perceive the delay or postponement of investment transactions, whether by sellers or buyers, rather than the situation stabilizing and pandemic measures easing,” he adds.
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