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Wohncenter - Summary
Location: Emmen, Switzerland
Tenant: Multi-tenanted
In September 2006, Pentrich Investments Limited ("Pentrich") acquired Wohncenter – a newly constructed shopping centre in Emmen, Switzerland. Wohncenter’s gross acquisition cost was CHf 231m. The centre was purchased at a net initial yield of 4.9% on gross acquisition cost.
The Wohncenter was revalued in August 2008 by Engel and Volkers at a 5% yield equating to a sale price of Chf 236m.
The value of the investment in Wohncenter has increased partly as a result of the strengthening of the Swiss franc. The NAV per share as at 31 October 2008 is £1,278.66.
Distribution
The Directors of Pentrich have declared a fourth dividend of £715,000 (£47.67 per share). This dividend relates to income earned for the 6-month period to 30 September 2008. Distributions to date equate to 8.38% pa. The next dividend distribution will be for the six month period to 31 March 2009 and will be distributed in May 2009.
Funding
£15m of shareholders’ equity was used to complete the transaction and Chf 195.3m of bank debt. Deutsche Bank provided funding of 90% of the purchase price. The funding is in place until 2013. The first three years of the loan are interest only with amortisation commencing in 2010.
Tenant
Construction of the shopping centre was completed in 2005, after a ten-year planning and construction period. It has a net lettable area of 48,315 sqm, spread over three floors.
The scheme is anchored by Mobile Pfister, Conforama, Interio,
Co-op, Tip Top, Migros and Fust AG, who are household names within Switzerland and continental Europe. The lease for the last empty space was recently agreed and the centre is now 100% let.
Rent
The annual rental income has increased from Chf 11.44m to CHf 11.79m. Chf 0.25m is attributable to indexation and the other Chf 0.096m to recent lettings. The average lease term remaining has decreased from 14 years to 11.85 years.
Capex
There is additional storage space of 60 sq meter being built at a loss of 5 parking spaces. The new tenant (Helvietia) is taking up this space and will pay approximately CHF 5,400 p.a. The cost of building this estimated at CHF 22,000.
The computer systems used to manage the shopping centre facility will be updated at an estimated cost of CHF100,000. This will be done towards the end of the year.
Planning approval has been received to build a catering outlet in the car park and above the mall. The management company is progressing this issue.
Status
The centre is defined as a "Living Centre" due to a high proportion of the space being allocated to furniture, home appliances, gardening and decorating.
The property is well positioned between Lucerne and Emmen, where the centre has a catchment area of around 600,000 people. It is located near a highway intersection, where the passing traffic amounts to approximately 150,000 cars per day.
Although we continue to receive offers to acquire the Wohncentre, we intend to hold onto the property for the foreseeable future.
Important Notice
The investment is suitable for those investors who understand the risks involved and who are able and willing to withstand loss of investment. Investors are referred to the summary of risks listed in the Private Placement Memorandum before making an investment.
Investors should be aware that the shares are not listed and are regarded as non-readily realisable investments. Any investment should be intended to be long term. It may be difficult to sell the shares at a reasonable price and, in some circumstances, it may be difficult to sell the shares at any price. Although the Company has the power to purchase or redeem its shares in certain circumstances it is not obliged to do so and investors should not expect that it will do so.
Market movements may cause the value of the investment and the income thereon to up or down and you may not get back the amount invested. Past performance is not a guide to future performance.
Investors should not invest in the shares unless they have carefully considered whether or not such investment is suitable depending upon their circumstances and they should take advice before investing.
