MILAN — Prada Holding NV took another step toward lowering its debt this week, forming a joint venture with Aedes SpA to create Real Estate International Srl.
By the end of the year, the new company will acquire a number of real estate assets owned by Prada for about $116.8 million. The assets include development areas, stores and offices, but a spokesman for Prada declined to provide further details about specific locations or sites. Dollar figures are converted from the euro at current exchange rates.
Aedes will hold 80 percent of the stock capital of the venture, which will manage Prada’s real estate assets, which will in turn be leased to Prada’s subsidiaries. Aedes, a real estate company here, is listed on the Italian stock exchange and is headed by Luca Castelli. The acquisition of the real estate assets will be financed through capital injections by shareholders and through bank financing by Credit Lyonnais and Barclays Bank.
The Prada spokesman said this operation allows the firm to estimate a debt of under $817.6 million by 2004. The group’s total real estate assets are estimated to be worth more than $700.8 million.
In a statement, Prada said the two companies intend to pursue other “similar transactions” together in the future, in Italy and internationally.
“This operation allows Prada to maintain control of its real estate in a way that is functional to its business,” said Paola Durante, luxury goods analyst at Merrill Lynch. Durante said Prada’s real estate assets would otherwise weigh down its balance sheet, with returns lower than those of Prada’s core business.
“They would dilute the return on capital employed,” she said, adding it makes more sense for a company specialized in real estate to manage those assets.
“This is a good operation because it will bring added value to Prada’s real estate patrimony, and fresh funds for the operative management,” said Andrea Paladini, luxury goods analyst at Centrosim. Paladini said there is “no need” for a firm like Prada to directly control its real estate assets.
Gianluca Pacini, analyst at Caboto, said, “The 20 percent holding will allow Prada enough weight in the decision making.” While Prada will have the added costs of rent, the venture will lower the group’s debt, related interest rates and management costs.Now that Prada’s initial public offering is on hold, the group has been looking for ways to chip away at its debt, collected through the acquisitions of labels Jil Sander and Helmut Lang, among others.Selling its 25.5 percent stake in Fendi to LVMH Moët Hennessy Louis Vuitton helped Prada lower its net debt to $807.2 million at the end of last year from $1.15 billion at the end of 2001. That compares with 2002 sales of $1.81 billion.
In 2002, Bertelli sold Byblos to the Italian Swinger International. In April, Prada sold 45 percent of Church’s to private equity fund Equinox Management Co. SA for an undisclosed sum. Prada now owns Jil Sander, Helmut Lang, Genny, Azzedine Alaïa and Car Shoe.
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