WWD.com/retail-news/retail-features/prada-in-104m-real-estate-sale-589040/
government-trade
government-trade

Prada in $104M Real Estate Sale

Prada has inked a 77 million euro real estate deal, its second such sale this year, as it seeks to generate cash and lower its debts.

MILAN — Prada has inked its second real estate sale of the year as it seeks to generate cash and lower its debts.

The fashion house has agreed to sell seven real estate assets, including warehouses, laboratories and offices, to Spazio Industriale for 77 million euros, or $103.95 million at current exchange rates. Spazio Industriale, a joint venture that is 75 percent-controlled by Soro Real Estate Investors and 25 percent owned by property firm Pirelli RE, will in turn rent those spaces back to Prada.

The deal, announced in a joint statement from Prada and Pirelli RE, should be finalized by the end of January. Spazio Industriale also has the right to purchase another two industrial sites from Prada within a three-month period from the deal’s closing date. Spazio Industriale said the Prada deal will lift the market value of its real estate portfolio to more than 200 million euros, or $270 million.

It brings the total amount raised by Prada through real estate transactions this year to more than 200 million euros, or $264 million.

This is Prada’s third real estate transaction over the past couple of years. The multibrand fashion and accessories group is trying to chip away at the debts amassed from buying brands like Jil Sander, Helmut Lang, Church & Co, Azzedine Alaïa and Genny during the luxury mergers and acquisitions boom of the Nineties.

Last month, Prada postponed its initial public offering for the fourth time until some time after 2005. It has clearly renegotiated the terms of its debts with the banks, thus reducing the urgency to go public. In the meantime, Prada has also been working to reduce its debts through a series of small asset sales like the latest real estate deal.

ITMD Investments BV, the holding company that controls Prada, has convertible bonds worth 700 million euros, or $945 million, plus interest that are due next June. If Prada had gone to the stock market by then, those bonds could have been converted into Prada shares. On top of that, Prada Holding N.V. had net debts of 675 million euros, or $911.25 million, at the end of 2003. The company has said it wants to bring those debts below the 300 million euro, or $405 million, threshold by the end of 2004.

This story first appeared in the December 28, 2004 issue of WWD.  Subscribe Today.

Earlier this year, Prada sold off about 130 million euros, or $175.5 million, of real estate to Beni Stabili. Last year it formed a joint venture with Italian company Aedes to manage other property assets. Aedes holds 80 percent of the venture, called Real Estate International Srl, and Prada controls the remaining 20 percent. This new company bought about 100 million euros, or $135 million, worth of Prada’s real estate and leased those spaces back to Prada.

Prada isn’t just disposing of factories and office buildings, however. Last year, it sold its 55 percent stake in British footwear firm Church’s to Swiss investment fund Equinox, generating a 25.8 million euros, or $34.83 million, gain. Over the past few years, fashion observers have speculated that Prada might try to sell one of its other brands, such as unprofitable Jil Sander — which last month saw its namesake designer leave for the second time in four years — or Helmut Lang. Prada has repeatedly denied it is shopping those brands around.

Prada chief Patrizio Bertelli told Italian newspaper La Repubblica last month that he wouldn’t rule out selling Helmut Lang or Jil Sander. A few days later, however, Prada spokesmen restated the company’s original line, saying neither fashion house is on the block.