Big C plans REIT as part of Casino Group’s financial strategy for 2016

One of the plan’s components consists of externalising the value of the group’s real-estate portfolio through the participation of investors in its real-estate activities in Thailand and Colombia.

In Thailand, Casino’s Big C owns almost 800,000 square metres of gross leasable area (GLA) in its shopping malls, which are located in prime areas all across the country.

In Colombia, Xito’s real-estate activity includes more than 300,000 square metres of GLA, excluding hypermarkets.

Those transactions will create value for all shareholders and will enable both companies to pursue their development in their respective markets, where they already own leading positions, the group announced.

Big C Thailand and Xito will continue to fully consolidate their real-estate activities, it said.

The disposal of non-core assets includes in particular a project to sell the group’s operations in Vietnam.

Casino Group will therefore continue to focus on its growth strategy in its key markets in France, Latin America and Asia around buoyant assets.

Combined with the expected progression of free cash flow after dividends in France, this deleveraging programme will contribute to a significant improvement its financial structure, the group explained.

Meanwhile, Big C Supercentre’s board yesterday approved a plan to issue a real estate investment trust (REIT) to raise funds from the capital market in the next year, said Robert James Cissell, chief executive officer and president of the Thai listed company.

He said the budget and strategic priorities for the company next year and beyond were to further strengthen its platform and expand it, while at the same time maintaining tight financial discipline.

Big C is also considering monetisation options of part of its real estate, in particular the creation of a REIT.

A REIT is a fund under the trustee’s ownership. The trust founder can use an income-generating property to raise new capital for further development and investment in future projects.

A REIT provides a relatively strong and stable return on investment through rental income and other revenue streams as specified by the Securities and Exchange Commission’s regulations.

A part of Big C’s real estate – mostly comprising its Big C shopping centres – will be injected into the REIT, the CEO said.

Big C is considering several strategic alternatives and the exact portfolio has yet to be completed, with other assets such as some real estate at the hypermarket sites or logistics assets possibly included, as well.

The main objective of this strategic project is to make sure that the organisation of the company’s real-estate portfolio is optimised, and subsequently to unlock value for Big C shareholders, Cissell said.

Given the early stage of the project and the timeline to completion, it is too early to decide what would be the proceeds, and their use would depend on market opportunities, in the best interest of shareholders. The REIT will be an attractive way to maximise capital allocation for Big C shareholders, he said.

"At this stage, we are starting to conduct an in-depth analysis of our options in the first quarter of next year. Such a transaction typically takes six to nine months to be structured. Further communication will be issued as the project materialises," he added.

In a challenging market, Big C expects to maintain its brand price leadership in 2016 while benefiting from the improvement in store productivity and in working-capital efficiency with a completed supply-chain overhaul, he explained.

Expansion is targeted to continue to ramp up next year with the opening of six hypermarkets, three Big C Markets and 75 Mini Big C stores.

A further seven major Alcudia renovations should be completed during the year, including the Lop Buri and Bang Plee stores, work on which started in July.