LMVH Backed L Catterton Snaps Up World’s Most Upscale Outlet Group

A private equity firm backed by French luxury fashion power house LVMH Moet Hennessy Louis Vuitton, has bought the world’s most luxurious designer outlet group.

L Catterton has agreed to buy U.K.-based REIT Hammerson’s stake in outlet mall landlord Value Retail, which includes the famous Bicester Shopping Village, in a deal valuing the full portfolio at around $1.9 billion.

The transaction includes nine luxury retail properties outside major European cities, notably Bicester, close to Oxford, which has often been touted as the most profitable retail location per square foot worldwide and attracts droves of international shoppers every year, especially Chinese consumers.

Other locations include Fidenzo Village, Milan; Ingolstadt Village, Munich; Kildare Village, Dublin; La Roca Village, Barcelona; La Vallee Village, Paris; Las Rozas Village, Madrid; Maasmechelen Village, Cologne; Wertheim Village, Frankfurt; plus Shanghai Village, Shanghai and Suzhou Village, Suzhou in China.

Opening this Septemberin New York, Belmont Park Village will be the latest addition to ‘The Bicester Collection’, with the company promising landscaped open-air streets, restaurants and cafés and a suite of five-star guest services. It is close to the Belmont Park Racetrack and UBS Arena.

L Catterton has become an increasingly active investor in prime retail properties as it looks to take more control of the top locations for its brands. The Greenwich, Conn.-based business manages approximately $35 billion of equity capital across three multi-product platforms: private equity, credit, and real estate.

Founded in 1989, the firm has made over 275 investments, including Birkenstock, Pepe Jeans, KIKO Milano, Miami Design District, South Bay Galleria and Hong Kong Central among a wide-ranging and diverse global portfolio.

L Catterton Backs Real Estate

Led by co-CEOs J. Michael Chu and Scott Dahnke, the original Catterton Partners merged with the family office of LVMH founder Bernard Arnault (and LVMH in 2016 to become L Catterton and LVMH owns a 40% stake in the company.

“We have deep experience investing in luxury retail, and we are eager to leverage our operational expertise and global network of established relationships to partner with Value Retail and propel the business forward,” Chu said in confirming the deal.

The deal is surely a coup for L Catterton, with Value Retail holding a collection of prized outlet malls that lure millions of international shoppers, especially big-spending Chinese, Indian and Middle Eastern shoppers while traveling in Europe.

As in the U.S., European designer outlet centers have been among the retail destinations most robust against the rise of online shopping, although mall and office owner Hammerson had long sought an exit from its minority 42% stake in the business in part because of its lack of control over the company.

The deal will generate cash proceeds of just over $775 million for Hammerson, which has been on a long term drive to sell a number of major assets and reduce its debt levels. Shares in Hammerson rose by over 10% in early trading in London on Monday before dropping back and the company said that it plans to buy back up to $181 million in stock from the sale proceeds and to enhance dividend pay outs to 80%-85% of adjusted earnings.

“This is a transformational deal for Hammerson, generating cash proceeds of £600 million [$775 million] whilst removing an overweight, low yielding and minority stake, and positioning us for accelerated growth and value creation. The disposal focuses our portfolio on prime urban real estate with a transformed capital structure and the capacity and capability to advance our strategy in higher yielding opportunities with stronger returns,” Hammerson CEO Rita-Rose Gagne said in a London Stock Market statement.

The deal, which has been completed at a 24% discount to gross asset value, will reduce Hammerson’s loan to value ratio to circa 23%. It will leave the company portfolio focused on mostly U.K.-located large shopping centers and mixed use developments in urban locations and the transaction is expected to complete in the second half of this year.