4th Jun 2015 06:47
LONDON (Alliance News) - Sirius Real Estate Ltd Thursday said it intends to raise up to EUR50 million through a private placement of shares to help fund the acquisition of five mixed-use business parks in Germany for EUR58.2 million, as it also refinanced the two most expensive loans in its debt portfolio in a move that will boost earnings and cashflow.
The operator of business parks in Germany said the portfolio of parks it is buying have annualised rental income of about EUR5.4 million and net operating income of EUR4.7 million on a total lettable area of 103,610 square metres. The portfolio will have a net initial yield of 8.1%, a vacancy of 16.4% and a weighted average lease length remaining of 3.6 years.
The purchase price will be met partly by the share placing and partly by a EUR18 million bank facility that the company is currently negotiating. It expects the facility to have a fixed interest rate of about 2.5%.
Sirius also said it expects will repay two loans - the most expensive in its debt portfolio - with Macquarie Bank totalling EUR56 million early, and at the same time enter into a new ten-year EUR56 million debt facility with a margin of 135 basis points over the three-month Euro Interbank Offered Rate or Euribor. The new facility will be provided by a "new European bank lender" that it didn't name.
It expects this refinancing to result in an annual interest saving of at least EUR2.4 million, and a cashflow saving of about EUR2.0 million due to the removal of the cash sweep and reduced amortisation requirements. It also means that two assets that had a value of EUR25 million at the end of March that are being marketed for sale become unencumbered.
The combination of the equity raise, acquisitions and refinancing is expected to be around 16% accretive to Sirius' annual dividend per share and approximately 2.5% dilutive to net asset value per share. It will also see the group's loan-to-value reduce to 46%.
"The proposed acquisitions fit very well into our existing portfolio and are located within key markets near Stuttgart and North Rhine Westphalia in which we are looking to grow our presence. On completion these will generate immediate returns for shareholders as we exploit the yield gap between the new portfolio's cash generation and our low cost of borrowings," Chief Executive Andrew Coombs said.
"As with the EUR71 million of acquisitions that we have completed since our last equity raise of EUR40 million in December 2014, this portfolio presents significant opportunities for Sirius to increase net operating income through our asset management initiatives including expanding the tenant base and introducing our higher margin SME focused products. Over time we also expect them to add further to the capital value of the portfolio," he added.
The EUR50 million private placement is being conducted through a bookbuild by Peel Hunt in the UK and PSG Capital in South Africa. The results are expected to be announced in Monday.
By Steve McGrath; [email protected]; @stevemcgrath1
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