Regional REIT has announced that it has reached an agreement with The Conygar Investment Company PLC to acquire UK regional office, industrial and retail & retail distribution investment properties owned by Conygar (the Conygar Property Portfolio) which, in total, are valued at circa £129m. Regional REIT says that it will acquire the properties by way of purchasing the Special Purpose Vehicles (SPVs) that own the individual assets. It also says that this is a significant deal that will allow it to expand UK regional footprint and to expand its asset management opportunities. Further details on the portfolio are provided below.
The mechanics of the acquisition incorporate a number of elements. These are detailed as follows:
- Regional REIT is to issue ordinary shares at its EPRA Net Asset Value (30 June 2016), adjusted as agreed between the parties, to acquire the Conygar Property Portfolio at the net asset value of the SPVs, again adjusted as agreed between the parties.
- The purchase price will be satisfied, up to £28.0m, by the issue of approximately 26.3m Regional REIT ordinary shares to Conygar (subject to adjustment) and the assumption of two existing secured banking facilities (totalling £69.5m).
- The balance of the consideration will then be met by Regional Commercial Midco Limited, a wholly owned subsidiary of Regional REIT, acquiring Conygar ZDP PLC, a wholly-owned subsidiary of Conygar, and assuming Conygar’s obligations to fund the liabilities of Conygar ZDP (subject to certain agreed adjustments). The liabilities are reportedly in the region of £35.7m.
- The proposed acquisition is conditional upon the approval of Conygar’s ordinary shareholders and, separately, of the holders of the ZDPs.
- In addition, the completion of the proposed acquisition requires the approval of the change of control by the two banks currently providing secured debt facilities to Conygar.
The Conygar Property Portfolio comprises 31 mixed-use property assets amounting to 1,280,980 sq. ft. with a gross investment value of c. £129m (as at 30 September 2016). The Portfolio consists of 153 units and 115 tenants. By value, offices represent some 60% of the Portfolio and 12% is industrial. In addition, retail & retail warehousing represents 21% and leisure is 7%. The largest single asset is c. 11% of the gross asset value of the Portfolio being acquired.
Regional REIT says that the Portfolio is geographically spread across the regions of England & Wales outside of the M25 motorway, with Scotland amounting to c. 20% (by value). There is reportedly a minimal overlap of tenants with the existing lettings of Regional REIT.
The net initial yield of the Portfolio is 7.0%, assuming standard purchaser’s costs of 6.8%. Occupancy (as at 30 September 2016) amounted to 82.9% (by rental value) of the Portfolio. The weighted average unexpired lease term to expiry is 5.8 years; WAULT to first break is 3.8 years.
Regional REIT says that the Portfolio comprises institutional investment quality assets and that it has identified numerous active asset management opportunities across the Portfolio, offering increased occupancy, reduced void costs and higher rental income. The proposed acquisition is expected to complete on 24 March 2017.
Regional REIT to acquire a £129m portfolio from Conygar : RGL