Adamas Finance to invest more in Japanese ski village – Adamas Finance Asia has signed a conditional share sale and purchase agreement with Infinity Capital Group to acquire 40% of Infinity TNP. Infinity is a real estate developer of premium residential projects in the Asia Pacific region, including in Hirafu Village, a world-class ski resort in Niseko, Japan. On completion, Infinity will transfer seven property units in a luxury hotel condominium being built by Infinity, Tellus Niseko. This will be leased out for guest occupation all year round once construction is completed, which is expected in December 2019, in time for the 2019/20 winter season.
Dilution for shareholders
The consideration is GBP5,630,400, which will be settled by issuing 16,179,310 ordinary shares to Infinity at a price of 34.8p per ordinary share. This is a premium of 20% to the 30-day weighted average price per share in ADAM immediately prior to the execution of the SPA but a substantial discount to the 88p per share NAV as at the end of June and therefore represents a meaningful transfer of value from Adamas shareholders to Infinity.
As part of the agreement, Tellus Niseko has agreed to distribute income regularly to its shareholders, which must generate a minimum dividend yield each year of 6.0% as at completion of the transaction. If the dividend distribution does not occur in the 12 months following the completion of the transaction, Adamas has the right to put its 40% shareholding back to Infinity at no further cost to either party.
The construction of Tellus Niseko is approaching completion and is progressing on schedule and on budget, with an official opening due in mid-December 2019. Tellus Niseko is currently 95% booked for December 2019 and 80% for January 2020 with growing levels of interest.
As previously announced, on 31 January 2019, Adamas funded the first of two equal tranches of USD2.0 million of its investment in Infinity through a senior secured loan note paying a 17.5% cash coupon payable semi-annually and secured against Infinity’s real estate assets. On 15 July 2019, Adamas announced that a Hong Kong based family office agreed to co-invest on a 50:50 basis alongside ADAM in Infinity, the second tranche of this was funded on 30 August.
[QD comment: We have actually had a discussion with Adamas about the undesirability of issuing shares on a non-preemptive basis at a discount. The company has gone ahead and done it anyway. Why would anyone buy shares in this company when the directors might transfer value away from you in this manner without even asking for your approval?]
Bond issuance
The company has also announced that it has successfully raised gross proceeds of approximately US$1.9million through the issuance of a US Dollar-denominated corporate bond to family offices in the Middle East, representing the first close of a corporate bond issuance programme of up to US$10 million. The bond, which matures in October 2022, has a cash coupon with an interest rate of 12.5% per annum payable semi-annually and is secured with a fixed and floating charge on the corporate assets of the company.
ADAM : Adamas Finance to invest more in Japanese ski village