Circle Property has said it plans to sell more assets and return capital to shareholders after selling its largest asset today, as it battles a persistently wide discount to net asset value (NAV).
The group has sold Kents Hill Park to LXI REIT for £34.5m. The group said that following completion of the disposal, which requires shareholder approval at a general meeting, it will have 10 regional property assets, valued at around £76m (as at 30 September 2021) compared with a current market capitalisation of around £58m.
The board has decided to continue to make targeted sales over a period of two to three years and intends to return the proceeds to shareholders.
Half of the proceeds of the Kents Hill Park sale will be used to pay down debt, bringing its loan to value (LTV) down to 29.4%. The other half, plus existing cash, means the company has cash resources of £24.7m. This and the proceeds of any future asset sales will be returned to shareholders.
The board will update shareholders as to the timing and mechanism, but it is anticipated that a minimum of two returns of capital will be made and will likely include a tender offer and/or share buyback, the first of which is expected to occur within 12 months of completion of the Kents Hill Park disposal.
Since the group launched on AIM in 2016, it has suffered from limited liquidity in its shares and the share price has remained at a significant discount to the company’s NAV. On 11 February its share price was £2.05 and its most recent NAV (30 September 2021) was £2.74 per share, equating to a discount of 25.2%. Following completion of the sale, the company’s pro-forma NAV is estimated to be £2.77 per share.
Circle Property’s chairman, Ian Henderson, said: “[The sale] is aligned to our strategy of targeted asset sales and delivering premium returns on our quality regional commercial offices portfolio. We have a proven track record of crystallising value from our assets, which is reflected by the group’s total shareholder return of 114.3% since IPO in February 2016.
“Our intention is to return the proceeds of the disposal and any future asset sales to our shareholders in an orderly manner, alongside further reducing the group’s LTV. Notwithstanding the strong financial and operational performance of the company since IPO, the discount in the company’s share price relative to its NAV persists, and therefore the company will, following completion of the disposal, continue to selectively divest assets in the best interests of shareholders.”
CRC : Circle Property to return sales proceeds to shareholders as it battles persistent discount