Hibernia REIT has agreed a deal with Brookfield, the North American private equity giant, on the sale of the business for around €1.089bn.
Under the terms of the cash offer made by Benedict Real Estate Bidco Limited (a subsidiary of one of Brookfield’s real estate private funds), Hibernia REIT shareholders would be entitled to receive €1.634 per share – made up of €1.60 per Hibernia REIT Share and a 3.4 cent dividend per share.
The offer price, excluding the dividend, represents a 35.6% premium to Hibernia REIT’s closing price of €1.180 on 24 March 2022. It is also a 7.6% discount to Hibernia REIT’s EPRA NTA at 31 December 2021 of €1.732. It is a 0.8% premium to the December 2021 EPRA NTA, when taking into account the current estimates of expected latent tax and debt breakage costs for Bidco.
Comments
Danny Kitchen, chair of Hibernia REIT, said: “Despite significant progress against its strategic objectives and a track record of successfully recycling capital into value accretive opportunities, Hibernia REIT has traded at a persistent discount to its prevailing EPRA NTA per share. The acquisition recognises the company’s prospects and the quality of its portfolio of assets and delivers an acceleration of the value we expect to be created from completion of Hibernia REIT’s major office development projects. The acquisition allows Hibernia REIT shareholders to realise the value of their investment in Hibernia REIT in cash at a significant premium to Hibernia REIT’s prevailing share price and a premium to its EPRA NTA per share at 31 December 2021, when taking account of the directors’ current estimates of expected latent tax and debt breakage costs for Bidco.”
Brad Hyler, managing partner and head of European Real Estate at Brookfield, said: “We have built a strong relationship with Hibernia REIT’s management team and are excited to partner with them in the next phase of the company’s development by combining Brookfield’s global real estate expertise with Hibernia REIT’s established operating platform and portfolio of high-quality standing and development assets in Dublin’s most strategic submarkets. We look forward to supporting Hibernia REIT as they continue to create value by capturing demand from top global tenants for modern, sustainable buildings with best-in-class amenities and wellness credentials in prime locations.”
Next steps
The acquisition is conditional on the approval by Hibernia REIT shareholders, among other things. Hibernia REIT’s board said it considers the terms of the acquisition to be fair and reasonable and unanimously recommends that shareholders vote in favour of the acquisition. The board, which holds 9,069,791 shares in total representing 1.37% of the company, have irrevocably committed to vote in favour.
A scheme document, which will contain further information about the acquisition, notices convening the scheme meeting and the Extraordinary General Meeting, the expected timetable for completion and action to be taken by Hibernia REIT shareholders, will be published as soon as practicable, it said. Subject to obtaining the necessary regulatory approvals, the scheme is expected to be declared effective in late Q2 2022.
In the announcement released today, the parties said the financial terms of the acquisition were final and will not be increased, except in the event that Hibernia REIT receives an alternative proposal or offer by a third party.
About Bidco and Brookfield
Bidco is a newly incorporated Irish company established for the purpose of undertaking the acquisition. Bidco is a subsidiary of one of Brookfield’s real estate private funds. Brookfield Asset Management is a leading global alternative asset manager with approximately $690bn of assets under management across real estate, infrastructure, renewable power and transition, private equity and credit. Brookfield owns and operates long-life assets and businesses, many of which form the backbone of the global economy.
Brookfield is one of the world’s largest owners and operators of real estate with over $250bn of real estate assets globally, and an office portfolio of approximately 200 million square feet worldwide. In Europe, Brookfield’s real estate business comprises around $50bn of assets across office, student housing, logistics, life sciences, residential, retail and hospitality.
About Hibernia REIT
Hibernia REIT is an Irish Real Estate Investment Trust (REIT), listed on Euronext Dublin and the London Stock Exchange. It owns and develops property and specialises in Dublin city centre offices. Its business model is to deliver income and capital growth for its shareholders through asset management, development activity and capital recycling, while using modest levels of financial leverage. Asset clustering and ESG excellence are two strategic priorities for Hibernia REIT.
[QD comment: This is yet another example of M&A activity in the listed real estate sector. Many companies have been trading on persistent discount to NAV (or NTA), which has been exacerbated by the pandemic, making them targets for private equity takeovers. It must be frustrating for the managers of REITs trading on wide discounts that have seen their portfolios independently valued upwards on a quarterly basis as it recovers from the depths of the pandemic but the share prices not following suit. The market may be pricing in risk of a flare up in COVID cases and fresh restrictions, but at 20% or 30%-plus, this seems extreme. We expect more M&A activity throughout the year if large discounts persist.]
HBRN : Brookfield in €1.1bn bid for Hibernia REIT