abrdn Property Income Trust (API) has entered into an agreement to sell its entire share capital to funds managed by GoldenTree Asset Management for £351m.
The transaction comprises the sale of 39 assets (the company’s entire investment property portfolio, with the exception of its interest in the land at Far Ralia). API’s debt facility with RBS will be transferred in full to GoldenTree.
The cash consideration for the purchase of £351m represents a discount of 8.0% to API’s external valuation of the portfolio of £381.6m at 30 June 2024 (excluding assets disposed of between 1 July 2024 and the date of this announcement, and the interest in the land at Far Ralia) and implies a pro-forma net asset value of API of £244m, equivalent to 64.0p per share (adjusted for costs of the transaction).
This represents:
- a 12.7% discount to API’s NAV of 73.3p as at 30 June 2024;
- a 6.7% premium to the API share price of 60p on 26 September 2024;
- a premium of 20.1% to the API share price of 53.3p on 28 May 2024, being the date that API shareholders approved the managed wind-down; and
- it is also a 3.1% premium to the original merger bid made for the company by Custodian Property Income REIT (CREI) in January 2024. That share-for-share offer implied a value of 62.1p per API share, but fell dramatically in the weeks after the news of the offer as the share price of CREI dropped.
It is intended that, following completion, returns of capital will be made to API shareholders in cash from the consideration, by way of a members’ voluntary liquidation.
Such returns will be subject to the net realisation value of Far Ralia, which API is actively marketing, adjustments arising from the completion process, the operational costs of managing API through to liquidation (including tax effects) and the liquidation costs.
Background
On 28 May 2024, API shareholders approved a managed wind-down of the company. Under the process, API was to be managed with the intention of realising all of the assets in its portfolio in an orderly manner, via disposals of single assets, groups of assets or the portfolio as a whole, with a view to repaying borrowings and making returns of capital to API shareholders whilst aiming to obtain the best achievable value for API’s assets at the time of their realisations.
The board said that the transaction follows an extensive and competitive process undertaken by API and its advisers to identify a buyer for the portfolio in an effort to balance the objectives of maximising returns for shareholders against the timeframe for disposals.
The API board, having considered the potential alternatives including an asset-by-asset disposal, believes that the transaction represents an effective execution of the managed wind-down process. It provides greater price certainty and quicker return of proceeds for API shareholders through realising the substantial majority of the investment portfolio in a single transaction.
The transaction does not require the approval of API shareholders.
It is expected that the company will declare the Q3 dividend of 1p in line with previous guidance, to be paid before distribution of sale proceeds.
Completion of the transaction is anticipated to take place on 29 November 2024.
GoldenTree
GoldenTree is a global asset management firm that specialises in opportunities across the credit universe in sectors such as high yield bonds, leveraged loans, private credit, distressed debt, structured credit, emerging markets, real estate, private equity and credit-themed equities.
Founded in 2000 by Steve Tananbaum, it is one of the largest independent global credit asset managers, managing nearly $55bn for institutional investors including leading public and corporate pensions, endowments, foundations, insurance companies and sovereign wealth funds.
Farran Investments act as an advisor to GoldenTree and is a minority co-investor in the acquisition vehicle incorporated by GoldenTree and will become the asset manager to the portfolio following completion of the transaction.
It is led by the management team behind the failed IPO of Special Opportunities REIT – Simon Lee and Freddie Brooks. They were also directors at Alvarium, the managers of LXi REIT and Home REIT.
Chairman comments
James Clifton-Brown, chair of API said: “Since the shareholder vote on 28 May 2024 to put the Company into a Managed Wind Down was passed, the Board, alongside the Investment Manager, explored the most effective means of disposing of the Company’s assets. The aims were to maximise the returns to shareholders but also to return cash to them as soon as possible. The full range of disposal strategies was considered from individual property sales to a wider transaction. Through an independent agent, Gerald Eve, the whole portfolio was marketed to potential buyers in an extensive and competitive process.
“Following a second round of bids, the Board considered the GoldenTree Asset Management bid provided the best solution for shareholders, compared with the net present value of what might be achieved by way of individual sales over a longer period and represents a swift implementation of the shareholder resolution to conduct a Managed Wind Down. I would like to thank the team at abrdn who have delivered this outcome for shareholders.”
