Conditional Exchange for disposal of German Investments
Capital & Regional plc has announced the conditional exchange of contracts for the sale of its 50/50 German joint venture with Ares Management to clients and funds under management of Rockspring Property Investment Managers.
Upon completion the sale will represent the last major step in Capital & Regional's stated strategy of refocussing its business on its portfolio of dominant UK shopping centres and comes ahead of the Company's REIT conversion on 31 December 2014.
The proposed transaction, which is based on an adjusted NAV calculation effectively places a total equity value of approximately €105 million on the joint venture or approximately €52.5 million for the Company's 50% share. This is expected to be in line with the year end NAV and compares to a net equity value of €50.3 million at 30 June 2014. As part of the transaction the Company will retain for up to five years a small minority stake in each of the German portfolios expected to be valued at approximately €2 million in total. After transaction costs and the positive impact of currency hedging arrangements the Company expects the net cash proceeds to ultimately be approximately £43 million.
The transaction is subject to customary representations and warranties. Completion is subject to conditions including a material adverse change provision specific to the business and on German regulatory approval being obtained. This approval is expected to take approximately a month and no issues are anticipated in this being successfully obtained. Completion is also subject to the drawdown of funds into the acquiring vehicle.
The German joint venture consists of 23 properties held in five separate portfolios largely anchored by national food retailers and comprising over 200 units. For the six months to 30 June 2014 the Group's share of recurring pre-tax profit of the German joint venture was £3.1 million and the Group's share of gross property assets at that date was £141.8 million. The disposal proceeds will be used to repay existing debt on the Group's central facility and to further invest in the Group's core UK Shopping Centre business. Proforma See-Through Net LTV for the Group reflecting this disposal, the disposal of Waterside Lincoln and latest available valuations for The Mall (Q3) and Kingfisher Redditch (Q2) would be approximately 47%.
Hugh Scott-Barrett, Chief Executive, commented:
"2014 has been a year in which we have undertaken a number of major initiatives that have allowed us to significantly transform Capital & Regional. Having restructured the Company's debt, undertaken a number of non-core divestments, acquired full ownership of the Mall Fund and received shareholder approval for a REIT conversion on 31 December, the proposed disposal of our German joint venture represents the last major step in repositioning the Company's focus on its core portfolio of dominant UK community shopping centres."