JSE-listed Vukile Property Fund announced in a Sens statement on Thursday that Spanish-based subsidiary Castellana Properties Socimi has secured a “significant minority shareholding” in its market peer Lar España Real Estate Socimi – a deal worth some €97 million (around R1.67 billion).
Vukile currently holds a majority 88% stake in Castellana and will effectively be a majority funder of the acquisition through a shareholder loan of €75 million to its subsidiary. This means the SA-based property counter will increase its offshore exposure in Spain.
“Lar España is a leading, Madrid-stock exchange-listed, 100% retail-focused Spanish Socimis [Spanish real estate investment trust] which owns a portfolio of 14 retail assets run by an experienced management team,” Vukile notes in its Sens statement.
“The circa €100m transaction represents an investment with outstanding synergies. Both Socimis are specialist retail property investors with high-quality, low-risk geographically complementary portfolios of shopping centres and retail parks, which will give Castellana exposure to the entire Spanish peninsula,” the group further points out in a separate media release on the deal.
Lar España trading at a significant discount
“Lar España has demonstrated strong earnings generation and a robust balance sheet with healthy cash flows. After its recent debt restructure using corporate bonds, all of its assets are unencumbered. It has a [loan-to-value ratio] LTV of around 41%.”
“The current discount to tangible net asset value [NAV] of around 48% does not reflect the retail recovery experienced on the ground, as evidenced from actual trading by both Lar España and Castellana,” it adds.
“Castellana’s strong cash flow position combined with the right opportunity to invest in Lar España shares, presented us with an exciting prospect to recycle capital into a compelling investment, with more attractive yields than other opportunities in the direct property market,” says Laurence Rapp, CEO of Vukile Property Fund.
“We strongly believe Lar España is an undervalued stock that is due to re-rate.”
“This makes it a very attractive investment opportunity indeed, and one that we understand well, given the many similarities between Castellana and Lar España. The investment recognises the impressive performance of Lar España’s management and portfolio,” adds Rapp
“As retail property specialists with a proven track record in the Spanish market, the Castellana team respect what Lar España has achieved. We appreciate the management experience it takes to perform at the level reflected in the latest reported Lar España results. We also have every confidence in Lar España’s direction, which makes us comfortable to take a minority stake in the business.”
Palesa Mofokeng is a Moneyweb intern.