Australian property group Valad is set to spend $294 million to expand its successful Valad Capital Services business model in the $1.26 billion Crownstone European Properties Limited portfolio.
Director Corporate and International Transactions at Valad, Peter Hurley said yesterday that VCS will invest in Crownstone alongside funds managed by global investment management group Cambridge Place Investment Management.
Hurley said the European venture is Valad’s entrée into the European market through an investment in the office value-adding space.
“The Crownstone portfolio of 13 European office properties has significant reversionary and repositioning upside underpinned by a majority of credit rated corporate tenants,” Hurley added.
The Crownstone portfolio has combined NLA of 300,164 sqm million across 13 properties in four countries.
Valad’s $294 million investment comprises $252 million in preferred equity with a fixed coupon of 9.19%pa for four years and $42 million in ordinary equity, which is expected to yield an equity IRR in excess of 20%. CPI MILLION funds will invest $252 million in ordinary equity alongside Valad.
Valad’s investment will be financed by an $275 million institutional placement of Valad securities to be underwritten by lead manager and joint bookrunner, Citigroup; and UBS as co-manager and joint bookrunner.
“This investment provides immediate accretion of 5% for Valad securityholders,” Hurley added.
Crownstone’s head of real estate Dennis Lopez Valad’s investment will give Crownstone significant scale and allow for the acquisition of further European value-adding office assets as they become available.
“The European market is the world’s second largest investment grade property market after North America, providing liquidity, scale and availability,” Hurley said. “In order to access the significant opportunities we believe in finding appropriate local experts prior to investing in new markets. The investment structure with CPI MILLION ensures a strong alignment of interest with a specialist global investment manager.”
Valad is scheduled to announce its first half results on February 22 and subject to finalisation of the audit and Board process, the property group expects to report EPS slightly ahead of the market consensus forecast of 4.8 cents and DPS in line with the market consensus forecast of 5.4 cents.
On the basis of market consensus EPS forecasts of 10.8 cents in FY07 and 11.4 cents in FY08, the transaction delivers enhanced returns to Valad securityholders of 5+% accretion to those forecasts in 2HFY07 and FY08.
The Crownstone investment brings VCS’ total investment portfolio to over $400 million in 13 projects with 10 investment partners in more than $3.1 billion worth of end-value property.
Australian Property Journal
