Regional office and industrial property-focussed Regional REIT announced on Thursday that it has reached an agreement with The Conygar Investment Company to acquire UK regional office, industrial and retail, and retail distribution investment properties owned by Conygar, valued at £129m.
The London-listed firm said it will acquire the properties by way of purchasing the special purpose vehicles (SPVs) that own the individual assets.
Under the terms of the proposed acquisition, Regional REIT will issue ordinary shares
at its EPRA net asset value as at 30 June 2016, adjusted as agreed between the parties, to acquire the portfolio at the net asset value of the SPVs, again adjusted as agreed between the parties.
The consideration will be satisfied as to £28m by the issue of approximately 26.3 million Regional REIT ordinary shares to Conygar, and the assumption of two existing secured banking facilities totalling £69.5m.
Regional REIT said the balance of the consideration will be satisfied by Regional Commercial Midco, a wholly owned subsidiary of Regional REIT, acquiring Conygar ZDP, a wholly-owned subsidiary of Conygar, and assuming Conygar's obligations to fund the liabilities of Conygar ZDP.
Those obligations were reportedly £35.7m in relation to zero dividend preference shares issued by Conygar ZDP as at the expected date of completion on 24 March 2017.
The total consideration for the proposed acquisition remained subject to a potential net assets adjustment following completion.
Regional added that the proposed acquisition also remained conditional upon the approval of Conygar's ordinary shareholders and, separately, of the holders of the ZDPs.
In addition, the completion of the proposed acquisition required the approval of the change of control by the two banks currently providing secured debt facilities to Conygar.
"This is a quality investment portfolio secured off market, offering substantial asset management opportunities and income growth potential," said Stephen Inglis, group property director and chief investment officer of London & Scottish Investments, the asset manager for Regional REIT.
"The transaction is expected to be earnings accretive to Regional REIT, with significant upside potential as we implement our property management projects for each asset and increase occupancy."
Inglis said the deal is complementary to the existing asset base of Regional REIT and aligned well with the expertise and experience of the asset manager.
"There are the benefits of portfolio scale and coverage, for recycling capital and flexibility of the asset base and for diversifying risk.
"The spread of properties and tenants further underpins the strength of the Group's income base."