KCR Residential raised a total of £3.15m via the issue of 4.5m new ordinary shares
of 70p each on Monday in order to expand its residential property portfolio.
As a result of the placement, KCR saw cash invested into the company, the novation of rights to a debt and the conversion of a portion of its convertible loan note into equity, raising equity of £1.56m and capitalised loans of £1.59m, and reducing its net debt by £1.1m to 45% of its investment property value in the process.
Net assets also increased by £2.66m.
KCR intends to use the proceeds of the placing to purchase blocks of rented studios, as well as one and two-bedroom apartments, at discounts to their market value, as well as further assets aimed at generating rental and capital growth.
As part of the placing, residential property development investor Energiser Investments acquired almost one-quarter of KCR Residential's shares after saying it had identified a "positive structural shift underway" in the residential private rental sector (PRS).
Energiser acquired 2.4m new ordinary shares, or 24.7% of KCR's entire issued share capital, at a 9% discount to the group's net asset value per share at 70p each for a total of £1.7m.
Energiser's subscription was funded with a £1.21m of existing cash resources and the novation of the rights to its loan investment of £0.49m owed to it by Beta Circle.
The PRS market is £1.3trn in size, 44% larger than the entire commercial property market, Savills says, with only 2% of it professionally managed. Energiser said KCR is "one of the first" quoted investment companies to focus on investing in and professionally managing rented residential property in residential private rented sector.
Energiser's directors said they saw a "positive structural shift underway in residential PRS. With KCR, it has established a strategic shareholding in a growth company with a strong management team in a very large, under-managed sector".
In addition to Energiser's investment, a subscription of £0.3m was made by Consumer Refund Service for 0.43m shares, as well as a subscription of £50,000 by KCR's non-executive chairman Michael Davies for 71,428 shares.
KCR's chief executive, Dominic White, said, "This is a very positive step forwards for KCR and puts us in a strong position to acquire the next assets. The investment also represents a vote of confidence in our strategy to build a substantial residential property portfolio that generates secure income flow for shareholders."
The combination of increasing revenues through acquisitions and rental growth, reducing debt costs and becoming more efficient as an operating platform moves us closer to being able to pay dividends. We intend to refinance the remaining debt at significantly lower rates and continue to grow revenues through accretive acquisitions from our strong pipeline of investment opportunities," White concluded.
As of 0950 GMT, KCR shares had gained 1.52% to 67.00p, while Energiser shares had grown 45.65% to 1.33p.