Castellana Properties, 88% controlled by the South African fund Vukile, has bought its 21.7% stake in Lar España from Pimco and thus becomes its main shareholder. The price of the operation is around 96 million euros.
The operation has solid financial backing, driven by the strong operational recovery of Lar España Real Estate during the pandemic, according to the company. The company has recently concluded significant activity in the debt markets and has demonstrated strong earnings potential with a healthy balance sheet.
The acquisition of the stake, with a discount of 48% on the Net Value of the Tangible Assets, combines a high dividend yield with a potential for long-term capital appreciation. The acquisition is consistent with the mission of Castellana Properties to invest in assets at attractive prices in the Spanish retail real estate sector and represents a very good opportunity when compared to the prices of other similar assets in the market.
The operation will make Castellana Properties the largest shareholder in a company with which it shares the same strategic approach, and which has a broad, high-quality and complementary portfolio.
Castellana Properties has also obtained a remarkable recovery after the pandemic. In the months of October and November 2021, compared to the same period in 2019, 99% and 98% of visits were recovered, respectively, and sales have even exceeded pre-pandemic levels with increases of +7 % and +5.4%. The occupancy ratio has been consistently above 97%. These ratios are above the industry benchmark, which demonstrates the resilience of the company's portfolio. This is due, in part, to its business model focused on the active management of its shopping centers and parks, as well as the good behavior and experience in retail of the management team. Thanks to the agreements reached with the tenants during COVID-19, the collectability ratios have been consistently above 95%.
With the acquisition of 21.7% of Lar España Real Estate, Castellana Properties resumes its investment program from a position of strength, with the clear objective of becoming the leading capital platform in the Spanish retail real estate sector.
The operation will be financed with a combination of the existing liquidity of Castellana Properties and a capital injection of 75 million euros already committed by the largest shareholder Vukile Property Fund. In addition to evidencing a strong level of shareholder support, the financing structure will further strengthen Castellana Properties' balance sheet and substantially improve credit metrics.
Both Castellana Properties and Vukile are very satisfied with the acquisition and the potential for long-term revaluation of the assets of Lar España Real Estate.
“This is a financial investment and Castellana Properties will not ask for any position on the board of Lar España Real Estate. As a capital vehicle focused on retail and not as an investment fund, we believe that this transaction is positive for Castellana Properties and brings stability to the shareholders of Lar España Real Estate," said Laurence Rapp, President of Castellana Properties.
“In a market context where it is difficult to acquire retail assets at attractive prices, becoming the largest shareholder in Lar España Real Estate with a 48% discount on the Net Value of Tangible Assets represents a very attractive investment proposal. I would like to reiterate that our entry into Lar España Real Estate is amicable, and that we look forward to working with the company's Board and management to help increase shareholder value creation for both companies. I would also like to take this opportunity to thank the entire Castellana Properties team for their hard work, and Vukile for his extraordinary support”, said Alfonso Brunet, CEO of Castellana Properties.
Castellana Properties presented the half-year results last November (its fiscal year is from April to March), in which it obtained a recurring EBITDA of 23 million euros between April and September, as well as a net profit of 16.9 million euros. Likewise, total gross income (GRI) exceeded pre-pandemic levels with an increase of 5.7%.
The company currently has 16 assets in Spain with a gross leasable area of 350,271 sqm and a gross value of close to 1,000 million euros. In addition, portfolio valuations have recovered 1.6% after the latest published annual figures.