Vukile Property Fund’s board said yesterday an improved cash offer for its 28.8% stake in Lar España Real Estate had been accepted following careful evaluation of its options.
A consortium involving Hines European Real Estate Partners III and Grupo Lar Inversiones Inmobiliarias, Lar España's asset manager, has increased their offer to €8.30 per share from €8.10 per Lar España share, for all shareholders, following its negotiations with Vukile.
Vukile said that its investment in Lar España, held through its 99.5%-owned Spanish subsidiary, Castellana Properties, had realised significant value for Vukile shareholders. Vukile’s share price traded 0.33% higher at R18.30 yesterday morning, bringing its gain over 12 months to more than 42%.
CEO Lawrence Rapp said in a statement the disposal would allow Vukile, via Castellana, to achieve an internal annual rate of return of about 45% since January 2022 in rand terms, which represented an investment return of almost three times in under three years from the initial Lar España investment.
“Our ability to identify mispriced assets, listed and unlisted, and interpret market nuances through our on-the-ground asset management expertise, defined by profound knowledge of the property industry and retail specialisation, inform our capital allocation strategy,” Rapp said.
He said when Vukile invested in Lar España, it was trading at about a 48% discount to net asset value (NAV). For Vukile, the investment held potential for capital appreciation while receiving attractive dividends, and during Vukile’s time as a significant Lar España shareholder, the discount to NAV had reduced materially.
“While Lar España shares still trade at almost 19% discount to NAV based on the increased offer price, when viewed from the perspective of the yield on Lar España’s assets, Vukile believes the negotiated offer price presents an opportunity to redeploy capital into other strategically aligned and financially accretive opportunities with potentially better yields at significantly lower operational and deal execution risk.”
Rapp said while some in the market may have anticipated a counterbid, having considered all options, the complexity, cost, and execution risk of doing so made this a less optimal solution.
“This decision reflects Vukile's disciplined approach to capital allocation and deal-making,” said Rapp.
He said they would continue to grow in Spain and the Iberian Peninsula, where a significant presence and pipeline of opportunities had been established.
“From a standing start seven years ago, Vukile has grown Castellana to become the fifth biggest retail property owner in Spain. It is set to become the third largest by the end of 2024 and is on its way to growing the largest retail property portfolio across the Iberian Peninsula,” he said.
Vukile’s has also started to expand into Portugal with the pre-funded acquisition of three shopping centres, which closed earlier this week. The transaction takes Vukile’s exposure to the Iberian Peninsula to 64% of its assets.
Following a recent capital raise for several well-progressed deals that Vukile was evaluating, and given its pipeline of opportunities with a number under active consideration in Spain and Portugal, Vukile said it was confident that the proceeds from the Lar España offer would be redeployed in “these key markets.”
BUSINESS REPORT