US group Apollo is making its first large public investment into CEE real estate with an agreement to buy €300 mln worth of shares in CPI Property Group (CPIPG).
Under the operation, CPIPG will issue 487 million new shares at a price of €0.616 apiece to be entirely subscribed by Apollo by the end of 2021. The €300 mln investment will result in a stake of around 5.5%.
Also, the group’s majority shareholder and founder Radovan Vitek will also subscribe to 243 million new ordinary shares of CPIPG at €0.616/share, increasing the group’s equity by a further €150 mln.
Following this capital increase and Apollo's investment, Mr. Vitek will own just under 90% of CPIPG’s share capital.
'Proceeds from the ordinary share issuances will be used for acquisitions and deleveraging,' said David Greenbaum, CFO of CPIPG. 'We see an opportunity to continue growing our portfolio while maintaining a conservative financial profile.'
Upon completion of the Apollo Funds’ investment, real estate expert Tim Scoble will join CPIPG’s Board of directors, increasing the total number of directors to eight (four members of management, three independents, and one Apollo representative).
CPIPG will remain focused on its core markets in Central Europe (covering both office and selected retail) going forward.
Leverage
CPI said it expects its net LTV for Q3 2021 to be below 40%, driven by positive revaluations and a €100 mln capital increase completed in September. At year-end, CPIPG expects the combined effect of capital increases, disposals, revaluations, and other actions to result in meaningful headroom below 40% Net LTV, thus creating capacity to pursue investment opportunities.
Although the company has not paid dividends in the past; it has now agreed to increase its FFO I distribution target from 50% to 65% beginning in 2022 in order to accommodate Apollo as a new equity investor.
