UK-focused retail property REIT Capital & Regional said on Wednesday that it is in discussions with Johannesburg-listed Growthpoint Properties about the sale of a majority stake in the company through a combination of a partial offer in cash and a capital injection.
'There can be no certainty that a partial offer and subscription for new Capital & Regional shares will be made, nor as to the terms of any such transactions,' the company added in a statement, without disclosing financial details.
South Africa's Growthpoint is also an investor in London-listed CEE-focused property investor Globalworth.
The announcement came in tandem with the publication of Capital & Regional's half-year results to end-June 2019 which showed lower net rental income due to CVAs and retailer restructurings.
The company reported an IFRS loss for the period of £55.4 mln due primarily to a fall in property valuations, driven by negative sentiment towards retail assets and income impact of CVAs and retailer administrations. The company posted a profit of £6.7 mln over the same period a year earlier.
Lawrence Hutchings, Chief Executive, commented: 'We have been making solid progress to strengthen the balance sheet and provide additional liquidity given the fall in valuations, due primarily to the impact of CVAs and retailer administrations and market yield shift, which has increased net LTV to 52%.'
Capital & Regional's share price has plummeted over the past year from over £45 a share in early Sept 2018 to an opening price today of £18 a share.
M&A surge
M&A activity in the retail sector is gaining momentum as investors are attracted by sliding share prices linked to negative sentiment in the sector.
Also this week, Intu was reported to be exploring a buyout deal following a challenging trading period across its portfolio. According to a news report by the Sunday Times, Orion Capital Managers, run by Aref Lahham, is in the early stages of seeking partners for a buyout of the UK REIT, which has seen rental income fall by almost 18% in the six months to June.
Meanwhile the board of listed, CEE-focused Atrium said it continues to recommend a €3.75 per share cash bid received by Tel Aviv-listed Gazit Globe following an unsuccessful process to find a superior offer.
Last month Tel Aviv-listed Gazit Globe, the majority shareholder in shopping centre owner and developer Atrium European Real Estate for the past 11 years, announced plans to take full control of the listed, CEE-focused company and make it private.
Gazit chairman Chaim Katzman told PropertyEU that the move takes advantage of a year-long decline in the European firm’s share price. Gazit owned 60.1% of Atrium, which is listed on the Vienna and Amsterdam Euronext stock exchanges.
‘There is no doubt that there is a negative sentiment towards retail stocks in Europe right now,’ said Katzman. ‘But we believe that Atrium’s assets are resilient and have potential for future growth – even if we are alone in that thinking. We hope we’re not wrong.’
