Yew Grove Reit, the owner of office and industrial assets outside Dublin's city centre, plans to sell itself to Canadian property group Slate Office Reit for €127.8 million, as it struggles to raise large amounts of capital quickly enough to pursue deals and build a business of scale.
Including Yew Grove’s €49.5 million of borrowings implies an overall enterprise value of €177.4 million on the Dublin-listed company, which is focused on office and industrial assets let to State entities, IDA-supported companies and large corporates.
The offer price of €1.017 per share represents a tight 1.7 per cent premium to Yew Grove’s closing price on Monday and is 3.7 per cent above the company’s volume-weighted average share price over the past 180 trading days. Slate Office plans to use the deal as a launch pad for further European deals.
Dividend
In addition, Yew Grove has approved interim dividend of 1.2 cent per share in cash, bringing the total amount to be paid to Yew Grove shareholders, should the cash offer be made, to €1.029 per share.
Yew Grove, led by chief executive Jonathan Laredo, floated on the Irish stock market in June 2018 after raising €75 million in an initial public offering (IPO). However, the value of its property portfolio, at €168 million as of the end of June, is considerably below the €300 million to €500 million asset base the real-estate investment trust (Reit) had been targeting within three years of the IPO.
The portfolio includes two properties bought earlier this year for €19 million with the help of a €12.7 million Yew Grove share sale. Its assets include properties on IDA business parks in Athlone and Waterford, a number of office blocks in Millennium Park, outside Naas, Co Kildare, and office buildings in Citywest, Co Dublin. Its top 10 tenants include US life sciences group Optum, the ESB and Aldi.
The group, which is generating annualised rent of almost €13 million, also secured permission from its shareholders at in May to extend an existing 100 million of share-sale programme for a further 12 months as it continued to chase acquisitions.
The company, advised by Goodbody Stockbrokers, said on Tuesday that its directors “are conscious of the challenges of raising capital at the scale and timeframe required to fully exploit Yew Grove’s attractive investment pipeline. The acquisition allows Yew Grove Shareholders to realise their full investment in Yew Grove for cash in the near term at an attractive valuation.”
While shares in Yew Grove had been trading at the start 2021 at a 13 per cent discount to the company’s then most recent stated net asset value, they rallied strongly in the early months of the year on hopes it would secure attractive acquisitions, and as the company prepared to be promoted from the junior Dublin exchange, Euronext Growth Market, to the main exchange. That took effect in May, widening the net of potential investors.
Capitalisation
Still, the small size left it well short of the €250 million market capitalisation that would put it on the radar for many large institutional investors – making it, in turn, difficult to raise large amounts of capital to fund large acquisitions and grow.
Toronto-listed State Office Reit said that the planned purchase of Yew Grove would diversify its revenue streams. On completion of the planned deal, 17 per cent of its net operating income will come from the Republic, 18 per cent from the US and 65 per cent from Canadian assets.
“This is a transformational opportunity for Slate Office Reit to acquire a portfolio of modern properties underpinned by exceptional quality tenants,” said Steve Hodgson, chief executive of Slate Office. “With this initial acquisition in Ireland, we would be well positioned to pursue other attractive growth opportunities across Europe.”
