LONDON (ShareCast) - (ShareCast News) - South eastern Europe-focussed property and investment company Secure Property Development and Investment announced the proposed acquisition of up to a 50% interest in a portfolio of fully-let logistics properties in Romania on Tuesday.
The AIM-traded company said the portfolio - named the 'Olympians portfolio' - currently generated a net operating income of approximately €4.5m per annum.

It said the proposed acquisition, which remained subject to a number of conditions and banking consents - including the satisfactory completion of due diligence and funding - was in line with the company's strategy to build a leading south eastern Europe property company with a diversified portfolio of prime income producing real estate.

"The Olympians Portfolio was co-developed and owned by GE Capital and is now owned by GEC's development partner Myrian Nes, a leading developer of Grade A logistics properties in Romania," Secure Property's board explained in its statement.

"It comprises warehouses strategically located close to national highways, thus facilitating the transportation of goods throughout the country and the wider region."

The Olympians Portfolio is located across three "key" logistics areas in Romania, the board added, being the capital Bucharest, the industrial city and automotive centre of Timisoara on the Romania-Hungary border, and Brasov, a major city close to the capital.

The existing portfolio of around 100,000 square metres of warehousing and office facilities was fully let to largely multinational tenants.

"SPDI's existing logistics terminal in Bucharest - the Innovations Logistics Park - was developed by Myrian Nes, and the Olympians Portfolio transaction - should it complete - is expected to further cement SPDI's longstanding relationship with the vendor partner," the board said.

"The vendor partner intends to develop additional warehouse space, which SPDI is expected to have first right of refusal to acquire."

The proposed acquisition also complemented SPDI's existing logistics properties in Greece and Romania which, as the board announced on 28 September, generated net operating income of around €1.8m in the first half of 2017.

Subject to acquiring the full 50% interest, the Olympians Portfolio would increase the total lettable area of the company's logistics assets under management to 135,000 square metres.

The Gross Asset Value of the Olympians Portfolio is approximately €50m, and there is a senior loan liability of approximately €30m secured against the portfolio.

SPDI said the consideration for the 50% interest was expected to be approximately €8-9m, which would be finalised once the company completes its due diligence.

It said it already transferred, in aggregate, €3.6m to the vendor partner in the form of a 10% coupon loan, convertible into shares of the SPV that will be created to hold the Olympians Portfolio.

The board said it intended to raise the majority of the consideration necessary to close the proposed acquisition through the issue of a financial instrument with a value of between €3.5-4m, 35% of which consisted of a convertible loan and 65% of which is made up of a warrant.

It said the balance of the funding was expected to be provided in the form of external debt, over which the company was currently in discussions with providers.

"The proposed acquisition of a fully let Grade A logistics portfolio underpins our strategy to increase SPDI's income generating capacity in one of Europe's fastest growing economies and in the strategically-important south east corner of the EU," said SPDI CEO Lambros Anagnostopoulos .

"The commitments received to date from both existing and new investors for the Instrument represent an endorsement of our strategy and management's ability to execute it.

"We continue to enjoy the support of investors who have backed us in the past to firstly generate above market returns on our investments; and secondly to build SPDI into a leading income producing property company in a region of the EU which has the highest growth potential."

Anagnostopoulos said the recent disposals at or above book value of Terminal Brovary and the pre-sale agreement regarding the Kiyanovski plot of land, both in Kiev, together with the plan to acquire the Olympians Portfolio demonstrated the company's ability to sell assets at prices that matched the value indicated in the company's accounts, and also to acquire quality income producing properties at attractive rates.

"This serves to highlight the anomaly that is the 50% plus discount at which our shares trade at compared to our net asset value.

"Furthermore our NAV does not take into account the capital value appreciation we expect to see in the medium term as income yields in the region, which still hover at levels double those of western EU countries, converge to those in the rest of the EU as the underlying economies, including Romania, continue their fast pace of growth."

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