The Board of Directors of Bail Investissement, a Foncière des Régions subsidiary, has approved the acquisition from the CGW consortium (Ixis, Whitehall and GE Real Estate) of Technical SAS, owner of a large portfolio of mixed use offices and light industrial properties leased to France Telecom.
Since the spring of this year, Bail Investissement has been refocusing its investment policy on logistics and light industrial parks properties. The acquisition is in line with the new strategy.
A memorandum of understanding has been signed with CGW for the acquisition of Technical's entire capital. The properties in the portfo lio represent a total of 1,034,000 m² and are valued at 1.6 billion. They are leased to France Telecom under a lease expiring in 2011 at an annual rent of 124 million as of 31 December 2005, nearly half of which coming from Paris. The transaction is part of an investment policy that gives priority to teaming up with other investors to acquire property portfolios leased to first class covenants.
Bail Investissement and GE will sign a memorandum of understanding to enable GE to retain an interest in the portfolio. To this end, GE Real Estate France will purchase mandatory convertible bonds issued by Technical, which will eventually give it a direct stake of 32.5%. Technical's debt will be refinanced through a new 950 million bank loan. Technical is expected to be consolidated by Bail Investissement as from 2006 and therefore to benefit from its SIIC (REIT-style) tax regime.
By doubling the size of the managed portfolio, the transaction will enable Bail Investissement to significantly boost its presence in major urban centres, particularly Paris, and improve revenue visibility. The return of nearly 8% on the acquired assets will increase overall profitability and be immediately accretive to current cash flow per share, lifting it by around 30%. On completion of the transaction, Bail Investissement will have a loan-to-value ratio of around 50%, without resorting to a share issue.
The new portfolio will be managed by dedicated teams from Groupe Foncière des Régions. The Board of Directors also noted Jean-Claude Bossez's proposal to become non-executive Chairman. Until a new Managing Director is appointed, Christophe Kullmann will be acting Managing Director.
Source: Bail Investissement