Sponda Plc has signed a letter of intent for the sale of 12 logistics properties to a new logistics and industrial property investment company, Certeum Oy, for €216.7 million. The total debt-free sale price of the properties is equal to their combined fair value calculated in the first quarter of 2014.
The transaction is part of a broader arrangement in which Sponda and Varma Mutual Pension Insurance Company, Sponda Fund I (SF I), Sponda Fund II (SF II) and Sponda Fund III (SF III) have agreed on establishing a new company specialising in investments in logistics and industrial properties, with the newly established company acquiring 12 logistics properties from Sponda, 22 logistics and industrial properties from Varma, as well as SF I, SF II and SF III, or all property companies owned by the three funds. The total value of the properties to be acquired is approximately € 920 million. As part of the broader arrangement, Sponda will become a minority shareholder in the new company with an estimated holding of 38% at most.
The fair value of the equity invested by Sponda in the funds stood at EUR 74.8 million at the end of March 2014. Sponda estimates that the sale price will exceed the fair value by approximately €2.6 million.
Grounds for the sale
In September 2013, Sponda’s Board of Directors confirmed the company’s new strategy, the main goals of which are simplification of the business structure, more focused property ownership and profitable growth in office and shopping center properties in Helsinki and Tampere. According to the strategy, Sponda is planning to divest its logistics properties and properties located in Russia. Sponda’s strategy also includes exiting the real estate funds business.
The average economic occupancy rate of the properties is 80.2% at present. Their average net yield at present is 7.2%. After the transaction is concluded, the share of the newly established company’s result corresponding to Sponda’s holding will be recorded under the item “Share of result of associated companies” in the income statement. The impact of the transaction will be cash flow –neutral in the long-term.
“The sale of these logistics properties is in line with our new strategy announced last autumn. The sale of real estate funds, or the property companies they own, is also in line with the new strategy. I am particularly satisfied that we were able to carry out the sale at the fair value calculated for the first quarter, or slightly above that amount.
Establishing a new property investment company Certeum in Finland is certain to increase interest in our property sector as a whole. We are pleased to be a founding member in the new company in partnership with other strong investors. Our goal is to have the new company operating at full speed in late 2014”, says Sponda’s President and CEO Kari Inkinen.
After the sale is concluded, the key shareholders of Certeum will be Varma Mutual Pension Insurance Company, Sponda Plc and the State Pension Fund. Further shareholders in the new company will include the unitholders of the real estate funds SF I, SF II and SF III, or the real estate funds themselves, depending on the final structure of the transaction. After the conclusion of the sale, Sponda’s holding in the new company is estimated at 38% at most, and Sponda has made a commitment to not sell its shares in Certeum before its Annual General Meeting in spring 2015. In line with its strategy, Sponda plans to reduce its ownership in the company in the future.
As part of the sale, Certeum has agreed to acquire properties for a total sum of approximately € 920 million. The company plans to finance the transaction partly by debt financing, and it has received the necessary conditional commitments from financing partners to fund the arrangement. The company’s loan-to-value (LTV) will be approximately 50%. The company estimates that the transaction will be concluded by the end of September 2014, once the standard conditions for acquisitions are satisfied.