Spanish REIT/SOCIMI Merlin Properties has secured investment bank backing for another capital increase to finance its takeover of the Testa real estate unit from builder Sacyr, this time for €1bn later this month, local media say. Merlin only in May closed its last rights issue, at €614m.
Merlin has not officially confirmed the new financing, but El Economista reported, citing sources close to the pricess that the Greek debt crisis will not delay the capital move since the second instalment for another 25% of Testa stock, is due this month. It used most of the May equity raise to acquire the first 25%. "The agreement is effectively an insurance contract that Merlin has signed with the bank leading the operation – Morgan Stanley is the global coordinator – to safeguard its capital increase," the magazine said. The banks have undertaken to acquire Merlin's shares in the event they cannot be placed within the established timeframe. Post- Testa, Merlin's sudden new portfolio size of €5.55bn compares to €2.3bn pre-takeover. Rental income, including Testa, more than doubles to over €290m from €134m at present.
"Merlin Properties, already Spain's largest REIT/SOCIMI, will more than double assets to €5.5bn with the purchase .. of Testa .. for which it is paying €1.8bn," wrote PIE Managing Editor Allan Saunderson last month. "Even with the €614m capital increase just concluded, Merlin will need to sell non-core assets, and further capital market moves are coming." But El Economista reported that the timetable for the next capital increase must be adhered to so that the second phase can be closed within the next few weeks. "Financing required to undertake the entire transaction already secured," Merlin said inthe acquisition announcement. "Target LTV of approximately 50% by 2015 year-end."
The final phase in the acquisition of Testa must be completed by June 2016, a date by which Merlin will own almost all of the equity with the exception of 0.4% held by minority shareholders. The plan is to merge both companies before the end of next year, into a single REIT/SOCIMI - but to do that it must first qualify Testa for this status - and before 30 September this year, the deadline to be able to obtain tax benefits under this framework. Another €1bn capital raise, if confirmed, will represent an increase of 47% to Merlin's equity base. "The terms of the operation are not yet known but a discount is expected to be offered," El Economista said. "For now, analysts are keeping a buy rating on the stock. pie
Source: Property Investor Europe