The Local Shopping REIT plc ("the Company")
Sale of property-holding subsidiaries
The Local Shopping REIT plc announces that it has completed the sale of two of its property-holding subsidiaries, NOS 2 Limited and NOS 3 Limited, to Farraday Limited, an investment vehicle owned by certain funds managed by Värde Partners, for a cash consideration of £11.2m.
Between them, the two subsidiary companies own 235 properties with a net rental income of £7.07m. The transaction represents an implied property sale price of £79.3m and the subsidiaries will take with them third party fixed rate debt totalling £66.7m.
After taking account of the net short term liabilities of the subsidiaries of £1.4m, a total of £11.2m was received on completion.
A further balancing payment will be made by either the buyer or the seller following post-completion adjustments in respect of rent receipts and debtor balances and certain balance sheet adjustments.
The implied sale price over the most recent valuation of the properties of £77.5m results in a gross book gain of £1.8m. After adjustment for sales costs (debt breakage costs, impairments, vendor's insurance and marketing and agency fees) of an estimated £2.6m, the directors anticipate a loss of £0.8m.
The sales costs contain £0.75m of fixed rate debt breakage which are not included in the Company's Net Asset Value ("NAV") under International Financial Reporting Standards ("IFRS"). This amount compares favourably with the implicit liability of £5.7m at the time of sale.
Following on from the sale, all the Company's remaining financing is swapped or floating and the related breakage costs will continue to be fully reflected in the IFRS NAV.
The directors believe that adjusting the 31 March 2014 NAV for this transaction, together with a limited number of individual asset sales and recent movement in derivatives, results in an implied NAV per share of 42-44p on an IFRS basis and 47-49p on the Adjusted NAV basis.
The net proceeds of the sale will be applied to reduce the Company's indebtedness, thereby reducing its overall loan to value ratio from 75% to 58% (before balancing payment).
Subject to the post completion adjustment, the Company has no carried liabilities resulting from the sale.
As part of a transitional arrangement the Company's fund manager, INTERNOS Global Investors Limited, has been retained by the purchaser for a minimum of three months to ensure the orderly handover of property assets and operational matters.
The sale of the subsidiary companies is in accordance with the Company's investment strategy, adopted by shareholders in July 2013. Following the sale, the Company continues to own 387 properties across the United Kingdom, with 1,127 individual letting units.
Steve Faber, Director
Bill Heaney, Company Secretary
020 7355 8800