Acquisition of two high quality Irish property portfolios with an aggregate value of €472m
9 May 2014
Kennedy Wilson Europe Real Estate plc (the "Company" and, together with its subsidiary undertakings from time to time, the"Group"), a closed ended investment fund that invests primarily in real estate and real estate loans in Europe, is pleased to announce that it has entered into a conditional agreement to acquire a portfolio of residential and commercial properties located in Dublin (the"Central Park Portfolio") for a total consideration of approximately €88.1 million, comprising approximately €30.7 million of cash and approximately €57.4 million of assumed non-recourse debt (the "CP Purchase Price") and a separate conditional agreement to acquire a portfolio of properties located across Dublin, with one in Cork, comprising 7 office and 6 retail properties (the "Opera Portfolio"), for a total consideration of approximately €391.4 million, comprising approximately €194.9 million of cash and approximately €196.5 million of assumed non-recourse debt (the "Opera Purchase Price").
The properties forming part of the Central Park Portfolio are located in Sandyford, approximately 11km from Dublin city centre in an affluent catchment area of Dublin, comprising 272 residential units, approximately 31,000 square feet of commercial space included in the residential blocks and the partially completed residential block with planning permission for approximately 166 residential units, approximately 14,800 square feet of commercial space and 362 car parking spaces.
As at 1 May 2014, the Central Park Portfolio had been valued in accordance with the RICS Red Book by CBRE at €82 million and had an annual gross rental income of approximately €3.8 million, in respect of 93 per cent of the residential space that was occupied, and €23,000, in respect of approximately 2.6 per cent of the commercial space that was occupied. CBRE completed its valuation on the real estate assets and such valuation did not take into account approximately €6.1 million of net current assets held by the entity that is being acquired by the Company.
The properties forming part of the Opera Portfolio are located across Dublin, with one in Cork, comprising 7 office and 6 retail properties, let to tenants including Bank of Ireland, KPMG, Tesco and Mark & Spencer. As at 1 May 2014, the Opera Portfolio had been valued in accordance with the RICS Red Book by CBRE at €390 million, and consisted of, in aggregate, approximately 670,000 square feet and had an annual gross rental income of approximately €24 million. CBRE completed its valuation on the real estate assets and such valuation did not take into account approximately €1.4 million of net current assets held by the entity that is being acquired by the Company.
The Company, through its wholly-owned subsidiaries, entered into a conditional agreement to acquire the Central Park Portfolio from KW EU Investors X, LLC ("KW EU") by acquiring the entire issued participating share capital issued by KW Real Estate plc, in respect of its sub-fund KW Irish Real Estate Fund IX ("KW Irish RE"), for the CP Purchase Price (the "Central Park Acquisition") and a separate conditional agreement to acquire the Opera Portfolio from VF Opera, LLC ("VF"), KWF Real Estate Venture XV, LP ("KWF") and Kennedy-Wilson Holdings, Inc. ("KW" and, together with its subsidiaries, the"KW Group") by acquiring the entire issued participating share capital issued by Cavalli Investments plc, in respect of its sub-fund Cavalli Real Estate Fund I ("Cavalli"), for the Opera Purchase Price (the "Opera Acquisition", together with the Central Park Acquisition, the "Proposed Transactions").
The independent directors of the Company (the "Independent Directors"), having been advised by KW Investment Management Ltd, which acts as the investment manager of the Company, (the"Investment Manager") consider that the Proposed Transactions will create a strong platform for growth and enhance value for shareholders of the Company (the"Shareholders"). In particular, the Independent Directors, having been advised by the Investment Manager, believe that the Proposed Transactions will provide the following benefits to the Company:
- the Central Park Portfolio is one of Dublin's prime rental schemes and offers the ability to develop a further 166 units, while the Opera Portfolio includes some of Dublin's best properties with an excellent spread of core long term income and value added asset management opportunities; and
- the Central Park Portfolio and the Opera Portfolio complement and enhance the Group's existing portfolio, and will provide the Group with asset diversification, both geographically and from a tenant base perspective.
As KW is a significant shareholder in the Company, holding together with its associates approximately 12.5 per cent of the share capital of the Company, as well as other factors described below, each of the Central Park Acquisition and the Opera Acquisition is classified as a related party transaction pursuant to Chapter 11 of the Listing Rules (the "Listing Rules") of the Financial Conduct Authority (the"FCA"). The Proposed Transactions are therefore conditional on, amongst other things, the approval of Shareholders of the Company, other than KW and any of KW's associates (the "Independent Shareholders"), at an extraordinary general meeting of the Company. A circular containing further information about the Proposed Transactions and a notice convening an extraordinary general meeting of the Company at which Independent Shareholders will be asked to vote in favour of resolutions to approve the Proposed Transactions (the "Circular") will be posted to Shareholders as soon as practicable.
Mary Ricks, director of the Company, commented:"Our first Irish acquisitions are complementary to our growing portfolio, and reinforce our investment strategy to invest in value-add assets within markets with strong fundamentals and high return potential. We have made excellent progress on our investment pipeline and are ready to take full advantage of opportunities in our core markets."
Upon completion of these two acquisitions, since its IPO in February 2014, the Company's investments will include four portfolios of properties comprising in aggregate 54 office, industrial, retail and multi-family properties across the UK and Ireland, and a portfolio of subordinated loans secured by properties in the UK.