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(Alliance News) - Schroder European Real Estate Investment Trust PLC said Thursday it has exchanged contracts to sell its Boulogne Billancourt office asset in Paris for about EUR104 million.
Shares in the investment firm were 16% higher in London on Thursday at 72.03 pence each. In Johannesburg, the shares were 7.7% higher at ZAR14.99.
The sale is structured as a forward funding, Schroder European said, with the building being handed over to the purchaser in the first half of 2022, following completion of a comprehensive refurbishment which is being undertaken by Schroder European.
"The refurbishment and sale follows the agreement of a new 10-year pre-let contract with existing tenant Alten in June this year. The rental uplift is 39% higher than the previous rent paid," the company added.
The final sale price will be about EUR104 million, with net proceeds of EUR70 million to Schroder European when the deal is completed - which includes the roughly EUR30 million refurbishment costs.
Schroder European said the sale represents a profit on cost of about 35%.
"The sale proceeds will be received in stages and the company expects the NAV to increase incrementally as sale receipts occur 50% of the price is to be received on exchange of the definitive deed prior to this calendar year end 2020, with the remainder payable in installments over the subsequent 18 months as construction is completed," the company continued.
Schroder European said the deal will about 15% to its June 30 NAV per share, which was reported as 133.4 rand cents per share.
The building was originally acquired in 2016 for EUR37.5 million.
"The net sale proceeds strengthen the company's balance sheet, providing significant operational and financial flexibility. The funds will primarily be redeployed into new earnings enhancing initiatives including new investments," Schroder European added.
Chair Julian Berney said: "This is a transformational transaction, which will be highly accretive to shareholder returns. It is a strong endorsement of the company's strategy, to identify real estate where we can create significant value for shareholders through asset management, benefiting from our team's local expertise inside the key markets.
"Our focus continues to be on driving the performance of the existing portfolio. This will provide a clear path to income growth and improving long-term shareholder returns and the company's rating."
By Paul McGowan; paulmcgowan@alliancenews.com
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