Capital & Regional Regulatory News (CAL)

19 Aug 2008 17:37



19 August 2008

CAPITAL & REGIONAL PLC

ANNOUNCES GERMAN JOINT VENTURE WITH APOLLO 

Capital & Regional plc, the co-investing property asset manager, today announces that contracts have been exchanged with an investment fund managed by Apollo Real Estate Advisors for the formation of a joint venture for its German portfolio. 

Under the terms of the joint venture Apollo will acquire approximately half of Capital & Regional's equity investment in the German portfolio for a cash consideration of €65.6m. The parties will also together buy out the equity interest that the Hahn Group holds in part of the portfolio for €12.0m in cash. The transaction has been structured so the existing bank debt and interest rate swaps will remain in place. 

The portfolio was valued at €637m at 30 June 2008 and comprises 50 out-of-town income producing retail assets in locations predominantly across western Germany.  There is a total of 472,000 sq m of leasable space plus 161,000 sq m of development land which will both continue to be managed by Capital & Regional's team. There are a number of opportunities for asset management, which will be actively pursued by the new joint venture, and there will be more vigorous recycling of capital. In 2007 the portfolio contributed €14m to the Capital & Regional Group's recurring pre-tax profit after interest and overhead cost but before revaluation surplus and other one off items.

The proceeds of the transaction, which is subject to shareholder approval, will be used to reduce gearing and will significantly strengthen the financial resilience of the Capital & Regional Group.  The price reflects a property value of €631m. Capital & Regional will also incur costs including professional fees and a write down relating to the value of interest rate swaps. These costs can not be determined exactly at this point. A circular seeking shareholder approval will be sent to shareholders after the Group announces its interim results on 28 August and it is anticipated that the disposal will complete at the end of September.

Bill Benjamin, Managing Partner of Apollo Real Estate in Europe, said: 

"This represents a terrific opportunity to participate in and contribute our expertise to a high quality retail portfolio in Germany.  We are delighted to be teaming up with Capital & Regional's strong and very able team and believe that together we can unlock significant potential in these assets."

Hugh Scott-Barrett, Chief Executive of Capital & Regional, said: "We are delighted to have reached this broad-reaching agreement with Apollo and we look forward to working with them on the further development of the German portfolio. 

The proceeds of the transaction will further reduce Capital & Regional's gearing and increase our financial flexibility as we seek investments where our specialist property management skills can add value for shareholders.  We are grateful to the Hahn team for its contribution over the last three years while the portfolio was built up".  

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About Capital & Regional plc

Capital & Regional is the co-investing asset manager which specialises in town centre shopping centres, out of town retail parks, and urban entertainment complexes.

Capital & Regional founded the Mall and Junction Funds in conjunction with Morley Fund Management. It also founded the X-Leisure fund with Hermes Investment Management Limited, and has a number of other joint ventures and developments. Its shares are quoted on the London Stock Exchange. For further information see www.capreg.com 

About Apollo Real Estate Advisors 

Apollo Real Estate Advisors is one of the most active and prominent opportunistic real estate investors in the U.S. and internationally. Apollo focuses on the acquisition of fundamentally sound income producing assets in the major European markets. The firm seeks to add value with proven local operating partners through aggressive asset management. Since the firm's founding in 1993, Apollo has overseen the investment of 17 real estate funds totalling more than $10 billion in equity. Apollo funds collectively have invested in more than 400 transactions with an aggregate value of more than $30 billion. Apollo principals are William Mack, founder and senior partner; Lee Neibart, senior partner; William Benjamin, managing partner, London; John Jacobsson and Richard Mack, managing partners, New York; and Stuart Koenig, partner and global CFO. The firm's web site is: www.apollorealestate.com