Secure Income REIT is to buy Manchester Arena in a £436m purchase of two leisure and hotel portfolios alongside intentions to raise £315.5m in new equity.
Along with the UK’s largest indoor arena, the first portfolio includes The Brewery at Chiswell Street, EC1, the largest catered events space in the City of London, 18 freehold pubs and 17 Travelodge hotels all purchased from Mansford Opportunity Fund for £224m.
Secure Income REIT will purchase a separate portfolio of 59 hotels across the UK let to Travelodge from Goldman Sachs, Avenue Capital and Golden Tree for £212m.
The portfolios represent a net initial yield of 6% and an average unexpired lease term of more than 20 years.
Secure Income REIT is seeking to raise up to £315.5m in a share issue at 365p per share – equal to the 31 December 2017 EPRA NAV per share adjusted for the completion of the transaction. Its board and management team, Prestbury, will invest £5.25m in new shares at the placing price.
Trading in the new shares is expected to start on 29 March.
The balance of the two portfolios will be funded by two non-recourse debt facilities, which are expected to total £128.7m – about 30% loan to cost.
Full-year results
Secure Income REIT also announced its full year results this morning, including a 14.5% rise in EPRA NAV to 370.4p and a 20.4% rise in adjusted EPRA earnings per share to 13.6p.
Martin Moore, non-executive chairman of the company, said: “Secure Income REIT has been a beneficiary of being an early mover into this market with its NAV per share more than doubling since float in 2014 but we believe this has further to run.
“The weight of cash seeking well-let index-linked property is in our judgment far in excess of the stock currently available on the market, which continues to put upward pressure on prices.”
The company said it expects net LTV to fall to 45.8% from 49.6% and the weighted average unexpired lease term to be 21.7 years with no breaks once the acquisitions, placing and new debt are confirmed.
EPRA NAV is expected to rise to £1.2bn from £870.8m.
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