Lar España sells an office building in Madrid to Colonial
Lar España sells an office building in Madrid to Colonial
Lar España has sold its office building Arturo Soria, 366 to Colonial for €32.54Mn (3,756€/sqm). The asset has a GLA (Gross Leasable Area) of 8,663 sqm and it is fully occupied. It is located in the North-East of Madrid, very close to the M-30 ring road.
Positive for Lar España
The price paid for Arturo Soria implies:
- A 34.5% premium to the acquisition price (€24.2Mn in July 2014).
- A 12.6% premium to the last appraisal valuation (€28.9Mn in June 2017).
- It is in line with our valuation of €33.2Mn.
A capital gain of €8.3Mn has been achieved by Lar España with this sale. According to the Spanish REIT law, 50% of the capital gain should be distributed to the shareholders. As a result, we expect Lar España to pay an extraordinary dividend of €0.045/share, adding 0.55% of additional yield to the 4% already distributed in 2017.
Lar España has started the sale of its office portfolio with the intention to increase its exposure to retail assets. We see the rationale behind this strategy as: 1) the higher yield of retail assets should lead to increasing dividends; and 2) LRE’s long track record to create additional value on retail assets.
We reiterate our Buy recommendation with a target price of €10.1/share.
Neutral for Colonial
As we mentioned before, the price paid by Colonial is in line with our valuation and therefore the value creation for Colonial should be marginal. Although the acquisition is accretive for Colonia in terms of yield (4.5% of initial yield vs. Colonial’s 3.8%), it is located out of the CBD. We reiterate our Sell recommendation with a target price of €7.38/share.
Lar Espana Real Estate SOCIMI SA is a Spain-based company primarily engaged in the operation of retail Real Estate Investment Trusts (REITs). The Company specializes in acquiring, managing and renting real estate assets within the Spanish market. Its business activities are divided into three segments: Shopping Centers, Offices, as well as Logistics. The Shopping Centers area is responsible for operation of a number of shopping malls, namely Txingudi, Las Huertas, Albacenter, Anec Blau, Hiper Albacenter, and Nuevo Alisal, among others. The Offices segment invests in office properties, such as Arturo Soria, Cardenal Marcelo Spinola, Egeo and Eloy Gonzalo. The Logistics division focuses on managing logistics warehouses, including Alovera I and Alovera II. The Company also owns a plot for residential properties development. It is a parent of a number of entities, such as Lar Espana Inversion Logistica SA, Gran Via Centrum Holdings SAU, Global Noctua and Puerta Maritima Ondara.
Bankinter S.A. is a Spanish brokerage firm established in 1989. The company's line of business includes the provision of market research and trading services for Equity and Fixed Income products.
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