The American real estate company Southern Property Capital is promoting a huge deal for the sale of 52 sets of residential apartments in the US, for a total consideration of about $ 2.44 billion. Most of the assets will be purchased by two private investment funds.
Southern and its partner, McQuirri, jointly and equally hold Victory Abode Apartments (or VAA for short), which owns and operates rental housing complexes in the United States (multi-family properties). In November 2021, Southern and McQuirri decided to jointly sell all properties. The joint corporation or of most of them.
Southern is now reporting the signing of a set of agreements for the sale of all 52 VAA multi-family properties. As part of the transaction, the two investment funds will acquire up to 45 assets included in VAA’s portfolio, as well as one asset held by Southern directly.
The agreement further stipulates that the funds will be allowed to reduce the number of assets acquired by them by up to five assets. The other seven assets included in VAA’s portfolio will be acquired by Southern itself from the joint venture.
The cash flow from the sale will be used mostly for new investments
Completion of the transaction is planned within 75 to 90 days, and is conditional on the completion of an examination of the assets by the two investment funds. According to Southern, the completion of all the described transactions, including the sale of all 45 assets to the investment funds, is expected to yield a net cash flow of approximately $ 420 million.
Southern has three series of bonds (A, B and C) totaling NIS 546 million (in terms of coordinated liability value), which have been issued to the public in Israel in recent years and are still traded on the Tel Aviv Stock Exchange. According to the company, it expects to In all its liabilities after the completion of the sale of the assets, including compliance with the financial and legal standards to which it has committed to the bondholders of the three series.
The company believes that the transaction will not adversely affect its debt rating, and even emphasizes that it intends to use most of the cash flow that will result from the transaction for the purpose of making new investments to expand its portfolio of rental properties (multi-family).
However, the company intends to distribute a dividend to the controlling shareholder (Transcontinental Realty Investors) in an estimated amount of approximately $ 100 million, to cover the tax liability that will accrue to the controlling shareholder from the transaction (the company is “transparent” for tax purposes. ).
Transcontinental Realty Investors is an American real estate company, whose shares are traded on the New York Stock Exchange under the symbol TCI, at a current value of $ 358 million. On the Tel Aviv Stock Exchange in early 2017.
The bonds have maintained relative stability since the beginning of the year
Southern operates in two main areas. The first is income-producing residential real estate, consisting of multi-family apartment complexes, while the second is income-producing real estate for commerce and offices, which consists of office buildings with limited commercial space within them.
The company operates primarily in the states of Texas, Arkansas, Tennessee, Mississippi, Alabama, North Carolina, Florida, Louisiana, Georgia, Colorado, Arizona and Nevada. Southern ended the first quarter of 2022 with a net profit of $ 6.5 million, following a net profit of $ 115.9 million that it recorded in the entire 2020, as well as a net profit of $ 35 million that it recorded in the years 2019-2020 together.
As of the end of March 2022, Southern presented equity of $ 625.6 million, which constitutes approximately 65% of the total balance sheet. The company’s bonds from the three series are currently traded on the stock exchange at an annual yield to maturity of between 5% and 5.6%, having maintained relative stability since the beginning of 2022.
For example, the Company’s A bonds have risen by 0.5% since the beginning of the year, while B and C bonds have fallen by 1.3% and 1% in the same period, respectively. By comparison, the Tel Bond Global Index, which includes Southern bonds, has fallen sharply since the beginning of 2022 by 4.3%.