A Lens Over 3 Real Estate Stocks – VCX, CMW, MGR

The companies engaged in the properties or real estate asset class have come up with the fund-raising program. The basic purposes of the fund raising is to support growth opportunities and working capital management. Let’s dive a bit deeper and look at three stocks from this arena.

Vicinity Centres (ASX: VCX)

Vicinity Centres (ASX: VCX) is engaged in the investment, management and development of properties with leasing and funds management.

Pricing of Medium-Term Notes: The company recently announced that it had priced six-year medium term notes (Notes) worth $400 million. The notes comprised of fixed rate notes amounted to $225 million at a coupon of 2.60% and floating rate notes of $175 million, which were priced at a coupon of three-month bank bill swap rate +142 bps. The management planned this transaction amount to repay the current bank facilities and for usual corporate purposes. CBA (Commonwealth Bank of Australia) and NAB (National Australia Bank Limited) were Joint Lead Managers for the purpose. Settlement of the issuance of the senior and unsecured notes was expected to occur on 27th June 2019, however, the company has not communicated further details related to this.

The company recently announced an ordinary dividend of AUD 0.07950000 on fully paid ordinary shares with ex and payment date of June 27, 2019, and August 28, 2019, respectively.

March 2019 quarterly update: Total portfolio specialty store MAT per sqm stood at $10,939 against $9,918 in the prior corresponding period, posting a growth of 10.3% on the back of portfolio repositioning, partially led by the organic growth. The destination portfolio specialty store MAT per sqm stood at $11,392. The total portfolio specialty store and mini majors’ MAT grew by 3.3%, primarily driven by jewellery, up 11.0%; leisure, up 6.1% and retail services, up 5.3%. Solid results for Chadstone and the DFO portfolio also contributed to this growth. Specialty store and mini majors’ MAT for the destination portfolio posted a growth of 3.9%.

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Redevelopment of The Glen worth $430 million continues with stage IV and is expected to inaugurate in the month of August 2019, including a new format David Jones, 60 specialty stores and alfresco dining. The company also mentioned that the construction of >550 apartments on site, by Golden Age, which is a third-party was planned to start in May 2019, with targeted completion to occur in 2021.

VCX released an Investor Calendar, briefing about the key dates of important announcements, as can be seen in the image below.

The stock is trading at a price to earnings multiple of 13.980x. At market close, the stock of VCX was trading at a price of 2.580, with an annual dividend yield of 6.28% and market capitalisation of $9.54 billion on 3rd July 2019.

Cromwell Property Group (ASX: CMW)

Cromwell Property Group (ASX: CMW) is a real estate investor and manager with operations in multiple continents, with a global investor base. The company recently announced that SPP (share purchase plan) opening on 03 July 2019, offers CMW’s shareholders an opportunity to buy stapled securities in CMW (New Securities) up to $15,000 at a price of $1.15 per new share with no brokerage/transaction costs.

The company has observed a few strategic growth avenues across its Property Investment segments and intends to fund these prospects with the transaction value from the SPP and the recent Placement of $375 million. These avenues include more than $1.0 billion of acquisition opportunities in Australia and Europe under its ‘Invest to Manage’ strategy. The consideration from the funds raised and recycled capital from the dispose of assets will be available for more than $1 billion of value-add development prospects across the company’s real estate portfolio.

Financial Impact: The company’s implementation of ‘Invest to Manage’ strategy is on track and the raised funds will be deployed for the further growth of the business. With this, the management reconfirmed its FY2019 guidance of operating profit to be not less than 8.00 cps and distributions of 7.25 cps. The management also provided preliminary FY20 guidance for operating profit to be in the range of 8.1 cps to 8.3 cps and distributions to be not less than 7.5 cps. The company also pointed out that after the reinvestment of this raised fund, gearing is expected to come within its revised targeted range of 30% to 40%.

SPP key dates: The company has updated the market with key dates of the SPP, as can be seen in the table below.

Sale of 50% Interest in Northpoint Tower to Early Light International: The company recently inked a contract to sell its 50% stake in Northpoint Tower for the consideration value of $300 million to Early Light International. Northpoint is comprised of 44 levels of mixed office and retail tenancies, built in 1977. The company acquired its interest in the building for $139.35 million in December of 2013. This sale of the asset is subject to FIRB approval and is likely to be completed in September 2019.

At market close, the stock was trading at a price of $1.185, with a price to earnings multiple of 9.910x and an annual dividend yield of 6.17%, with a market capitalisation of $3.01 billion on 3rd July 2019. The stock is inching towards its 52-week high of $1.270. The stock has gained ~19% on YTD basis.

Mirvac Group (ASX: MGR)

Mirvac Group (ASX: MGR) is engaged in the investment and development of the real estate, third-party capital management and asset management related to the property. The company operates through three major segments: (a) Office and Industrial; (b) Retail; (c) Residential.

The company has recently issued 15,914,244 fully paid ordinary stapled securities at the issue price of $2.90 per stapled security.

The company, on 29th May 2019, announced its fully underwritten institutional placement, which successfully raised $750 million (Placement). MGR also updated the market about its non-underwritten SPP (security purchase plan) for eligible Mirvac shareholders to acquire up to $15,000 of Mirvac stapled securities in Australia and NZ, thus raising fund up to $75 million. On 4th June 2019, the company dispatched booklet related to SPP to eligible Mirvac shareholders in Australia and NZ. The SPP process was successfully completed on 25th June 2019.

Further, the company informed that ~$46.2 million was raised under the SPP, with ~15.9 million new shares, which will be issued to eligible applicants on 4th July 2019 for the offer price of $2.90 per new share. The issue price for SPP was the same as the issue price for institutional investors after a discount of 6.3 cents. The discount given to eligible applicants of SPP was equivalent to the dividend/distribution amount to be paid for the six-months ending 30th June 2019, implying that new shares issued under the SPP will not be eligible for the dividend/distribution for the above-mentioned period.

24,158 eligible shareholders received SPP offer and valid applications amounted to ~$46.2 million were received from ~3,386 shareholders. This accounts for a participation rate of 14% by eligible shareholders with an average application of $13,600. The company will issue the holding statements to eligible applicants on 5th July 2019. The issuance of new shares under SPP are expected to trade on the exchange on 5th July 2019.

At market close on 3rd July 2019, the stock was trading at a price of $3.210, with an annual dividend yield of 3.67% and a market cap of $12.36 billion.


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