Last Friday publity announced its intention to contribute up to a 94.9% stake in its subsidiary publity Investor GmbH to PREOS Real Estate AG (PREOS). In exchange, PREOS would issue 47.45m new shares, translating into a 5:2 exchange parity. According to publity, this will create a listed property company valued at up to €574m.
PREOS is a German commercial real estate investor listed on the over the counter market of the Munich Stock Exchange since December 2018. The company focuses on high yield properties and its current portfolio is valued at €93.6m.
In January 2019, publity AG received an asset management mandate from PREOS, allowing the latter to benefit from publity’s extensive real estate database used to identify new acquisition targets, which is particularly important in the initial stage of portfolio ramp-up.
In December 2018, publity decided to develop publity Investor GmbH as its own investment vehicle, acquiring attractive office real estate located in the largest German cities. It has conducted real estate transactions on behalf of publity and managed its own portfolio of non-performing loans with a nominal value of c. €2.3m. The market value of its real estate portfolio (once fully developed) is around €600m and the properties have lettable space of c. 200k sqm, according to publity.
The management intends to combine the operations of both entities, letting publity AG focus on its core activities as a pure asset manager. Meanwhile, the PREOS real estate portfolio would be supplemented with high-yield properties held by publity Investor. publity AG will continue to manage the combined assets and support the rapid development of the real estate business by granting access to its extensive real estate pipeline.
In course of the transaction, PREOS will increase its capital by issuing c. 47.5m shares at a price of €8 each. Consequently, publity will receive five new shares in PREOS for every two shares in publity Investor, implying a valuation of €400m. In addition, PREOS plans to issue a convertible bond with a volume of up to €300m, with publity’s €150m claim under the current and prospective shareholder loans granted to publity Investor being contributed to PREOS as part of the transaction.
The decision is pending approval of publity’s supervisory board and PREOS shareholders that will decide on the capital increase and convertible bond issue at the Annual General Meeting held on 28 August 2018
. It is worth noting that Thomas Olek, publity’s CEO and majority shareholder, is also a majority shareholder at PREOS with a 75.21% stake.
Author: Michal Mierzwiak