JSE-listed and UK-focused real estate investment trust Atlantic Leaf Properties has entered into an implementation agreement with South Downs Investment (SDI), which intends to acquire the issued share capital of Atlantic for £152-million.

This values Atlantic at a price at 80.5p, or R17.30, a share.

SDI is an affiliate of certain investment funds managed by affiliates of NYSE-listed Apollo Global Management.

Together with Atlantic’s May distribution of 4.5p apiece, Atlantic’s shareholders will receive 85p a share.

The independent directors of Atlantic have unanimously recommended that shareholders vote in favour of the acquisition, as they have irrevocably undertaken to do in respect of their own shares.

Vukile Property Fund – Atlantic’s largest shareholder – has also irrevocably undertaken to vote in favour of the acquisition, in respect of its 34.9% shareholding.

Atlantic CEO Paul Leaf-Wright says that despite facing various challenges in the UK real estate market, the company has consistently generated attractive dividend returns by acquiring well tenanted, strategically located assets that have offered rental growth from a relatively defensive asset base.

However, he adds that the challenging environment in both South Africa and the UK has seen continued market uncertainty, particularly surrounding Brexit and more recently the Covid-19 pandemic.

“Limited support for capital raises and reduced liquidity has put pressure on Atlantic’s share price, which has, in turn, made it uneconomic to raise new capital to fund portfolio growth.

“Share prices of listed property companies have fallen considerably and the wider property sector is expected to face continued headwinds in the near future. Vukile also stated their intention to dispose of their stake in Atlantic, adding further pressure on our share price,” Leaf-Wright explains.

Atlantic chairperson Peter Bacon notes that while the board of Atlantic remains confident regarding the underlying strength and prospects of the business, it believes that the acquisition provides shareholders with a fair and reasonable consideration for their shares in the context of current market dynamics.

“The Apollo funds will bring a sizeable capital base, access to captive funding, execution resources and deep experience of investing in real estate portfolios, all which will contribute towards improved performance during uncertain times.”

Apollo senior partner Skardon Baker points out that, with Atlantic’s industrial and logistics-focused portfolio in the UK, the company is well positioned with a defensive asset base to realise value.

Atlantic will remain an externally managed vehicle and it is anticipated that a new management company will be incorporated by members of the existing management team to act as the external manager after the transaction is complete.