RAM Essential Services Property Fund has completed the $218.6 million sale of five retail assets, with proceeds earmarked for debt repayment. The settlement advances REP’s healthcare-focused strategy while leaving refinancing and capital management decisions as the next major tests.
- $218.6 million sale of five retail assets settled
- 10% interest retained in the acquiring institutional trust
- Pro forma gearing expected to fall to 16.8%
- Net proceeds being used to repay debt
- UBS appointed to advise on capital management initiatives
Five Retail Assets Change Hands
RAM Essential Services Property Fund (ASX:REP) has completed the $218.6 million sale of five retail assets, turning a planned portfolio reshaping into a settled transaction. Coomera Square, Springfield Fair, Keppel Bay Plaza, Coles Rutherford and Mowbray Marketplace all settled on 22 October.
The transaction completes the planned retail selldown, which had been identified as a key step towards lowering the Fund’s gearing. REP is retaining a 10% interest in the newly established institutional trust that acquired the assets, preserving some exposure to the divested portfolio.
Debt Repayment Drives Gearing Reduction
Net sale proceeds are being applied to repay debt. On a pro forma basis after settlement of all five properties, REP expects gearing to fall to 16.8%.
That balance-sheet change is the clearest immediate financial consequence of the deal, although the announcement does not disclose its effect on earnings, distributions or net tangible asset value. The gearing figure is also presented on a pro forma basis rather than as a reported period-end outcome.
Refinancing and Capital Strategy Remain Unresolved
George Websdale, RAM executive director and head of real estate, said the retail selldown was consistent with the Board’s strategy of moving towards a specialised REIT and had positioned REP to continue its pivot to healthcare.
The Fund is finalising a debt refinancing and said details of the first stage of its proposed capital management strategy would be provided shortly. Its Board is also assessing further strategic initiatives aimed at reducing the trading discount to NTA and maximising securityholder value, with UBS Securities Australia appointed as adviser.
The settlement removes one substantial execution hurdle. The more consequential questions now concern the terms of the refinancing, how the retained 10% interest is valued, and whether the forthcoming capital management measures can address the gap between REP’s market price and its underlying asset value.
Bottom Line?
The retail sale is complete and gearing is materially lower on a pro forma basis, but the next announcements must show how refinancing and capital management will translate into value for securityholders.
Questions in the middle?
- What debt terms will REP secure in the refinancing, and how will they affect future distributions?
- How will the retained 10% interest in the institutional trust be valued and managed?
- What specific capital management measures will the Board pursue to reduce the discount to NTA?