Post by
sclarda on Nov 22, 2021 12:57am
SOT
Just throwing a few number around trying to make sense of the new acquisition. In looking at the website of the Irish company being acquired Yew Grove they have a list of their properties and the fair value cap. rate of each property. Assuming SOT is paying around fair value it appears that the properties are yielding any where from the high 6% to the mid 9% range. Assuming an average cap rate on the acquisition of aprox. 8% on the $255 million acquisition results in aprox. $20 million per year in cashflow from the properties. Allowing aprox. $ 7.5 million for annual interest on the debentures and the new debt taken on that leaves aprox. $12.5 million leftover. Lets allow $1.5 million per year in management expenses that would leave aprox. $11 million.
SOT had aprox. $11 million in AFFO in the last quarter which is aprox. $44 million annually. Add the $11 million to that and SOT would have aprox. $55 million in annual AFFO after the acquition.
SOT now has aprox. 68 million shares outstanding. Adding the aprox. 11 million shares from the new acquisition SOT would have aprox. 79 million shares outstanding. Times that by the 40 cent annual dividend and SOT would be paying out aprox. $32 million in dividends per year.
That would result in the payout ratio after the acquisition being aprox. 58% aprox 3 percent lower than what it currently is. Currently SOT has aprox. $ 16 million left in AFFO after paying the dividend. After the acquisition it would have aprox. $ 23 million in AFFO leftover.
So basically the payout ratio which is already very low goes down a bit more and the company increases AFFO left after dividends by nearly 50% but also takes on aprox. $125 more debt. If they could sell some of the low occupancy Atlantic properties and raise $100 million that would take care of much of the new debt.
Some of my numbers are an educated guess and could be out somewhat. That being said their strategy of selling low occupancy Atlantic properties with little demand and low rental rates een if they have to sell them cheaply and buying into Irelandat a reasonable price where there is a lot of demand and good rental prices seems sound to me. This REIT will now have significant properties in Canada, USA and Europe.
The only problem is that it now appears that another real estate investment company Quanta Capital which already owns 4.5% of Yew Grove REIT says that it is preparing to make a counter offer to buy the REIT which may force SOT to raise its bid if it wants the properties.
Comment by
SNAKEYBOY on Nov 22, 2021 3:20pm
A bidding war would not be good for SOT.UN. They gonna offer more shares at $4.6x NOW?
Comment by
pennydredful on Nov 22, 2021 5:27pm
Looks like SOT is unpaid stocking horse to souse out other bidders for YEW
Comment by
HermannHaller on Nov 23, 2021 2:47pm
I think mgmt is correct to say that if they were bigger they would get more institutional interest. This deal is making them bigger, but also a lot more complicated. Plus the debt is actually going up a bit, and I think it was already at the high-end in the sector. I've had enough, GLTA, I'm out.
Comment by
SNAKEYBOY on Nov 24, 2021 12:43pm
SP doesn't translate to the private value, if these guys sell properties at or above NAV then its likely their Book value is not that far off. Question though is whether they want to close the gap or have no intention of doing so.