RMG - AFI Development sells its stake in Four Winds, Dec 17, 2012.
Each of the sellers is expected to receive $104m for the transaction, AFI estimates its profit from the operation at $50m. Jones Lang LaSalle earlier valued AFI stake at $160m (7% of end-2011 portfolio), which means that AFI is selling the asset 35% below its fair value. The proceeds are to be used for other projects in development stage.
The transaction will result in reduction of AFI net debt, as Westec outstanding debt to Nordea Bank ($163m) will be removed from company balance sheet (AFI end-2011 net debt stood at $540m). According to Mark Groysman, company Executive director, the disposal is in line with company strategy to dispose of completed developments. This has been news to us, as AFI earlier claimed that it focused from development to rental business.
We are confused by this corporate decision, as it falls out of previous company plans. Furthermore, Four Winds asset is sold at significant discount to JLL estimated fair value. Finally, the transaction will have negative effect on AFI portfolio and cash flows in 2012, as positive effect from the proceeds, which will be invested in other prospects, will not be immediately visible. Unfortunately, we could not reach any company representatives to obtain comments on the deal.
Rye, Man & Gor Securities
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|Publication:||Russian Banks and Brokers Reports|
|Date:||Dec 17, 2012|
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