Yew Grove Reit, the Dublin-listed owner of office and industrial assets outside Dublin's city centre, is eyeing a €50 million share sale as soon as late March to reboot its growth strategy, after Covid-19 put paid to fundraising and deal-making in 2020, according to its chief executive.
"Our plans were put back by 12 months at least [by Covid-19]," Yew Grove's chief executive, Jonathan Laredo, said in an interview with The Irish Times on Wednesday, noting that the company had originally aimed to raise between €35 million and €40 million in the second quarter of 2020 and more than €50 million towards the end of the year.
Yew Grove’s focus on office and industrial assets let to State entities, IDA-supported companies and large corporates has resulted in the company collecting between 97 per cent and 100 per cent of quarterly rent collections since Covid-19 struck the economy last March.
However, the small size of its market value, at under €95 million, leaves it well short of the €250 million market capitalisation that would put it on the radar for many large institutional investors. The value of its property portfolio, at €141 million as of last June, is considerably below the €300 million to €500 million asset base the reit had been targeting within three years of its June 2018 initial public offering (IPO).
Pipeline
Mr Laredo said that the pipeline of potential deals is “fairly healthy” again, with transactions largely drying up for much of last year as the property industry dealt with the crisis.
However, the problem for Yew Grove is that its shares are trading at a 13 per cent discount to the company’s most recent stated net asset value, meaning that existing investors stand to be diluted by an equity raise at current levels, if they do not take part. On the other hand, the discount reflects the fact that there is little trading in the stock because of the small-size reit’s portfolio.
“But sitting there and hoping the share price changes is not a strategy,” said Mr Laredo. “We have looked carefully at how to take control of the agenda, and one of the things we might be able to do is issue a relatively large amount of shares, albeit at a discount, in the context of having a very strong pipeline of assets that would be good for us and good for the company.”
Larger portfolio
The chief executive said that having more shares in issue and a larger portfolio of assets would also boost trading activity. “It would mean that when we put out strong trading statements, the shares would react. At the moment, they don’t react to trading statements,” he said.
Mr Laredo said that the while there will continue to be demand in the post-Covid world for prime city centre office space in Dublin for certain activities, companies such as professional services firms may move more towards a “hub and spoke” model of more suburban locations.
There will also be a change in the function of the office as people combine commuting with working from home, he said.
“There will be less focus on cramming people in and more of a focus on making the office a better and more pleasant place to work,” he said.
