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Elanor (ASX:ECF) to raise capital for $113.5m office purchase
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  • Elanor Commercial Property Fund (ECF) agrees to buy 50 Cavill Avenue in Surfers Paradise for $113.5 million from GDI Property (GDI)
  • To help fund the purchase, ECF is issuing $84.7 million in fully underwritten shares at a $1.10 per security issue price
  • The equity raise is made up of a $45 million 1-for-5 expedited non-renounceable entitlement offer and a $39.7 million institutional placement
  • Elanor Investors Group, ECF's largest shareholder, has agreed to sub-underwrite up to $10 million of the retail component of the entitlement offer
  • Shares in Elanor are sitting at $1.16 in a trading halt

Elanor Commercial Property Fund (ECF) has entered into an agreement with GDI Property (GDI) to purchase 50 Cavill Avenue, Surfers Paradise for $113.5 million.

The Cavill Avenue purchase has a seven per cent passing yield and a 6.8 per cent capitalisation rate, with the acquisition set to be settled by August 31, 2021.

ECF is issuing $84.7 million in fully underwritten shares at a $1.10 per security issuance price to help fund the acquisition.

The equity raising comprises a 1-for-5 accelerated non-renounceable entitlement offer to raise $45 million and an institutional placement to raise $39.7 million.

An issue price of $1.10 represents a 4.8 per cent discount on the last traded price of $1.155 and a 3.5 per cent discount on the theoretical ex-rights price of $1.14.

The equity raising will result in the issuance of roughly 77 million additional ECF securities, bringing ECF's market capitalisation to $321 million after the equity raising.

From the date of issuance, any securities issued under the equity raising will rank on par with existing ECF securities and will be eligible for the September 2021 quarterly dividend.

ECF fund manager David Burgess said 50 Cavill Aebnue is the pre-eminent commercial building on the Gold Coast, a region well positions for further economic growth.

"This investment typifies ECF’s strategy of acquiring assets that have strong competitive advantages in their respective markets," he said.

"50 Cavill Avenue is a high investment quality acquisition for the Fund, acquired at a capitalisation rate of 6.8 per cent and significantly below replacement cost."

Elanor Investors Group (ENN) CEO Glenn Willis said the performance of ECF during FY21 has been strong in challenging conditions.

"The acquisition of 50 Cavill Avenue further enhances the Fund’s portfolio of high investment quality commercial office properties invested in favourably positioned
markets," he said.

"Furthermore, this asset, in addition to ECF’s other properties, presents significant opportunities to enhance value for securityholders."

ENN is ECF's largest shareholder, has agreed to sub-underwrite up to $10 million of the retail component of the entitlement offer.

It will also retain between 11 and 14 per cent co-investment stakes after the equity raise, depending on the entitlement offer take-up.

The equity raising is fully underwritten by the joint lead managers MA Moelis Australia Advisory, Ord Minnett and Shaw and Partners.

ECF has also reached an agreement on conditions for a new $39.7 million loan facility to help fund the acquisition.

The new debt facility has a five-year duration and a fully hedged all-in cost of 2.3 per cent per year.

Subject to current market circumstances and no unanticipated occurrences, ECF gave a fund from operation (FFO) per security of 10.8 cps in FY22 (FY22 FFO yield of 9.8 per cent on issue price) guidance for FY22.

It also posted guidance for a 9.4 cps dividend per share in FY22 (FY22 DPS yield of 8.5 per cent on issue price).

Shares in Elanor are sitting at $1.16 in a trading halt.

ECF by the numbers
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