First Property Group has, in conjunction with a club of investors, agreed to acquire Pilot Tower, a recently built class A office building in Krakow, Poland, at a total cost of some €23m.
Completion of the acquisition, which is unconditional save for it being subject to receiving a ruling on the tax treatment of the transaction, is expected to take place in the second quarter of 2017.
The net operating income being generated by the property is currently €1.9m per annum, equating to a net initial yield on purchase of 8.3% per annum.
The acquisition will be part funded by a bank loan of up to €15.9m and cash of approximately €7.5m.
The cash has been committed by two family offices, a Cambridge college, and other clients of First Property. Included within this the Group intends to co-invest €1.5m pari-passu with other investors.
The investment is forecast to earn a pre-tax profit of €1.16m per annum, of which the group’s share, which will be accounted for as an associate, should be €230,000 per annum.
This equates to a pre-tax rate of return on equity invested of more than 15% per annum.
The group will also earn ongoing management fees of circa €220,000 per annum
In addition it will earn a one-off arrangement fee of €220,000.
At 9:55am: (LON:FPO) First Property Group PLC share price was +0.75p at 48.25p
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