Irongate (ASX:IAP) share price halted amid cap raise and $156m property deals

Here’s why the Irongate share price is frozen on Thursday.

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The Irongate Group (ASX: IAP) share price has been put in the freezer as the company undergoes a capital raise to fund its latest acquisitions.

The real estate investment trust (REIT) is purchasing a Western Australian industrial park and a 50% stake in a Victorian office building.

To pay for the acquisitions, the company has initiated a $50 million placement. While that’s happening, the Irongate share price is halted at its previous close of $1.66.

Additionally, the company has updated its guidance for financial year 2022.

Let’s take a closer look at what’s going on with the REIT on Thursday.

Irongate share price halted ahead of acquisitions

The Irongate share price is frozen today as the company undergoes a placement wherein new shares are offered for $1.55 a piece.

That represents a 6.3% discount on the company’s previous closing price.

The raised funds will partly go towards purchasing the stake in the office building for $130 million. Some will also go towards the industrial property’s $26 million acquisition.

The remaining costs will be funded using a new tranche of debt under Irongate’s existing syndicated debt facility. The facility is provided by Westpac Banking Corp (ASX: WBC) and Australia New Zealand Banking Group Ltd (ASX: ANZ).

According to the company, the acquisitions fall into its strategy of purchasing good quality industrial properties with strong tenant covenants and suburban office properties located near key infrastructure.

The industrial property – Bibra Lake – was built in 2015 and covers 16,861 square meters of lettable area across 8 warehouses. It’s located 16 kilometres south of the Perth CBD.

Irongate CEO, Graeme Katz commented on the property, saying:

We have been able to secure the property off-market at an acquisition yield of 5.8%, which provides an attractive spread to the eastern seaboard states, where industrial assets are currently commanding yields of 4.00% – 4.75%.

The office building – the Cremorne Property – is brand new and comprises 19,798 square metres of lettable area across 9 levels. It’s made up of office accommodation, ground floor retail, and 145 car parks.

It’s in Melbourne’s fringe office market, 2 kilometres south-east of the Melbourne CBD.

Commenting on the acquisition of the Cremorne Property, Katz added:

The Cremorne Property provides us with an opportunity to improve the overall quality of the portfolio in a market we are familiar with. The property was developed by Alfasi Group who will maintain a 50% interest in the property.

Guidance upgrade

The Irongate share price might also be commanding attention today following the company’s guidance upgrade for financial year 2022.

After the acquisitions, Irongate expects its funds from operations per security growth to be between 6% and 7%, in line with consensus.

Additionally, the company’s dividends per share are expected to grow from 2.5% to 3%. That represents the top end of its previously provided guidance.

Finally, Irongate’s pro forma gearing is expected to be approximately 34.3% following the acquisitions and placement.

That’s in line with its target gearing range of between 30% and 40%. That provides further debt capacity for committed development expenditure and further growth opportunities.

Right now, the Irongate share price is 28% higher than it was at the start of 2021. It has also gained 4% over the last 30 days.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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