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Secure Income agrees to £436M in acquisitions, plans £316M share placement

Secure Income REIT Plc's board agreed to acquire two U.K. portfolios for a gross purchase cost of £436 million and is planning a share placing to raise roughly £315.5 million in gross proceeds to partly finance the acquisitions.

The first portfolio is being acquired for £224 million, reflecting a net initial yield of 5.9%. The 37-asset portfolio has a weighted average unexpired lease term of 18 years.

The properties include the eight-acre Manchester Arena site atop Manchester Victoria station. The site includes the largest indoor arena in the U.K., let to SMG for 27 years, along with 160,000 square feet of office and additional leisure space and a 1,000-space car park.

Also part of the first portfolio is The Brewery at Chiswell St. in the City of London, 17 hotels let to Travelodge Hotels Ltd. and 18 freehold high street pubs let to or guaranteed by Stonegate Pub Co. Ltd.

The second portfolio, being acquired for £212 million, comprises 59 hotels across the U.K. let to Travelodge with a weighted average unexpired lease term of 23.5 years. The acquisition cost reflects a net initial yield of 6.1%.

The acquisition will take the company's total portfolio to 177 assets and a pro forma portfolio value of £2.21 billion, up from its present portfolio of 81 healthcare and leisure assets with an external valuation of £1.77 billion as at Dec. 31, 2017.

The board is proposing to issue up to 86,438,000 new ordinary shares in a placing to institutional investors, priced at £3.65 per share. The placing volume represents 36.8% of the company's existing ordinary share capital.

The company plans to hold a general meeting March 27 to seek shareholder approval for the proposed placing, and the board unanimously recommends that shareholders vote in favor of the resolutions for the placing.

Admission and dealing of the shares on the London Stock Exchange's Alternative Investments Market is expected to commence March 29, subject to customary terms and conditions.

The remainder of the acquisition costs will be funded by two new nonrecourse debt facilities that are expected to total £128.7 million.

Following the completion of the acquisitions and the next scheduled rental uplifts on its existing portfolio, the board expects to increase distributions to an annualized 15.7 pence per ordinary share, up from 14 pence per share paid for the year ended Dec. 31, 2017. The record date for the first increased dividend is expected to be in the third quarter.

Stifel Nicolaus Europe Ltd. is the sole book runner for the placing.