Earlier this week, Hili Properties plc obtained regulatory approval and published a prospectus in connection with the issuance of 185,185,185 new shares at a price of €0.27 each, for a total value of €50 million.

This is Hili Properties’ second offering on the local capital market, following its €37m bond issue in 2015. The company owns and manages a portfolio of commercial properties in Malta, Romania and the Baltics (namely Estonia, Latvia and Lithuania). The 23 properties currently held have a total value of just over €115m and are almost entirely fully occupied with a weighted average lease term (WALT) of almost nine years.

The portfolio of properties is diversified not only geographically but also across their type. The company currently owns six grocery-anchored shopping centres, 12 restaurants, two office buildings, a property in the healthcare sector and a residential property.

Regarding the geographical split, 34 per cent of the portfolio’s value is in properties in Latvia (the six grocery-anchored shopping centres having the ‘Rimi’ chain as the anchor tenant and three McDonald’s restaurants); another 34 per cent is in Romania (the property housing the healthcare operator Regina Maria and five McDonald’s restaurants); 27 per cent in Malta (two office buildings, a McDonald’s restaurant and a private residence); four per cent in Lithuania (two McDonald’s restaurants); and one per cent in Estonia (a McDonald’s restaurant).

The five largest assets, accounting for 64 per cent of the total value of the portfolio, are the property housing the healthcare operator in Romania, valued at €29.8m; the office and warehousing complex in Malta (the ‘1923 Building’) valued at €16.9m; one of the grocery-anchored shopping centres in Latvia, valued at €10.9m; the McDonald’s restaurant and offices in Sliema, valued at €8.2m; and another grocery-anchored shopping centre in Latvia,  valued at €7.7m.

Meanwhile, in August 2015, Hili Properties had also agreed with APM Holdings Ltd (a shareholder of its parent company Hili Ventures Ltd) to acquire all the ordinary shares held in Harbour (APM) Investments Ltd, the owner of a circa 92,000sqm parcel of land in Benghajsa, for a total of €25m. Since then, Hili Properties transferred an aggregate deposit of €24.5m (in cash and by the issuance of new shares) to APM Holdings Ltd. The final deed of sale is expected to be executed by December 31, 2022.

Essentially, this means the company has a €24.5m asset from which it is not and will not be generating any cashflow for the foreseeable future, until such time as a purpose for the land is established (in line with the prevailing planning policies in force at the time). This ultimately adversely impacts the company’s financial metrics since no rental income is being derived. Notwithstanding this, at a meeting with financial analysts earlier this year, it was explained that the Benghajsa land remains a priority for the company and professional consultants were engaged to derive the best use for the land, including for industrial and/or logistical purposes.

Hili Properties’ future strategy is to grow its property portfolio by pursuing acquisitions of newly identified assets, coupled with property appreciation of existing assets through continuous management and upkeep, as well as potential redevelopment opportunities. In fact, apart from the Benghajsa land, the presentation published in conjunction with this Initial Public Offering (IPO) indicates the company plans a major renovation and development of one of its existing grocery-anchored shopping centres in Latvia.

Hili Ventures, the parent company of Hili Properties (as well as the parent company of Premier Capital plc and 1923 Investments plc) injected €18.4m in additional share capital in Hili Properties a few weeks ago, ahead of the IPO. Essentially, should this €50m public offering be fully subscribed, the company would immediately have up to €68m in additional capital to pursue its strategy to continue to expand its property portfolio.

In fact, the company stated that it is already in advanced discussions to acquire a commercial property in Poland and an industrial property in Lithuania, having a combined value of over €38m. The property in Warsaw, Poland, is a newly reconstructed property with a strong tenant in place having a nine-year lease agreement, which may also be extended in due course. It currently generates a rental yield of circa seven per cent. The asset in Lithuania would be the first investment in an industrial property that is also newly built and already has a 20-year lease agreement with a strong international tenant occupying the entire area. The property currently generates a rental yield of circa six per cent and it also has potential for expansion in the future.

Hili Properties is also in discussions with prospective buyers to sell three of the grocery-anchored shopping centres in Latvia. These have a combined value of €8.3m.

Hili Properties’ financial statements indicate that during 2020, it generated €8.1m in rental income, which equates to an implied gross rental yield of 7.2 per cent. The company published its financial forecasts until 2024 as part of the IPO documentation, showing that revenue is expected to rise to €12.1m in 2024, with pre-tax profits of €7.4m. The assumptions indicate that these forecasts are based on the inclusion of additional properties in the coming years, with an acquisition in Poland and another one in Lithuania. The assumptions also include the sale of the three shopping centres in Latvia.

The company’s adjusted net asset value prior to the IPO amounts to €86.6m. Based on the issued share capital of 300 million shares prior to the IPO, the net asset value per share equates to €0.289 while the offering price of the new share issue has been established at €0.27 per share.

Hili Properties intends to distribute a net dividend of four per cent, based on the offering price of €0.27 per share, which would represent a dividend payment of €5.2m per annum, assuming all the 185,185,185 new shares are fully subscribed in the upcoming general public offer.

This is the largest-ever equity fund- raising exercise by a company to be listed on the Malta Stock Exchange as it just surpasses the €49m IPO of BMIT Technologies plc in January 2019.

The Hili Properties equity issue is a very important development for the capital market not only due to the size of the offering but also as its business prospects are not entirely dependent on the Maltese economy, therefore enabling investors to obtain access to international property via a well-known Maltese company.

The Hili Properties equity issue is a very important development for the capital market not only due to the size of the offering but also as its business prospects are not entirely dependent on the Maltese economy, therefore enabling investors to obtain access to international property via a well-known Maltese company

Hili Properties is not a development company but an owner of a growing stock of commercial properties leased to various tenants across different economic sectors. As such, this diversification element provides a lot of resilience as was very much evident at the height of the pandemic in 2020, with the company continuing to receive almost all the pre-agreed rental income from the various tenants in line with the long-term lease agreements in place. This is an important observation in view of the stated dividend policy being projected.


Rizzo, Farrugia & Co. (Stockbrokers) Ltd, ‘Rizzo Farrugia’, is a member of the Malta Stock Exchange and licensed by the Malta Financial Services Authority. This report has been prepared in accordance with legal requirements. It has not been disclosed to the company/s herein mentioned before its publication. It is based on public information only and is published solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The author and other relevant persons may not trade in the securities to which this report relates (other than executing unsolicited client orders) until such time as the recipients of this report have had a reasonable opportunity to act thereon. Rizzo Farrugia, its directors, the author of this report, other employees or Rizzo Farrugia on behalf of its clients, have holdings in the securities herein mentioned and may at any time make purchases and/or sales in them as principal or agent, and may also have other business relationships with the company/s. Stock markets are volatile and subject to fluctuations which cannot be reasonably foreseen. Past performance is not necessarily indicative of future results. Neither Rizzo Farrugia, nor any of its directors or employees accept any liability for any loss or damage arising out of the use of all or any part thereof and no representation or warranty is provided in respect of the reliability of the information contained in this report.

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