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Sale of land and turnkey developments for Panattoni in Newport Pagnell, England
EQUITES PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
Share code: EQU ISIN: ZAE000188843
JSE alpha code: EQUI
(Approved as a REIT by the JSE)
("Equites" or the "Company" or the "Group")
SALE OF LAND AND TURNKEY DEVELOPMENTS FOR PANATTONI IN NEWPORT PAGNELL, ENGLAND
1. INTRODUCTION
Shareholders are advised that Equites Newlands (Land) Limited ("ENLL"), a subsidiary of Equites that forms part
of the Equites Newlands group of companies ("ENGL"), has concluded the following agreements:
- Sale of land agreement, in terms of which ENLL will sell undeveloped, vacant land at Caldecote Farm,
Willen Road, Newport Pagnell MG16 0JJ ("the Property") to CP Logistics UK Milton Keynes Propco
Limited ("Purchaser"), ("Sale Agreement"); and
- Development agreement, in terms of which ENLL is appointed by the Purchaser, as developer, to develop
two distribution centres for the Purchaser on the Property, which developments will be owned and funded
by the Purchaser ("Development Agreement"),
for a consideration of £59,800,000 (ZAR 1,435 million),
together the ("Transaction").
2. RATIONALE
As communicated to shareholders in its annual results in May 2023, the Group is no longer undertaking large-
scale developments in the UK. However, the Group will consider undertaking forward-funded development
agreements to unlock development profits, whilst allocating limited capital to the development platform.
The rationale supporting this Transaction is as follows:
- Loan-to-value ratio: The Transaction will reduce the Group’s LTV ratio by 3.0%, on a pro-forma basis.
- Decrease land holdings. The Transaction will decrease the Group’s land holdings by 32%, on a pro-
forma basis.
- Source of capital: Equites is currently exploring various alternative sources of equity to fund its
development pipeline in SA. Upon conclusion of this Transaction, Equites will release R1.2 billion of equity
(post all costs and taxes), providing a source of capital to reduce borrowings and create capital for further
investment opportunities.
- Crystalise development profits: Crystalising development profits will unlock a portion of ENGL’s value
creation on a cash basis.
- Strong counterparty: The Purchaser is 80% owned by California State Teachers’ Retirement System
("CALSTRS"), which is one of the largest pension funds in the United States. The remaining 20% is
owned by Panattoni UK Holding S.à.r.l., which forms part of Panattoni, one of the largest real estate
development companies in the world. Equites believes the Purchaser is a strong counterparty to the
Transaction.
3. DETAILS OF THE PROPERTY
The total net site area is 36 acres (14.6 ha) of undeveloped land. Following the implementation of the
infrastructure and associated works, ENGL will develop two distribution centres with a combined extent of 792,032
sq. ft (73,582 sq. m) on the Property, which development will be funded and owned by Panattoni. It is estimated
that the developments will be completed in October 2024.
4. TERMS OF THE TRANSACTION
Sale Agreement
The Purchaser will acquire the freehold interest in the Property. The Purchaser has paid a deposit in the amount
of £3,800,000 (ZAR 91 million).
The Transaction is subject to the fulfilment of the following conditions precedent:
- planning and associated consent for the development of the distribution centres becoming free from
challenge;
- the conclusion of legal agreements with third parties in respect of electricity cables and contributions in
respect of shared infrastructure;
- satisfaction with an environmental condition; and
- conclusion of building contracts on terms approved by the Purchaser,
by no later than 9 February 2025; it is expected that the above conditions precedent should be fulfilled before the
end of 2023.
Development Agreement
In terms of the Development Agreement, ENLL (as the developer) will implement:
- the completion of the requisite infrastructure on the Property; and
- the development of the two distribution centres for the Purchaser,
(collectively "Development Works").
Development Works are to be carried out on the Property in accordance with the agreed specifications, the
relevant building/works contract and all applicable statutory consents and requirements.
The Purchaser will fund all costs and expenses in respect of the Development Works subject to a maximum
commitment of £78,725,388 (ZAR 1,889 million), increased by the cost of any agreed variation requested by the
Purchaser. Any cost overruns, which are not expected, will be funded by the Purchaser and ENLL on a 50:50
basis. Equites International Limited ("EIL"), which is wholly owned by the Company, has agreed to guarantee the
developer obligations of ENLL under the Development Agreement up to a maximum of £15 million. This EIL
guarantee will be released 12 months after the final certificate of making good defects has been issued. In effect,
the EIL guarantee is the full extent of financial support Equites has made available to support the development.
Payment of the Consideration
The consideration payable by the Purchaser to ENLL for the Property, and the services rendered as developer,
amounts to £59,800,000 (ZAR 1,435 million), which will be payable as follows:
- £30,800,000, after the fulfilment of all conditions precedent and against transfer of the Property to the
Purchaser; and
- payment of the balance, £29,000,000, will be deferred and become due after practical completion of the
development and delivery of remaining handover items to the Purchaser by ENLL under the Development
Agreement.
5. VALUATION
The directors of Equites are satisfied that the purchase consideration for the Property will approximate its fair
value at the date of transfer. The directors of the Company are not independent and are not registered as
professional valuers or as professional associate valuers in terms of the Property Valuers Profession Act, No.47
of 2000.
6. FINANCIAL IMPACT
Equites’ attributable share of post-tax land sale and development profits is expected to be £6.3 million
(ZAR 151 million). The profits will not be included in the calculation of distributable earnings and will not be
distributed by Equites.
The carrying value of R960 million included a fair value gain as of 28 February 2023, driven by an independent
valuation of the land parcel. The Transaction is estimated to be marginally accretive to Equites’ NAV per share in
the next financial period.
Implementation of the Transaction will result in a decrease in Equites’ LTV ratio by 3.0%, post Equites receiving
the balancing payment.
7. CONCLUSION
The Transaction affords Equites the opportunity to crystalise development profits, reduce borrowings and
generate capital internally for further development opportunities in SA. The Group maintains its distribution per
share guidance of between 130 and 140 cents per share for FY24 and estimates that it will reach its target LTV
ratio of approximately 35% by 29 February 2024.
8. TRANSACTION CATEGORISATION
The Transaction is a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not
require approval by shareholders. Any forward-looking statements have not been reviewed by the Group’s
external auditors. GBP:ZAR exchange rate of ZAR24.00 has been assumed.
15 August 2023
Corporate advisor and sponsor to Equites
Java Capital
Debt sponsor
Nedbank Corporate and Investment Banking
(a division of Nedbank Limited)
Date: 15-08-2023 08:00:00
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