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Cautionary announcement regarding the acquisition of commercial properties in the United Kingdom
TEXTON PROPERTY FUND LIMITED
(formerly Vunani Property Investment Fund Limited)
Granted REIT status by the JSE
(Incorporated in the Republic of South Africa)
(Registration number 2005/019302/06)
JSE code: TEX
ISIN: ZAE000190542
(formerly ISIN: ZAE000185872)
(“Texton” or “the Company”)
CAUTIONARY ANNOUNCEMENT REGARDING THE ACQUISITION OF COMMERCIAL PROPERTIES IN THE
UNITED KINGDOM (“UK”)
1. INTRODUCTION
Texton is pleased to advise holders of Texton shares (“Shareholders”) that it is in the process of
concluding agreements for the acquisition of 2 well-located properties in the UK
(“Acquisitions”) for approximately £15,239,754:
- a two-storey office building (“Stanford House”) in Warrington, England; and
- a warehouse (“Booker Warehouse”) in Burton-upon-Trent, England
(collectively the “Properties”).
The Acquisitions are pursuant to Texton’s stated strategy to achieve geographic diversification
beyond the South African borders into the UK where management of Texton’s asset
management company, Texton Property Investments Proprietary Limited (“TPI”) has extensive
knowledge and experience and where pricing of property acquisition opportunities and related
financing in domestic UK currency is attractive.
The Acquisitions are inter-conditional to one another and closure of the Acquisitions is
imminent. Property information and other details pertaining to the Acquisitions are set out in
section 3 below.
2. RATIONALE FOR THE ACQUISITIONS
Further to the above, rationale for the Acquisitions is as follows:
- Geographic investment and risk diversification into the UK, a region with significant
economic stability and growth prospects and where pricing is attractive
- Increase in Texton’s annual distributable income
- Potential upward rental reversion
- Access to a portfolio whose “asset type” is consistent with Texton’s current South African
asset type:
- Office, industrial and retail
- Underpin of strong tenant covenants and long lease expiry profiles
- The Acquisitions provide Texton a unique platform to conclude further portfolio
enhancing transactions in the UK in a manner consistent with its investment strategy.
3. INFORMATION RELATING TO THE ACQUISITIONS AND THE PROPERTIES
Details relating to the Stanford House and Booker Warehouse are as follows:
3.1. Acquisition of Stanford House
Description Acquisition of the entire issued share capital of Gladstone
Investment Holdings Limited (“Gladstone”), a company
registered in the British Virgin Islands (“BVI”). Gladstone’s
sole asset is Stanford House
Property description: - Stanford House, Science Park South, Garrett Field,
Birchwood, Warrington registered at the Land Registry
with freehold title absolute under title numbers
CH464481 and CH300848
- Enhanced two story office building, fully refurbished in
2003
Tenants: Talk Talk Communications Limited (guaranteed by Talk
Talk Telecom Group Plc, a London Stock Exchange
listed company and a constituent of the FTSE 250
Index) (GLA: 4,980.77m2)
British Telecom (GLA:109.62m2)
Location: Warrington, England
GLA: 5,090.39m2 (net internal) together with 341 parking bays
Lease expiry Full repairing and insuring (triple net) lease expiring on 31
December 2025
Net annual income: £1,006,090 (R18,089,498 converted at the spot exchange
rate as at 19 February 2015 of £1:17.98)
Weighted average net rental £16.47 per m2 (R290.37 per m2 converted at the spot
per m2 exchange rate as at 19 February 2015 of £1:17.98)
Purchase price: £13,699,342 (excluding acquisition costs of approximately
£269,168) (R246,314,169 converted at the spot exchange
rate as at 19 February 2015 of £1:17.98)
Vendor Credo European Properties Limited
Independent valuation £12,981,806 (R233,412,872 converted at the spot
exchange rate as at 19 February 2015 of £1:17.98).
(19 December 2014):
Difference in the purchase price of the Talk Talk Building
and the gross independent valuation are supported by
the fact that this is an off-market share transaction with
opportunity to acquire a portfolio of properties..
3.2. Acquisition of the Booker Warehouse
Description Acquisition of the Booker Warehouse by a new special
purpose BVI subsidiary company of Texton, Heddon
Investment Holdings Limited (“Heddon”)
Property description: - Freehold property known as Block E, Crown Industrial
Estate (an established secondary Industrial Estate),
Angelsey Road, Burton upon Trent as the same is
registered at the Land Registry under Title Number
SF341607
- Property comprises a two bay detached warehouse of
steel frame construction.
Tenant: Booker Limited (a wholly owned subsidiary of Booker
Group Limited, a London Stock Exchange listed company
and a constituent of the FTSE 250 Index). Booker has
occupied the building for 20 years and operates a
wholesale cash and carry business out of the Booker
Building.
Location: Burton-upon-Trent (East Midlands), England
GLA: 3,825.99m2 (retail)
Lease expiry Full repairing and insuring (triple net) lease expiring on 16
June 2025
Net annual income: £117,500 (R2,112,650 converted at the spot exchange
rate as at 19 February 2015 of £1:17.98)
Weighted average net rental £2.56 per m2 (R46.02 per m2 converted at the spot
per m2 exchange rate as at 19 February 2015 of £1:17.98)
Purchase price: £1,540,412 (excluding acquisition costs of approximately
£113,125 and Stamp Duty) (R27,696,608 converted at the
spot exchange rate as at 19 February 2015 of £1:17.98)
Independent valuation £1,518,860 (R27,309,103 converted at the spot exchange
rate as at 19 February 2015 of £1:17.98). Difference in
(17 December 2014):
the purchase price of the Booker Building and the gross
independent valuation is considered to be immaterial by
Texton management.
Pursuant to the Acquisitions, Gladstone and Heddon will be wholly owned subsidiaries of
Texton and their respective memorandums of incorporation will comply with the JSE Listings
Requirements.
It is envisaged that Argo Real Estate Limited, qualified and experienced property managers,
domiciled in UK, who currently manage the Properties will remain appointed as the property
managers.
The Properties have been valued by Lambert Smith Hampton, a well-established and
recognised national commercial property consultancy based in the UK with 27 offices located
across the UK and Ireland. Lambert Smith Hampton are independent and RICS (Royal Institution
of Chartered Surveyors) registered valuers.
4. PURCHASE CONSIDERATION
The aggregate purchase consideration for the Acquisitions amounts to £15,239,754
(R274,010,777 converted at the spot exchange rate as at 19 February 2015 of £1:17.98), on a
cash and debt free basis. Acquisition costs of approximately £382,293 (R6,873,628 converted
at the spot exchange rate as at 19 February 2015 of £1:17.98) will also be incurred. The total
purchase consideration (including acquisition costs) will be funded by way of pound sterling
loan facilities which include senior and bridge financing. The funding has been raised in
pounds sterling in order to mitigate as much currency risk as possible.
5. EFFECTIVE DATE
The effective date of the Acquisitions is expected to be on or about 25 February 2015.
6. CONDITIONS PRECEDENT
The Acquisitions are conditional on the fulfilment of the following outstanding conditions
precedent:
- Final approval of facility letters, deed of priority, insurance, certificate of title, asset
management plan, utilisation requests and legal opinions by the funders; and
- Registration of mortgage bonds (to be done by Sheppherd and Wedderburn) over the
Properties which is expected to have been completed by the end March 2015.
7. CLASSIFICATION OF THE ACQUISITIONS
The Acquisitions will constitute a category 2 transaction, in terms of the JSE Listings
Requirements and accordingly a circular will not be posted to Shareholders.
8. CAUTIONARY ANNOUNCEMENT
Shareholders are cautioned that the agreements required to effect the Acquisitions have not
been signed and accordingly, Shareholders are advised to exercise caution when dealing in
Texton shares until a further announcement is made.
Dunkeld West
23 February 2015
Investment Bank and Sponsor
Investec Bank Limited
Due Diligence Advisors
BDO
Legal Advisers
Osborne Clarke
Walkers
Date: 23/02/2015 08:17:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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