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Further Acquisition of Properties in the UK and Expansion of Texton's UK Property Portfolio
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”)
FURTHER ACQUISITION OF PROPERTIES IN THE UNITED KINGDOM (“UK”) AND EXPANSION OF
TEXTION’S UK PROPERTY PORTFOLIO
1. INTRODUCTION
Further to the announcements on Monday, 2 March 2015 and Tuesday, 19 May 2015, and the
establishment by Texton of their UK platform, Texton is pleased to advise holders of Texton
shares (“Shareholders”) that it has concluded agreements for the acquisition of 3 additional
well-located properties in the UK (“Acquisitions”) for approximately £32,381,779:
- a high quality office building (“Tesco Building”) in Newcastle-Upon-Tyne, England;
- Decentralised retail centre (“Parc Pensarn Units”) in Carmarthen, Wales; and
- City centre retail complex (“Bonmarche and Poundland Units”) in Nottingham, England
(collectively the “Properties”).
Conclusion of the Acquisitions ensures further UK portfolio enhancing acquisitions which are
pursuant to Texton’s stated strategy to achieve geographic diversification beyond South African
borders into the UK where management of Texton’s asset management company, Texton
Property Investments Proprietary Limited, has knowledge and experience, and where property
acquisition opportunities and related financing in domestic UK currency is attractive.
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:
- Further 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 and retail; and
- Underpin of strong tenant covenants and long lease expiry profiles
- Adding scale to Texton’s existing UK portfolio through the further acquisition of a
portfolio enhancing transaction in the manner consistent with Texton’s stated
investment strategy.
3. INFORMATION RELATING TO THE ACQUISITIONS AND THE PROPERTIES
Details relating to the Tesco Building, Parc Pensarn Units and the Bonmarche and Poundland
Units are as follows:
3.1. Acquisition of Tesco Building
Description Acquisition of the entire issued share capital of Chobe
Investment Holdings Limited (“Chobe”), a company
registered in the British Virgin Islands (“BVI”). Chobe’s
sole asset is the Tesco Building
Property description: - Tesco Building, Q8 Quorum Business Park, Longbenton,
Newcastle upon Tyne, registered at the Land Registry
with freehold title absolute under title number
TY518599
- “A Grade” quality modern specification over 3 floors
Tenant: Tesco Personal Finance Plc, trading as Tesco Bank
Location: Newcastle upon Tyne, England
GLA: 9,323.02m2 of flexible floor plates arranged in an ‘L’
shape with 279 parking spaces
Lease expiry Full repairing and insuring (triple net) lease expiring on 13
December 2024
Net annual income: £1,500,277 (R27,755,125 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50)
Weighted average net rental £13.41 per m2 (R248.09 per m2 converted at the spot
per m2 exchange rate as at 27 May 2015 of £1:18.50)
Purchase price: £21,109,346 (excluding acquisition costs of approximately
£309,126) (R390,522,901 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50)
Vendor Argo Real Estate Partners LLP (acting for and behalf of its
private clients) (20%) and Investec Property Proprietary
Limited (80%)
Independent gross valuation £20,003,693 (R370,068,321 converted at the spot
exchange rate as at 27 May 2015 of £1:18.50). Difference
(9 December 2014):
in the purchase price of the Tesco 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 Parc Pensarn Units
Description Acquisition of the entire issued share capital of Zeya
Investment Holdings Limited (“Zeya”), a company
registered in the BVI. Zeya’s sole asset is the Parc Pensarn
Units
Property description: Parc Pensarn Units in Carmarthen, Wales, which
comprises a terrace of three new self contained retail
units constructed using a steel portal frame with surfaced
car parking facilities
Tenants: - Dunelm Mill (GLA: 1,559.83m2)
- DP Realty (trading as Domino’s Pizza) (GLA: 111.48m2)
- Subway Realty (trading as Subway) (GLA: 111.48m2)
Location: Carmarthen, a thriving county and market town located
80 kilometres northwest of Cardiff
GLA: 1,782.79m2
Lease expiry All leases are full repairing and insuring (triple net)
leases:
- Dunelm Mill: 15 year lease expiring on 20 October 2029
with rent reviews on a five yearly basis, upwards only
subject to lower of open market rent and 2% per
annum uplifts
- DP Realty: 20 year lease expiring on 11 August 2034
with break at the end of year 11 and rent reviewed on
a five yearly open market basis (upwards only)
- Subway Realty: 15 year lease expiring on 19 September
2029 with break at the end of year 10 with rent
reviewed on a five yearly basis to RPI subject to a cap of
5% per annum compounded and a collar of 2% per
annum compounded
Net annual income: £214,000 (R3,959,000 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50)
Weighted average net rental £10.00 per m2 (R185.00 per m2 converted at the spot
per m2 exchange rate as at 27 May 2015 of £1:18.50)
Purchase price: £3,459,856 (excluding acquisition costs of approximately
£53,395) (R64,007,336 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50)
Vendor Argo Real Estate Partners LLP (acting for and behalf of its
private clients) (20%) and Investec Property Proprietary
Limited (80%)
Independent gross valuation £3,237,971 (R59,902,464 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50). Difference in the
(13 November 2014):
purchase price of the Parc Pensarn Units 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.
3.3. Acquisition of Bonmarche and Poundland Units
Description Acquisition of the entire issued share capital of Chevelon
Investment Holdings Limited (“Chevelon”), a company
registered in the BVI. Chevelon’s sole assets are the
Bonmarche and Poundland Units
Property description: - Bonmarche and Poundland Units, 191-195 Victoria
Centre, Parliament Street, Nottingham, registered at
the Land Registry with freehold title absolute under
title number NT434742
- Two adjacent retail units arranged over basement,
ground and first floor (with trading from the ground
and first floor)
Tenants: - Bonmarche Limited (GLA: 1,216.37m2)
- Poundland Limited (GLA: 1,384.34m2)
Location: Nottingham, England
GLA: 2,600.71m2
Lease expiry All leases are full repairing and insuring (triple net)
leases:
- Bonmarche: 10 year lease expiring on 4 April 2024
- Poundland: 15 year lease expiring on 27 January 2029
Net annual income: £500,000 (R9,250,000 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50)
Weighted average net rental £16.02 per m2 (R296.37 per m2 converted at the spot
per m2 exchange rate as at 27 May 2015 of £1:18.50)
Purchase price: £7,812,577 (excluding acquisition costs of approximately
£115,253) (R144,532,675 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50)
Vendor Argo Real Estate Partners LLP (acting for and behalf of its
private clients) (20%) and Investec Property Proprietary
Limited (80%)
Independent gross valuation £7,387,121 (R136,661,739 converted at the spot
exchange rate as at 27 May 2015 of £1:18.50). Difference
(10th December 2014): in the purchase price of the Bonmarche and Poundland
Units 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.
Chobe, Zeya and Chevelon 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 £32,381,779
(R599,062,912 converted at the spot exchange rate as at 27 May 2015 of £1:18.50).
Acquisition costs of approximately £477,774 (R13,157,589 converted at the spot exchange
rate as at 27 May 2015 of £1:18.50) will be incurred as well as funding and debt arranging
costs of £233,447 (R4,318,770 converted at the spot exchange rate as at 27 May 2015 of
£1:18.50). The total purchase consideration (including acquisition costs) will be funded by way
of pound sterling loan facilities. 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 was 27 May 2015.
6. CONDITIONS PRECEDENT
There are no outstanding conditions precedent other than the registration of mortgage bonds
over the Properties and additional South African properties which form part of the security for
a funder. Registration of these bonds is expected to be completed by the end of June 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.
Dunkeld West
28 May 2015
Investment Bank and Sponsor
Investec Bank Limited
Due Diligence Advisors
BDO
Legal Advisers
Osborne Clarke
Walkers
Date: 28/05/2015 01:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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