Wrap Text
Acquisition of 50% interest in two A grade Zambian retail properties anchored by multi-national tenants
DELTA AFRICA PROPERTY HOLDINGS LIMITED
(Registered by continuation in the Republic of Mauritius)
(Registration number 128881 C1/GBL)
JSE share code: DLA
SEM share code: DEL.N0000
ISIN: MU0473N00010
(“Delta”)
ACQUISITION OF 50% INTEREST IN TWO A GRADE ZAMBIAN RETAIL PROPERTIES ANCHORED BY MULTI-NATIONAL TENANTS
WITH DOLLAR UNDERPINNED LEASES
1. INTRODUCTION
1.1. Shareholders are advised that Delta has, through its wholly-owned subsidiary, Delta International Mauritius Limited,
entered into an agreement (“Acquisition Agreement”) with Rockcastle Global Real Estate Company Limited (“Seller"),
Ndola Kafubu Investments Limited (“NKI”) and Kitwe Mukuba Investments Limited (“KMI”), in terms of which Delta
will purchase from the Seller –
1.1.1. all shares held by the Seller in NKI (amounting to 100% of NKI’s issued share capital) and all amounts owing by NKI
to the Seller, as at 1 December 2015 or such other date as may be agreed in writing between the parties to the
Acquisition Agreement (“Effective Date”), (collectively, “NKI Sale Equity”); and
1.1.2. all shares held by the Seller in KMI (amounting to 100% of KMI’s issued share capital) and all amounts owing by
KMI to the Seller, as at the Effective Date, (collectively, “KMI Sale Equity”),
with the NKI Sale Equity and the KMI Sale Equity being hereafter collectively referred to as the “Sale Equity” and with
the sale of the Sale Equity by the Seller and the purchase thereof by Delta, on the terms and conditions set out in the
Acquisition Agreement, being hereafter referred to as the “Transaction”.
1.2. NKI holds 50% of the ordinary shares in the issued share capital of Kafubu Mall Limited (“KML”), which, in turn, holds
the rights to occupy the land in Ndola, Zambia on which the Kafubu Mall is situated and on which the letting
enterprise conducted by KML is operated.
1.3. KMI holds 50% of the ordinary shares in the issued share capital of Mukuba Mall Limited (“MML”), which, in turn,
holds the rights to occupy the land in Kitwe, Zambia on which Mukuba Mall is situated and on which the letting
enterprise conducted by MML is operated.
1.4. Kafubu Mall and Mukuba Mall are collectively referred to as the “Properties”.
2. RATIONALE FOR THE TRANSACTION
2.1. Delta has identified these dominant retail Properties in Ndola and Kitwe, Zambia and the 50% acquisition of the
Properties presents a unique opportunity to enter a new market in Africa. Not only does the investment meet the
rigid investment criteria of strong counter party leases, underpinned by long-term dollar-based leases, it also provides
Delta with a strong in-country partner, who will provide invaluable knowledge and insight into the Zambian market.
2.2. The recent depreciation in the Kwacha, as well as the announcements by operators in the Zambian mining sector
intending to re-engineer their operations to reduce production costs over the next 18 months, have allowed Delta to
acquire the Properties on favourable terms. Delta has a long-term hold strategy for the Properties and has priced in
the risks associated with the short-term mine closures.
2.3. The following salient points should be highlighted:
2.3.1. net Kwacha exposure is estimated at a maximum of 8.7% of rentals by the end of the 2016 financial year. All
exposure to the Kwacha has been hedged by the Seller for a period of 12 months;
2.3.2. the Properties are seen as the dominant retail offering in their respective regions;
2.3.3. the tax incentives associated with the investments further enhance the yield accretion in Mauritius;
2.3.4. strong multi-national anchor tenants in both Malls:
2.3.4.1. Kafubu Mall is anchored by Shoprite (33% of rentals). Other major tenants are: OK Furnishers (4%), Innscor Africa
(5%), Spur (4%), Jet (4%) and Edgars Active (3%); and
2.3.4.2. Mukuba Mall is anchored by Game (17% of rentals) Shoprite (14%), Pick n Pay (6%), Mr Price (6%)). Other major
tenants are: Woolworths (5%), Carnival Furnishers (4%), Innscor Africa (3%), Spur (3%), FNB (2%) and Barclays
(2%); and
2.3.5. vacancies and arrears for both Properties are negligible.
3. PURCHASE CONSIDERATION
3.1. The consideration payable by Delta to the Seller –
3.1.1. for the NKI Sale Equity, amounts to USD4,075,831 (four million and seventy five thousand eight hundred and thirty
one United States Dollars) (“NKI Consideration”); and
3.1.2. for the KMI Sale Equity, amounts to USD17,530,465 (seventeen million five hundred and thirty thousand four
hundred and sixty five United States Dollars) (“KMI Consideration”),
and these amounts will be paid by Delta to the Seller in cash on the Effective Date (these payments are non-
refundable).
3.2. Delta intends to fund the purchase consideration by way of a vendor consideration placement of Delta shares to third
parties and/or debt funding.
4. LOANS
4.1. On 18 November 2014 NKI, the Seller and Standard Bank of South Africa Limited (acting through its Corporate and
Investment Banking Division) (“Standard Bank”) entered into a loan facility agreement, in terms of which Standard
Bank granted loan facilities to NKI (“NKI Facility Agreement”).
4.2. On 28 August 2014 KMI, the Seller and Standard Bank entered into a loan facility agreement, in terms of which
Standard Bank granted loan facilities to KMI (“KMI Facility Agreement”).
4.3. The total amount owing by NKI and KMI to Standard Bank under the NKI Facility Agreement and the KMI Facility
Agreement, plus any interest accrued or capitalised thereon, plus any fees or other costs owing to Standard Bank
thereunder (but less any early settlement fees or repayment fees) is referred to, respectively, as the “NKI Facility
Outstandings” and the “KMI Facility Outstandings”.
4.4. Pursuant to the Acquisition Agreement -
4.4.1. a loan facility agreement (“NKI Loan Agreement”) is to be entered into between the Seller (as lender) and NKI (as
borrower), in terms of which the Seller will make loan facilities available to NKI for the purpose of, inter alia,
advancing additional funds to NKI and/or discharging the NKI Facility Outstandings; and
4.4.2. a loan facility agreement (“KMI Loan Agreement”) is to be entered into between the Seller (as lender) and KMI (as
borrower), in terms of which the Seller will make loan facilities available to KMI for the purpose of, inter alia,
advancing additional funds to KMI and/or to discharge the KMI Facility Outstandings,
with the NKI Loan Agreement and the KMI Loan Agreement being referred to collectively as the “Loan Agreements”
and the amounts due by NKI and KMI to the Seller under the Loan Agreements being referred to as the “Loan
Outstandings”.
4.5. The amounts due –
4.5.1. under the NKI Facility Agreement and the NKI Loan Agreement, as the case may be, will not exceed USD5,000,000
(five million United States Dollars); and
4.5.2. under the KMI Facility Agreement and the KMI Loan Agreement, as the case may be, will not exceed
USD14,000,000 (fourteen million United States Dollars),
as at the Effective Date.
4.6. NKI, KMI and Delta will, prior to the Effective Date, furnish to the Seller all agreements and documents creating or
evidencing the collateral security furnished (or to be furnished) by them in favour of the Seller, if required, as security
for the obligations of NKI and KMI to the Seller in terms of the Loan Agreements (“Security Documents”).
4.7. Delta will settle the Loan Outstandings within twelve months of the Effective Date (“Final Loan Settlement Date”)
by –
4.7.1. paying Standard Bank the aggregate of the KMI Facility Outstandings and the NKI Facility Outstandings; and/or
4.7.2. paying the Seller the Loan Outstandings.
4.8. It is intended that the NKI Facility Agreement and the KMI Facility Agreement will remain in place until the Loan
Outstandings are settled, provided that at any time prior to the Final Loan Settlement Date –
4.8.1. Delta will be entitled to settle the Loan Outstandings; and/or
4.8.2. the Seller will be entitled to discharge the amounts due to Standard Bank under the NKI Facility Agreement and
the KMI Facility Agreement (or any part thereof), in which event, any such payments made by the Seller shall be
deemed to be advances made by the Seller to NKI and KMI in terms of the Loan Agreements, which advances shall
be repayable to the Seller in terms of the Loan Agreements.
5. EFFECTIVE DATE
5.1. Possession and effective control (but not ownership) of the Sale Equity will, subject to the Seller receiving payment of
the NKI Consideration and the KMI Consideration, pass to Delta on the Effective Date, from which date all risk and
benefit in and to the Sale Equity shall pass to Delta.
5.2. Ownership of the Sale Equity will only pass to Delta against settlement of the outstanding loan amounts referred to in
paragraph 4 above.
6. CONDITIONS PRECEDENT
6.1. The Acquisition is subject to the following conditions precedent (“Conditions Precedent”), namely that:
6.1.1. within 14 business days of the signature date of the Acquisition Agreement (“Signature Date”), the board of
directors of Delta resolves, inter alia, to approve the conclusion and implementation of the Transaction, and such
written resolution is delivered to the Seller;
6.1.2. within 14 business days of the Signature Date, the board of directors of the Seller resolves, inter alia, to approve
the conclusion and implementation of the Transaction, and such written resolution is delivered to Delta;
6.1.3. within 14 business days of the Signature Date, the parties conclude the Loan Agreements and, to the extent
required, the Security Documents;
6.1.4. within 14 business days from the Signature Date, Delta confirms in writing to the Seller that it is satisfied with the
results of its due diligence investigation into the Sale Equity (“Due Diligence Investigation“) in all respects and that
it has, after conducting the Due Diligence Investigation, satisfied itself as to the absence of any grounds on which
the implementation of the Transaction shall not proceed.
6.2. The Conditions Precedent referred to in:
6.2.1. paragraphs 6.1.1 and 6.1.2 have been inserted for the benefit of Delta and the Seller who are entitled to waive
fulfilment of same by written notice to the other party on or before the due date of fulfilment of such Conditions
Precedent;
6.2.2. paragraph 6.1.3 has been inserted for the benefit of the Seller, which is entitled to waive fulfilment of same by
written notice to Delta on or before the due date for fulfilment of such Condition Precedent; and
6.2.3. paragraph 6.1.4 has been inserted for the benefit of Delta, which is entitled to waive fulfilment of same by written
notice to the Seller on or before the due date for fulfilment of such Condition Precedent.
7. CURRENCY HEDGE
Delta has secured a Kwacha/USD hedge from the Seller in the Acquisition Agreement in respect of those tenants of KML
and MML whose rentals in terms of their leases are denominated and paid in Kwacha, and which applies for a period of
12 months following the Effective Date.
8. WARRANTIES
The Seller has provided warranties to Delta that are standard for a transaction of this nature. Save for such warranties,
the Sale Equity is purchased on the basis that it, and the underlying assets of NKI and KML, are taken as is with the
exclusion of all common law and other remedies.
9. THE PROPERTIES
9.1. The details of the Properties are as follows:
Property Name and Geographical Location Sector Gross Lettable Weighted
Address Area Average Gross 2
(m2) Rental/m2
(USD)
Kafubu Mall Ndola, Zambia Retail 11,964 12.24
Corner President Ave.
and T3 Highway
Mukuba Mall Kitwe, Zambia Retail 28,235 14.45
Corner Chiwala Ave.
and Freedom Ave.
9.2. Details regarding the Properties, as at the expected Effective Date of 1 December 2015, are set out below:
Property Name Purchase Yield Weighted Average Lease Duration Vacancy % by
and Address Attributable to Escalation (years) GLA
Shareholders
Kafubu Mall 8.4% 5.2% 5-6 1.446%
Corner President
Ave. and T3
Highway
Mukuba Mall 8.4% 3.7% 5-6 1.445%
Corner Chiwala
Ave. and Freedom
Ave.
Notes:
a) The costs associated with the Transaction are estimated at USD 1,804,121.
b) The Properties have been valued by Quadrant Properties Proprietary Limited, independent and registered
professional valuers in terms of the Property Valuers Profession Act, No. 47 of 2000, who have attributed a
value of USD68 660 714 to Mukuba Mall (as at 1 July 2015) and a value of USD22 513 587 to Kafubu Mall (as at
30 June 2015). Delta will effectively be obtaining a 50% interest in the Properties.
10. FORECAST FINANCIAL INFORMATION OF THE TRANSACTION
The forecast financial information relating to the Transaction for the financial periods ending 30 June 2016 and 30 June
2017 are set out below. The forecast financial information has not been reviewed or reported on by a reporting
accountant in terms of section 8 of the JSE Listings Requirements and Chapter 12 of the SEM Listing Rules and is the
responsibility of Delta’s directors.
Forecast for the 7 Forecast for the 12
month period ending month period ending
30 June 2016 30 June 2017
(USD) (USD)
Revenue – contracted income 2,043,792 3,580,536
Revenue – uncontracted income 31,655 55,457
Operating expenses 288,265 520,968
Operational net income 1,787,182 3,115,025
Net profit after tax 1,063,338 1,901,067
Earnings available for distribution 1,063,338 1,901,067
Notes:
a. Contracted income is based on current signed leases, and assumes any lease that may expire during the period is
renewed on the same terms and conditions.
b. Uncontracted income (which is 1.52% of total rentals for both the 7 month period ending 30 June 2016 and the 12
month period ending 30 June 2017) is assumed as the rentals per lapsed leased proposals.
c. Operating expenses do not contain any material individual expenditure items.
11. CATEGORISATION
11.1. The Transaction qualifies as a Category 2 acquisition for Delta in terms of the JSE Listings Requirements.
11.2. The Transaction constitutes an undertaking in the ordinary course of business of Delta and therefore does not fall
under the scope of Chapter 13 of the SEM Listing Rules.
11.3. On implementation of the Transaction, NKI and KMI will become subsidiaries of Delta. In this regard, Delta confirms
that the requirements of paragraph 10.21 of Schedule 10 of the JSE Listings Requirements will be complied with.
20 October 2015
Directors: Sandile Nomvete (chairman), Greg Pearson*, Greg Booyens*, Bronwyn Anne Corbett, Peter Todd (lead independent),
Maheshwar Doorgakant, Chandra Kumar Gujadhur, Ian Macleod and Leon van de Moortele*
(*executive director)
Company Secretary: Apex Fund Services (Mauritius) Ltd
Registered address: 4th Floor, Raffles Tower, 19 Cybercity, Ebene, Mauritius
Transfer secretary in South Africa: Computershare Investor Services Proprietary Limited
Registrar and Transfer Agent (Mauritius): Mauritius Computing Services Ltd
Corporate advisor and JSE Sponsor: PSG Capital (Pty) Ltd
SEM sponsor: Capital Markets Brokers Ltd
This Notice is issued pursuant to the JSE Listings Requirements, SEM Listing Rule 11.3 and the Securities Act of Mauritius 2005.
The Board of directors of Delta Africa Property Holdings Limited accepts full responsibility for the accuracy of the information
contained in this communiqué.
Date: 20/10/2015 02:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
