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Acquisition of Croatian Retail Property Portfolio and Cautionary
TOWER PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2012/066457/06)
JSE share code: TWR ISIN: ZAE000179040
(Approved as a REIT by the JSE)
(“Tower” or the “company”)
ACQUISITION OF CROATIAN RETAIL PROPERTY PORTFOLIO AND CAUTIONARY
1. INTRODUCTION
Shareholders are advised that Tower has concluded an agreement (the “preliminary acquisition agreement”)
with Agrokor d.d (“Agrokor”) and Konzum d.d (“Konzum”) to acquire the following 4 Konzum stores and
shopping centres in Croatia for an aggregate purchase consideration of €66 386 227 (exclusive of VAT) less the
amount of debt in the Dubrovnik company (the “total purchase consideration”). To this end, Tower will
acquire:
- the entire issued share capital of Sub Dubrovnik d.o.o (the “Dubrovnik company”) which owns the Sub
City Centre situated in the Dubrovnik area (the “Dubrovnik property”) from Agrokor for an aggregate
purchase consideration of €28 746 413 (exclusive of VAT) less the amount of debt in the Dubrovnik
company, which debt will remain in the Dubrovnik company pursuant to Tower acquiring the Dubrovnik
company;
- the standalone superKonzum situated in Zagreb (the “Zagreb property”) from Ares Nekretnine d.o.o.
(the “Zagreb seller”) for an aggregate purchase consideration of €13 151 880 (exclusive of VAT);
- the Meridijan 16 shopping centre situated in Zagreb, Gracanska (the “Gracani property”) from Siget
ulaganje d.o.o. (the “Gracani seller”) for an aggregate purchase consideration of €15 677 987 (exclusive
of VAT); and
- the standalone superKonzum situated in Velika Gorica (the “Velika Gorica property”) from Bacal Beta
Nekretnine d.o.o. (the “Velika Gorica seller”) for an aggregate purchase consideration of €8 809 947
(exclusive of VAT),
(collectively the “acquisitions”) as a series of interconditional transactions.
Tower is in the process of establishing one or more Croatian subsidiaries (each a “purchaser” or “Tower
subsidiary”) which will assume all of Tower’s rights and obligations in respect of each acquisition.
2. OVERVIEW OF KONZUM AND AGROKOR AND RATIONALE
The Agrokor Group is the largest company in the Adria region, employing over 60 000 people. Agrokor focuses
on food retail and wholesale as well as food production and has an annual turnover of €6.5 billion. Agrokor is
the controlling shareholder of Konzum, the largest supermarket retailer in Croatia and Bosnia and Herzegovina.
Konzum employs over 14 000 people in more than 740 stores in Croatia alone. The acquisition of the Mercator
business enabled Agrokor to also become the leading food retailer and wholesaler in the markets of Serbia,
Slovenia and Montenegro. Today, Agrokor's retail in the region employs 41 500 people in over 2 000 stores.
The acquisitions are in accordance with Tower’s strategy of establishing an offshore European platform to seek
out new markets that provide strong diversification opportunities through premium, high quality properties. The
Dubrovnik property, the Zagreb property, the Gracani property and the Velika Gorica property (collectively the
“properties”) are situated in prime locations, built to European standards and feature internationally renowned
tenants. The Zagreb property and the Velika Gorica property are standalone superKonzum stores (equivalent to
the South African Hypermarket stores). The Dubrovnik property and the Gracani property are shopping centres
in which Konzum is the anchor tenant and other strong line shop tenants make up the balance.
3. TERMS OF THE PRELIMINARY ACQUISITION AGREEMENT
3.1. Effective date
The effective date for the preliminary acquisition agreement will be the date of fulfilment, or waiver, as
the case may be, of the last of the conditions precedent to the preliminary acquisition agreement (the
“effective date”). On the effective date, Tower, Agrokor and Konzum, and each of the Zagreb seller, the
Gracani seller, the Velika Gorica seller (the “sellers”), as the case may be, will procure the execution of
agreements for the acquisition by Tower of the Dubrovnik company and each of the Zagreb property, the
Gracani property, and the Velika Gorica property. The effective date for each acquisition will be the date
of transfer against payment ("closing date") which is anticipated in April 2016.
3.2. The head lease agreements, property management agreements and guarantees
On the effective date, Konzum will enter a twelve year, triple net head lease with each Tower subsidiary
in respect of the Velika Gorica property and the Zagreb property, including line shop stores on the
premises (each a “head lease agreement”) and other existing tenants will remain as sub-tenants of
Konzum.
In respect of the Dubrovnik property, the Dubrovnik company will remain the lessor in relation to the
existing lease agreements. In respect of the Gracani property, the relevant Tower subsidiary will be the
lessor. Konzum will enter into a property management agreement with each of the Dubrovnik company
and the purchaser owning the Gracani property for a period of 12 years (each a “property management
agreement”). In terms of the property management agreements, Konzum will manage the property and
guarantee the rental in respect of the Dubrovnik property and the Gracani property for the duration of the
property management agreement. In addition, Konzum will be responsible for all costs related to tenant
administration, management, maintenance, renewal of contracts and any other works on the Dubrovnik
property and the Gracani property as well as all other costs related to the proper operation and
management of a shopping centre (including, inter alia, insurance, repairs and maintenance, service fees,
security, cleaning and utility charges). The head lease and property management agreements will be
indexed to European inflation (rentals will increase with inflation) and turnover rental will be payable,
which underpins long-term income growth. Should line shop tenants’ rentals increase for any reason for
the duration of the head lease or property management agreement (including line shop tenant turnover
rental), the additional rental will be shared equally by Tower and Konzum.
Agrokor will guarantee to each of the Dubrovnik company and the purchasers, Konzum’s payment
obligations under each head lease, each property management agreement, the Konzum lease of a portion
of the Dubrovnik Property and the Konzum lease of a portion of the Gracani Property (“the
guarantees”).
3.3. Purchase consideration
The purchase consideration payable in respect of each of the acquisitions will be discharged in cash upon
the fulfilment of the discharge conditions for the loan(s) secured by Tower to part fund the acquisitions.
The total purchase consideration will be payable in Croatian Kuna, converted from Euros to Kuna at the
mid exchange rate of the Croatian National Bank on the date of payment thereof.
3.4. Conditions precedent
The preliminary acquisition agreement remains conditional upon:
3.4.1. written confirmation that the Agrokor and Konzum management and/or supervisory boards
approve the acquisitions;
3.4.2. Tower, Agrokor and Konzum, and the sellers agreeing to the terms of the property sale agreements,
the sale of share agreement in respect of the Dubrovnik property, the head lease agreements, the
property management agreements and the guarantees (the “transaction documents”), as
applicable;
3.4.3. Agrokor and Konzum confirming that they, or entities which they control, have an irrevocable
right to acquire control over the Dubrovnik company and the sellers such that Agrokor, Konzum or
an entity which they control will be the only shareholder of each of the sellers and the Dubrovnik
company;
3.4.4. the approval of Tower’s board;
3.4.5. all approvals required by the JSE (including shareholder approval) being obtained;
3.4.6. Tower raising 50% of the purchase consideration payable for each sale property and the Dubrovnik
company by way of an equity capital raise; and
3.4.7. Tower obtaining debt finance in respect of 50% of the purchase consideration payable for each sale
property and the Dubrovnik company; and
3.4.8. the head lease agreements, the property management agreements and the guarantees are signed and
have become unconditional, save for any condition requiring that the preliminary acquisition
agreement becomes unconditional.
Upon the fulfilment of the conditions precedent set out in paragraphs 3.4.1 to 3.4.4 above and Tower
obtaining an acceptable term sheet for debt finance in respect of 50% of the total purchase consideration,
Tower may require Konzum and Agrokor to sign the transaction documents.
The preliminary acquisition agreement includes warranties, indemnities and undertakings which are normal for
an acquisition of this nature.
4. PROPERTY SPECIFIC INFORMATION
The property specific information required in terms of the JSE Listings Requirements in relation to the
properties including property name and address, geographical location, rentable area, weighted average rental
per square metre and value attributable to the property is set out below.
Property name and address Sub City Centre, Dubrovnik/ Srebreno, Setaliste Dr. Franje Tudmana
Sector Retail
Geographical location Croatia
Rentable Area (m2) 12 259
Weighted Average rental per m2 €14.66
Value attributed to the property €28 746 413
Property name and address Zagreb superKonzum, Zagreb, Ulica grada Vukovara 275
Sector Retail
Geographical location Croatia
Rentable Area (m2) 3 223
Weighted Average rental per m2 €25.50
Value attributed to the property €13 151 880
Property name and address Meridijan 16, Zagreb, Gracanska cesta 208
Sector Retail
Geographical location Croatia
Rentable Area (m2) 9 362
Weighted Average rental per m2 €10.47
Value attributed to the property €15 677 987
Property name and address Velika Gorica superKonzum, Velika Gorica, A.K. Mioši?a, 64
Sector Retail
Geographical location Croatia
Rentable Area (m2) 5 510
Weighted Average rental per m2 €9.99
Value attributed to the property €8 809 947
The board is satisfied that the values of each of the properties are in line with the purchase prices being paid for
them by Tower. The directors of Tower 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.
5. CATEGORISATION OF THE ACQUISITIONS
As the preliminary acquisition agreement has been entered into by Tower with the same parties and each of the
acquisitions will be entered into by Tower with the same parties and their associates, the acquisitions have been
aggregated for the purposes of determining the categorisation of the acquisitions, in compliance with the JSE
Listings Requirements.
The acquisitions, which are classified as a Category 1 transaction in terms of the JSE Listings Requirements,
require shareholder approval. Accordingly a circular, detailing the terms of the acquisitions, and incorporating a
notice convening a general meeting of shareholders to consider, and, if deemed fit, approve the requisite
resolutions to implement the acquisitions, will be sent to Tower shareholders in due course.
6. FINANCIAL EFFECTS AND CAUTIONARY ANNOUNCEMENT
Shareholders are advised that a further announcement setting out the financial effects of the acquisitions will be
released on SENS in due course.
Shareholders are advised to continue to exercise caution when dealing in the company’s securities until a further
announcement is made.
27 January 2016
Corporate advisor and sponsor South African legal advisor Croatian legal advisor
Java Capital Cliffe Dekker Hofmeyr Glinska & Miškovic
Date: 27/01/2016 01:29:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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