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Acquisition Of Shopping Centres In Serbia And Montenegro
HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
JSE share code: HYP ISIN: ZAE000190724
(Approved as a REIT by the JSE)
(“Hyprop” or “the company”)
ACQUISITION OF SHOPPING CENTRES IN SERBIA AND MONTENEGRO
1. INTRODUCTION
Shareholders are advised that Hyprop has, through an offshore joint venture company (Hystead Limited
(“Hystead”)) acquired an interest in two shopping malls situated in South-Eastern Europe (“the acquisitions”).
Hystead is incorporated in the United Kingdom and is held 60% by Hyprop and 40% by Homestead Group
Holdings Limited (“Homestead”), a company associated with Louis Norval, a non-executive director of
Hyprop. The total purchase consideration is €202 750 000 (of which Hyprop’s effective share is €121 650 000)
(the “total purchase consideration”).
2. RATIONALE
The acquisitions are the first steps in Hyprop’s strategy to acquire or develop high-quality, income producing
shopping centres in Central and Eastern Europe, which will complement Hyprop’s existing high quality
shopping centre portfolio in South Africa and the rest of Africa. Hyprop’s objective is to have partial ownership
of a high quality shopping centre portfolio in these regions, with a value of approximately €1 billion, within 5
years.
The two upmarket shopping centres that are being acquired, namely Delta City Belgrade (Serbia) and Delta City
Podgorica (Montenegro) are well located in the most important city in each country. Both shopping centres
have high occupancy levels and footfall, and a balanced tenant mix, which includes key retailers and
international brands. The acquisitions are expected to enhance Hyprop’s distributions to its shareholders due to
healthy Euro denominated net rental income returns, resulting in a yield in excess of 8%, as well as the positive
effects of attractive European funding rates In order to mitigate currency risk, the acquisitions will be financed
entirely through Euro funding, supported by guarantees from Hyprop.
Hyprop has elected to acquire the shopping centres in joint venture with Homestead as it is of the view that
Homestead has significant value to contribute as a result of its knowledge of the area and its access to other
potential transactions.
3. TERMS OF THE SERBIAN ACQUISITION
3.1. The Transaction
A wholly-owned subsidiary of Hystead incorporated in Serbia, Universal Mall d.o.o. Belgrade (“UMB”),
has entered into an agreement with Delta Real Estate d.o.o (“Delta”) to acquire the entire issued share
capital of Delta City 67 d.o.o. (“Delta City 67”), which owns Delta City Belgrade, Serbia (“Delta City
Serbia”), for an aggregate purchase consideration of €127 750 000 (of which €111 942 332 is payable to
the Delta and €15 807 668 will be used to settle the existing bank loans of Delta City 67) (the “Serbian
acquisition”) with effect from the transfer date of Delta City 67 into UMB’s name (the “Delta City 67
transfer date”).
3.2. Purchase consideration
The purchase consideration of €127 750 000 payable for the Serbian acquisition (the “Delta City 67
consideration”) will be settled as follows:
- €61 942 332 is payable to Delta on the Delta City 67 transfer date;
- €49 250 000 is payable to Delta within 90 days of the fulfilment or waiver of the conditions
precedent to the Serbian acquisition, (the “second instalment”);
- €750 000 is payable to Delta together with the second instalment but will be deposited into a
separate escrow account to provide for income tax payments due by Delta City 67 (the “third
instalment”); and
- the balance of the Delta City 67 consideration, being €15 807 668, will be used to settle the
existing bank loans of Delta City 67.
The second instalment will be adjusted up or down with reference to the income and expenses of Delta
City 67 up to the Delta City 67 transfer date. In addition, the third instalment will be adjusted up or down
by the difference between the final amount of income tax payable for the 2015 tax year and the advance
payments made.
In terms of a surety agreement entered into between Delta, UMB and Delta M CG Podgorica d.o.o.
(“Delta M CG”), payment of the second and third instalments have been secured by a mortgage over
Delta City Podgorica (Montenegro) (“Delta City Montenegro”). Hyprop and Homestead are jointly and
severally liable for payment of the Delta City 67 consideration in the event of a default.
3.3. Conditions precedent
All regulatory and statutory approvals have been obtained. The Serbian acquisition is subject to the
fulfilment or waiver of certain conditions precedent, including confirmation that all funding and security
agreements are finalised, that notice to settle the existing bank loan of Delta City 67 has been received
and confirmation of registration of a new loan agreement with the Serbian National Bank.
3.4. Material terms
The agreement in respect of the Serbian acquisition contains undertakings, warranties and indemnities
which are normal for an acquisition of this nature.
4. TERMS OF THE MONTENEGRIN ACQUISITION
4.1. The Transaction
A wholly-owned subsidiary of Hystead incorporated in Montenegro, Universal Mall d.o.o. Podgorica
(“UMP”), has entered into acquisition agreements with Hemslade Trading Limited Cyprus (“Hemslade”)
(as to 72.07%) and Delta (as to 27.93%) to acquire the entire issued share capital of Delta M CG, which
owns Delta City Montenegro for an aggregate purchase consideration of €75 000 000 (of which €60 147
681 will be paid to Hemslade and Delta and €14 852 319 will be used to settle bank loans of Delta
M CG) (the “Montenegrin acquisitions”), with effect from the transfer date of Delta M CG into UMP’s
name (the “Delta M CG transfer date”).
4.2. Purchase consideration
The aggregate purchase consideration of €75 000 000 payable for the Montenegrin acquisitions (the
“Delta M CG consideration”) will be settled as follows:
- €39 013 590 is payable to Hemslade on the Delta M CG transfer date;
- € 15 119 323 is payable to Delta on the Delta M CG transfer date;
- €4 334 843 is payable to Hemslade on the Delta City 67 transfer date;
- €1 679 925 is payable to Delta on the Delta City 67 transfer date; and
- the balance of the Delta M CG consideration, being €14 852 319, will be used to settle part of the
existing bank loans of Delta M CG.
The Delta M CG consideration will be adjusted up or down with reference to the income and expenses,
receivables and liabilities of Delta M CG up to the Delta M CG transfer date.
In terms of a surety agreement entered into between Delta, UMP and Delta M CG, payment of the portion
of the Delta M CG consideration payable to Delta has been secured by a mortgage over Delta City
Montenegro. Hyprop and Homestead are jointly and severally liable for payment of the Delta M CG
consideration in the event of a default.
4.3. Conditions precedent
All regulatory and statutory approvals have been obtained.
4.4. Material terms
The agreements in respect of the Montenegrin acquisitions contain undertakings, warranties and
indemnities which are normal for an acquisition of this nature.
5. FUNDING OF THE ACQUISTIONS
The total purchase consideration payable by UMB in respect of the Serbian acquisition and UMP in respect of
the Montenegrin acquisitions will be funded as follows:
- the total purchase consideration will be funded by bank debt underwritten by Hyprop. Homestead will
furnish Hyprop with security in respect of 10% of the aggregate purchase consideration;
- within 12 months of the acquisitions being implemented, UMB and UMP will seek to raise asset-backed
bank debt (utilising Delta City Serbia and Delta City Montenegro as security). It is anticipated that this
will facilitate a bank loan of at least 50% of the total purchase consideration;
- during the period that Hyprop provides funding support for the transaction, Hyprop will be compensated
through a disproportionate participation in the dividends payable by Hystead to its shareholders.
6. MANAGEMENT OF THE SHOPPING CENTRES
Delta will oversee the management of Delta City Serbia and Delta City Montenegro for a period of 12 months
(which can be extended by a further 6 months) with the existing mall staff continuing their employment with
Delta City 67 and Delta M CG, respectively. Over this period Hystead will consider the establishment of a local
management office in Belgrade. Asset management responsibilities will be undertaken by Hyprop and
Homestead.
7. PROPERTY SPECIFIC INFORMATION
Property name and address Delta City Shopping Centre – Belgrade, 16 Jurija Gagarina Street,
New Belgrade, Serbia
Sector Shopping Centre
Geographical location Serbia
Rentable Area (m2) 29 875
Weighted Average rental per m2 €26
Value attributed to the property €130 900 000*
Forecast net operating income €10 430 000^
(January 2016 to December 2016)
Property name and address Delta City Shopping Centre – Podgorica, Cetinjski Put Street,
Podgorica, Montenegro
Sector Shopping Centre
Geographical location Montenegro
Rentable Area (m2) 23 343
Weighted Average rental per m2 €22
Value attributed to the property €78 100 000*
Forecast net operating income €6 450 000^
(January 2016 to December 2016)
* Independent valuations have been carried out by Nenad Suzic and Srdjan Teofilovic of CBS International
d.o.o (part of CBRE affiliate network) as at 1 September 2015. Both Nenad Suzic and Srdjan Teofilovic
are members of the Royal Institute of Chartered Surveyors.
^ This information has not been reviewed or reported on by the company’s auditors and remains the
responsibility of the directors of Hyprop.
8. CATEGORISATION OF THE ACQUISITIONS
As each of the acquisitions have been entered into by wholly owned subsidiaries of Hystead with the same party
and its associates, the acquisitions have been aggregated for the purposes of determining their categorisation, in
compliance with the JSE Listings Requirements. The acquisitions are classified as a category 2 transaction in
terms of the JSE Listings Requirements. Accordingly, they are not subject to the approval by Hyprop
shareholders.
9 February 2016
Sponsor
Java Capital
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