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Acquisition of a majority interest in Echo Prime Properties B.V. and withdrawal of cautionary
REDEFINE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/018591/06)
JSE share code: RDF ISIN: ZAE000190252
(Approved as a REIT by the JSE)
(“Redefine” or “the company”)
ACQUISITION OF A MAJORITY INTEREST IN ECHO PRIME PROPERTIES B.V. AND WITHDRAWAL OF CAUTIONARY
INTRODUCTION
Redefine shareholders are referred to the cautionary announcement released on 4 February 2016, and updated cautionary
announcement released on 26 February 2016, advising that the company was in advanced negotiations for the acquisition of an
offshore portfolio of assets. Redefine is pleased to announce the conclusion on Tuesday, 1 March 2016 of a share purchase and
subscription agreement with Echo Investment S.A. (“Echo”) and Echo Prime Properties B.V. (“EPP”), a company incorporated in
the Netherlands (the “transaction agreement”). In terms of the transaction agreement, Redefine will acquire 75% (plus one
share) of the issued share capital of EPP, which indirectly owns a portfolio of prime real estate assets throughout Poland (the
“property portfolio”) (the “transaction”). It is Redefine’s intention to reduce its shareholding to approximately 50% through the
immediate on-sale of approximately 25% of EPP’s shares on the basis set out more fully below.
RATIONALE FOR THE TRANSACTION
The transaction significantly advances Redefine’s international investment strategy, which is centred on geographic diversification
and exploiting attractive initial yield spreads. The transaction presents a unique opportunity to create the leading commercial real
estate platform in Poland and to build instant critical mass by acquiring a high quality retail-based portfolio with a strong local
partner providing a substantial development pipeline, which will provide additional growth. In line with its stated intention, it is
anticipated that Redefine’s offshore property assets will increase to 25% of its total property assets under management post the
conclusion of the transaction.
SALIENT TERMS OF THE TRANSACTION
Subject to the fulfilment of the conditions precedent set out below, Redefine will acquire (from Echo) and subscribe for (from
EPP) ordinary shares representing 75% plus one share of the total issued share capital of EPP (the “EPP shares”). It is Redefine’s
intention to reduce this stake to approximately 50% through the immediate on-sale of a portion of the EPP shares to a consortium
of selected co-investors, on the same terms as those governing Redefine’s acquisition of the EPP shares. Echo will remain
invested in EPP and will hold the remaining shares in EPP (representing 25% (less one share) of the ordinary shares in EPP).
The effective date of the transaction will be on the last day of either the month in which the last of the conditions precedent is
satisfied; or the following month, depending on whether or not the conditions precedent are satisfied on or after the fifteenth day
of a given month.
The total consideration payable by Redefine for the EPP shares (the “consideration price”) shall be an amount equivalent to 75%
of:
- EUR1,188,000,000; plus
- the amount of working capital held by the EPP group immediately prior to the effective date; plus
- the cash held by the EPP group immediately prior to the effective date; minus
- the amount of debt held by the EPP group immediately prior to the effective date,
which is estimated to result in a total consideration price for the 75% share in EPP of approximately EUR362,000,000. In
addition, there is a mechanism in place in terms of which EPP will pay an earn-out to Echo in connection with planned
GLA extensions to the properties within the property portfolio at an initial yield of 8.5% (with an estimated total value of
approximately EUR60,000,000). In this regard, EUR9,775,000 is payable by EPP to Echo on the effective date, in the context of
an already-completed extension and in respect of which Redefine will pay EPP its pro-rata portion of the amount due, calculated
with reference to its shareholding.
The consideration price will be funded by offshore bridge funding raised by Redefine, and it is anticipated that such bridge
funding will in due course be settled from the proceeds of a placement by Redefine of bonds listed in Europe and convertible into
Redefine ordinary shares.
The transaction attributes a value to the total property portfolio of EUR1,188,000 000. The property portfolio generates net
operating income of EUR71,000,000 and total distributable income (net of interest and withholding tax) of EUR46,000,000.
The transaction agreement contains warranties and other provisions that are typical for a transaction of this nature.
A number of related agreements were concluded together with the transaction agreement, including a shareholders’ agreement
between Redefine, Echo and EPP, containing terms and conditions normal for a transaction of its kind.
CONDITIONS PRECEDENT
The transaction agreement is subject to the following conditions precedent being fulfilled prior to 31 October 2016:
- obtaining of the required antitrust clearance;
- completion of a restructuring of the EPP group such that it is the sole holder of the property portfolio;
- execution by EPP of certain agreements specified in the transaction agreement; and
- receipt by the EPP group of all required consents to the change of control resulting from the transaction.
THE PROPERTY PORTFOLIO
The details of the properties owned indirectly by EPP, including the property name, location, sector, monthly weighted average
rental per square metre, the GLA and the valuation, effective as at 15 January 2016, attributed by Redefine, are as follows:
Monthly
weighted
average rental
per m2 GLA Valuation
Property name Location Sector (EUR/m2)1 (m2) (EUR’ million)2
Pasaz Grunwaldzki Pl. Grunwaldzki 22, Wroclaw Retail 22.99 49 402 233 200 000
Galaxy Al. Wyzwolenia 18-20, Szczecin Retail 24.20 41 297 200 900 000
Galeria Echo Kielce ul. Swietokrzyska 20, Kielce Retail 14.83 77 400 206 400 000
Galeria Amber Kalisz ul. Górnoslaska 82, Kalisz Retail 13.29 34 785 74 100 000
Galeria Veneda ul. Zawadzka 38, Lomza Retail 13.68 15 026 34 500 000
Outlet Park u. Struga 42, Szczecin Retail 16.55 22 232 60 300 000
Galeria Sudecka ul. Jana Pawla II 51, Jelenia Góra Retail 10.53 31 005 51 900 000
Galeria Olimpia ul. Kolejowa 4, Belchatów Retail 10.57 21 757 38 700 000
Centrum Echo Belchatow ul. Kolejowa 4, Belchatów Retail 5.77 11 426 9 620 000
Centrum Echo Przemysl ul. 29 Listopada 4, Przemysl Retail 6.50 5 759 4 560 000
Total Retail 310 089 914 180 000
Malta Office Park Baraniaka 88, Poznan Office 14.34 27 973 63 700 000
Park Rozwoju ul. Konstruktorska 10, Warsaw Office 13.39 33 004 73 300 000
A4 Business Park Francuska 42, Katowice Office 12.81 18 028 37 000 000
West Gate ul. Lotnicza 12, Wroclaw Office 13.05 14 714 40 400 000
Astra Kielce Al. Solidarnosci 36, Kielce Office 13.06 11 670 31 100 000
Oxygen Malczewskiego 22, Szczecin Office 15.39 12 680 28 300 000
Total Office 118 069 273 800 000
TOTAL 428 158 1 187 980 000
Note:
1. Excluding rental income generated by non-area units, for example parking lots and antennae.
2. The valuation amount reflects the value attributed to each of the properties by the directors of Redefine, having considered
an appraisal of the property portfolio conducted by Savills plc. The directors of Redefine are not independent and are not
registered as professional valuers or as professional associate valuers in terms of the South African Property Valuers
Profession Act, No 47 of 2000.
The property portfolio will be managed by Griffin Real Estate sp. z o.o., a leading investor in the commercial real estate markets
of Central and Eastern Europe.
DEVELOPMENT PIPELINE
In addition to the above, Redefine will pay its pro-rata portion (calculated with reference to its shareholding in EPP) of an amount
of EUR20,646,249 (subject to upward adjustment to account for equity contributions made prior to completion of the transaction)
(the “profit participation amount”), payable by EPP in consideration for the right to participate in the profit derived from the
sale of certain assets currently being developed by subsidiaries of Echo (the “development properties”) and in respect of which
EPP has a right of first offer to acquire. Irrespective of whether its right of first offer to acquire the development properties is
exercised or not, EPP will be entitled to 25% of the profit derived from the sale of such development properties.
REDUCTION IN SHAREHOLDING AND PROPOSED OPTION FOR PARTICIPATION BY EXECUTIVES
As set out above, it is Redefine’s intention, post the effective date, to reduce its shareholding in EPP to approximately
50% through the on-sale of approximately 25% of its shares in EPP to selected co-investors. In addition, the board of directors of
Redefine has agreed in principle to grant certain of the key executives of the company an option to acquire 5% of the issued shares
in EPP, at a price equivalent to the price being paid by Redefine for its shares in EPP, subject to the payment of an option
premium (the “option”). The detailed terms of the option, including the applicable option premium, are still to be determined.
The finalisation and conclusion of the option will constitute a small related party transaction in terms of the 10.7 of the JSE
Listings Requirements and as such will not be subject to shareholder approval, provided an independent expert has confirmed that
the terms of the option are fair as far as shareholders are concerned.
The board of Redefine has appointed Mazars Corporate Finance Proprietary Limited (“Mazars”), an independent professional
expert acceptable to the JSE, to prepare the requisite opinion. A further announcement detailing the terms of the option and the
outcome of the opinion prepared by Mazars will be published in due course.
CATEGORISATION OF THE TRANSACTION
The transaction is classified as a category 2 transaction in terms of paragraph 9.5(a) of the JSE Listings Requirements and
accordingly does not require the approval of Redefine shareholders.
PRESENTATION AND WEBCAST
The company is hosting a live webcast regarding the transaction at 16:00 (SA time) on Tuesday, 1 March 2016. A Powerpoint
presentation (including further details of the property portfolio) will be available on Redefine’s website at www.redefine.co.za
from 16:00 (SA time), with the webcast available for viewing at http://www.corpcam.com/Redefine02032016 and on Redefine’s
website once concluded.
WITHDRAWAL OF CAUTIONARY
Following the release of this announcement, the cautionary announcements published on SENS on 4 February 2016 and
26 February 2016 are withdrawn and caution is no longer required to be exercised by shareholders when dealing in their Redefine
shares.
1 March 2016
Corporate advisor and sponsor
Java Capital
South African legal advisor
Cliffe Dekker Hofmeyr
UK legal advisor
Pinsent Masons
Polish legal advisor
Kochanski zieba and partners
Date: 01/03/2016 03:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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