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Cautionary announcement and details relating to the establishment of an investment platform for Central and Eastern
ACCELERATE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 2005/015057/06)
Share code: APF ISIN: ZAE000185815
(Approved as a REIT by the JSE)
(“Accelerate” or “the Company”)
CAUTIONARY ANNOUNCEMENT AND DETAILS RELATING TO THE ESTABLISHMENT OF AN
INVESTMENT PLATFORM FOR CENTRAL AND EASTERN EUROPE
1. INTRODUCTION
Accelerate is pleased to advise shareholders on progress regarding discussions relating to the
establishment of its investment platform (“Investment Platform”) for Central and Eastern Europe
(the “Strategy”).
2. SALIENT DETAILS OF THE STRATEGY
The Investment Platform will have a specialist focus on single tenant net-long lease, properties
by acquiring single tenant, net-leased properties (retail, industrial and office) that are strategic
to blue-chip multinational or large regional tenants, targeting countries in Central and Eastern
Europe that are core and strategic to the underlying tenants. This specialist focus complements
Accelerate’s existing strategy in South Africa of focusing on retail, strategic nodes or strategic
properties.
The Investment Platform’s investment philosophy is to build a portfolio (up to 25% of
Accelerate’s total assets to be invested over time in a profitable manner) that protects capital,
maximises potential upside, achieves targeted returns and generates sustainable cash flows;
whilst utilising diversification and low gearing to mitigate portfolio risk. In addition the
Investment Platform focus will be on acquiring desirable real estate, based on sound property
fundamentals, that other international institutional investors want to own. An initial property
portfolio (“Initial Portfolio”) for the Investment Platform has been identified further details of
which are set out in paragraph 4 below.
The Investment Platform will draw on the experience of local expertise in the region including
the potential to benefit from the increasing investor interest and deal activity in the region even
when Accelerate does not participate as a principal.
At the outset, the Investment Platform will be wholly owned by Accelerate with the possibility to
introduce co-investors at a later stage.
3. BENEFITS OF THE SINGLE TENANT, NET-LONG LEASE STRATEGIC FOCUS
Benefits of a single tenant, net-long lease platform
- Successful, defensive and established asset class globally with renowned specialist
participants such as Gramercy and W.P Carey amongst others
- Known and predictable cash flows for an extended period of time
- Trading patterns unlikely to change in established commercial and residential centres with
limited space available for competition
- Lack of availability of strategically located land together with active asset management
ensures likely renewal of lease term
4. INITIAL PORTFOLIO
In implementing the Strategy, an initial portfolio (“Initial Portfolio”) of big box retail properties in
Austria (±80%) and Slovakia (±20%) has been identified as an off-market opportunity for
acquisition by the Investment Platform. The Initial Portfolio is tenanted on a long lease basis by
a leading blue chip multinational retailer operating across Europe. All leases are denominated
in Euros. The portfolio is concentrated in large cities of Austria and Slovakia and offers
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approximately104 000m of gross lettable area. The portfolio is charactarised by locations with
excellent visibility, easy access, complementary retail and dense residential catchment areas.
A pre-due diligence has been conducted to date and heads of terms agreed with the vendor.
The transaction is however subject to normal conditions precedent for a transaction of this
nature including inter alia a final due diligence, final transaction agreements being entered into,
any required regulatory approvals and a capital raise.
Subject to the above, a blended acquisition yield of 7.11% for the portfolio has been agreed,
which equates to a purchase price of up to ±€140 million for the assets. The total transaction
size may be reduced following the final due diligence. Based on management’s initial pre-due
diligence and conservative gearing assumptions of no more than 50% gearing funded in Euros
against the portfolio, this indicatively translates into an annualised (after tax, interest and costs)
ZAR yield for Accelerate of 10 – 14% per annum.
In addition to the Initial Portfolio, various other single tenant, net-long lease strategic properties
which fit the investment criteria and philosophy have been identified as off-market opportunities
for the Investment Platform and are under consideration.
The anticipated timeline for completion of the initial acquisition by the Investment Platform is
July/August 2016 however timing may differ subject to the progression of the other properties
that are under consideration by Accelerate for the Investment Platform.
5. CAPITAL RAISE
It is envisaged that up to 50% of the purchase consideration for properties to be acquired by
the Investment Platform will be funded from euro denominated debt from domestic European
banks in a manner that is ring fenced to the properties. Such domestic gearing will be fixed on
a long term basis (5 to 10 years) to provide certainty on cash flows, a strategy which this
focused asset class lends itself to.
The balance of the purchase consideration will be funded initially by Accelerate from proceeds
of a vendor consideration equity placement. Based on the target capital structure above, the
equity requirements for the Initial Portfolio will be approximately R1.2 billion (€70 million at an
exchange rate of €1 = R17.10).
Given the significantly accretive nature of the Initial Portfolio and Strategy, pricing for the
vendor consideration equity placement will be determined with reference to a target forward
distribution yield for Accelerate after the transactions. Timing of the capital raise will be
dependent on the progress made by Accelerate on the finalisation of initial properties for the
Investment Platform and shareholders will be kept informed in this regard.
Following the proposed capital raise and assuming Initial Portfolio completion, Accelerate’s
total assets will exceed R10 billion (including Portside which was announced on the Stock
Exchange News Service of the JSE Limited on 24 August 2015 and is now unconditional).
6. LONG TERM PERFORMANCE INCENTIVE SCHEME
A long term performance incentive scheme for the Investment Platform will be introduced to
align the interests of Accelerate, Accelerate's shareholders and senior executives of Accelerate
that are responsible for the Strategy, to create shareholder value in excess of industry
expectations in a “paid for performance” structure based on total return (capital and income) to
ensure complete alignment in investment and management decisions for the Investment
Platform.
7. OTHER SHAREHOLDER UPDATES
Shareholders are referred to the Company’s pre-listing statement dated 27 November 2013
regarding the cession of distributions back to Accelerate on shares issued to Fourways Precinct
Proprietary Limited at listing for bulk land acquired in the Fourways area which land is to be
developed in the future. Accelerate is pleased to inform shareholders that Fourways Precinct
Proprietary Limited has agreed to the extension of the cession of distributions agreement by 3
years to the earlier of December 2021 or the development of the bulk land.
Accelerate is also pleased to update shareholders that the anticipated redevelopment and
expansion of the Fourways Mall is well underway with expected final completion in 2018. It is
envisaged that once completed, Fourways Mall will be the largest shopping centre in Gauteng
boasting various new international tenants.
8. CAUTIONARY ANNOUNCEMENT
Accelerate believes that, if concluded, the acquisition of the Initial Portfolio may have a material
impact on the price of the Company’s securities. Shareholders are therefore advised to
exercise caution when dealing in their Accelerate securities until a further announcement in this
regard is made.
Johannesburg
20 April 2016
Investment Bank and Transaction Sponsor
Investec Bank Limited
Sponsor
The Standard Bank of South Africa Limited
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