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Acquisition of Properties
TEXTON PROPERTY FUND LIMITED
Granted REIT status by the JSE
(Incorporated in the Republic of South Africa)
(Registration number 2005/019302/06)
JSE code: TEX
ISIN: ZAE000190542
(“Texton” or “the Company”)
ACQUISITION OF PROPERTIES
A. INTRODUCTION
The board of directors of Texton is pleased to advise shareholders of the Company (“Shareholders”)
that it has concluded agreements with various vendors to acquire two property portfolios,
underpinned by strong contractual cash flows, in South Africa (“SA Acquisition”) and in the United
Kingdom (“UK Acquisition”) (collectively, the “Acquisitions”) for a gross purchase consideration of
R863.4 million at a yield of 9.61% in SA and 6.95% in the UK, comprising:
- R363.0 million for the SA Acquisition; and
- £21.98 million (R500.4 million converted at a spot exchange rate as at 26 May 2016 of
£1:R22.7672) for the UK Acquisition
The Acquisitions comprise quality income producing properties that complement Texton’s existing
portfolio and allows the Company to continue to follow its clearly defined strategy of acquiring
accretive properties, improving the overall quality of the portfolio whilst diversifying its portfolio
beyond the South African borders into the UK. This acquisition is weighted by value towards the UK
and moves the portfolio geographical split by value to 55:45 in South Africa and the UK, respectively.
The details pertaining to the Acquisitions are set out in the section B below. As a result of Texton’s
defined strategy of ensuring a diversification of its portfolio into the UK, Texton has ensured that the
Acquisitions are inter-conditional on each other.
The effective date of the Acquisitions will be the earlier of transfer date or 1 0ctober 2016.
B. OVERVIEW OF THE ACQUISITIONS
1. THE UK ACQUISITION
B.1.1. THE UK ACQUISITION
Texton has agreed terms, on an exclusive basis, with the vendors, to acquire a property
portfolio in the UK comprising, 2 office buildings and 1 industrial building, all single-tenanted,
(“UK Portfolio”) for an aggregate purchase price of £21.98 million (R500.4 million converted
at a spot exchange rate as at 26 May 2016 of £1:R22.7672), which is characterised by:
- strong tenants;
- no vacancies;
- long expiry profiles (11.76 years weighted average lease expiry) which will augment
Texton’s existing lease expiry profile; and
- geographic diversification to Texton’s UK property portfolio
In addition, this is a unique opportunity to acquire a portfolio of properties “off market “with
a further significant and low risk entry into the UK.
The UK Acquisition will be implemented by means of:
- the acquisition of 100% of the shares, and loan claims in, Hillview Blend (Gainsborough)
Two Limited, a company registered in Guernsey, which owns Heapham Road, from
Hillview Blend (Gainsborough) One Limited;
- the acquisition of 100% of the shares, and loan claims in, Hillview Blend (Mowbray)
Limited, a company registered in Guernsey, which owns Mowbray House, from Hillview
Blend (Gainsborough) One Limited; and
- the acquisition of 100% of the shares of, and loan claims in, ESKI Holdings Inc, a company
registered in British Virgin Islands, which owns the Chatham Building, from Limmat
Holdings Incorporated.
B.1.2. PROPERTY AND OTHER INFORMATION RELATING TO THE UK PORTFOLIO
Heapham Road Mowbray House Chatham Building Total
Location Gainsborough, UK Nottingham, UK Kent, UK
Sector Industrial Office Office
Tenant(s) Coveris Flexibles UK Browne Jacobson Lloyd’s (Insurance)
Limited LLP of London
GLA (ft2) 85 161 57 690 25 975 168 826
WALE (years) 15.5 5.8 12.5 11.76
Vacancies (%) 0% 0% 0% 0%
Rental/ ft2 (£) 5.09 13.54 14.00 10.88
(R115.89)¹ (R308.27)¹ (R318.74)¹ (R247.63)¹
Net Income from 1 Aug 2016 to 31 433.32 744.92 349.63 1,527.87
July 2017 (£’000) (R9.87m)¹ (R16.96m)¹ (R7.96m)¹ (R34.79m)¹
Purchase consideration (£m) 6.42 9.93 5.63 21.98
(R146.17m)¹ (R226.08m)¹ (R128.18m)¹ (R500.42m)¹
1. Converted at the spot exchange rate as at 26 May 2016 of £1:R22.7672.
Heapham Road
Heapham Road is a high specification modern industrial warehouse, developed in 2011, which
is exclusively tenanted by Coveris Flexibles, a leading international manufacturing company,
for a period of 20 years, with 15.5 years remaining on its lease.
Heapham Road is favourably situated within the successful Heapham Road Industrial Estate in
Gainsborough, UK, an established commercial and industrial location within the densely
populated district of Lincolnshire.
Mowbray House
Mowbray House is a modern multi-storey office building, exclusively tenanted by Browne
Jacobson LLP with 5.6 years remaining on its lease. Browne Jacobson LLP is the largest law firm
in the Midlands with over 400 lawyers including 103 partners. Mowbray House accommodates
central services for all its six regional offices. The tenant recently relocated to these offices
from their previous accommodation which they occupied for 60 years.
Mowbray House is situated in a prime location in Castle Meadow Road, Nottingham, UK, a
principal commercial and administrative centre for the region. The property forms part of a
greater office park incorporating the HM Revenue and Customs campus consisting of five
other office buildings and an amenity block.
Chatham Building
The Chatham Building comprises a high quality, modern, office building, which is exclusively
tenanted by Lloyd’s of London, a leading global insurance company, on a 15-year lease with
12.5 years remaining on such lease.
The Chatham Building occupies a prominent site in Chatham, a port town in the South East of
England and within 53km of London. The building is located within the successful Chatham
Dockyard precinct, a highly sought-after office precinct in Chatham and is within close
proximity to major amenities and arterial roads and highways and a short distance from the
Chatham Train Station.
This property is only one of three properties occupied by the international company, and the
Chatham Building is the only office located at its maritime roots.
2. THE SA ACQUISITION
B.2.1. THE SA ACQUISITION
Texton has agreed terms, on an exclusive basis, with the Blend Property group of companies (“SA
Portfolio Vendor”) to acquire a portfolio of 6 prime office properties for an aggregate purchase price
of R363.0 million (“SA Portfolio”), which is characterised by:
- high profile tenants;
- leases characterised by contractual above-inflation escalations;
- recently refurbished commercial buildings; and
- favourably located properties with excellent exposure to major road networks
The SA Portfolio tenant base consists of 51% national and / or multi-national tenants, with a weighted
average lease expiry of 4.3 years and average escalations of 7.6%.
B.2.2. PROPERTY AND OTHER INFORMATION RELATING TO THE SA PORTFOLIO
Bedfordview portfolio
Edenburg 18 Skeen 16 Skeen Whirlpool Babcock
Terraces MBD House Boulevard Boulevard Building Building
Total
Rivonia, Hyde Park, Bedfordview, Bedfordview, Bedfordview, Bedfordview,
Location Gauteng Gauteng Gauteng Gauteng Gauteng Gauteng
Sector Office, Office Office Office Office Office
Retail
Babcock
Africa
Multi- MBD Credit Multi- Whirlpool, Services,
Tenant(s) tenanted Solutions PG Glass tenanted General Mills Long City
Diamonds
GLA (m2) 11 968 5 570 3 850 4 000 1 940 1 861 29 189
WALE (years) 2.9 7.0 6.5 4.2 4.5 2.5 4.3
Vacancies (%) 9% 0% 0% 8% 0% 0% 0%
Rental/m2 (R) 90.35¹ 125.54 124.69 131.42 147.63 157.02 113.84
Net Income from 1 Aug
2016 to 31 July 2017 (Rm) 11.20 8.52 4.68 4.47 2.99 3.03 34.89
Purchase consideration
(Rm) 106.00 92.00 51.03 47.66 33.00 33.31 363.00
1. Majority office
Edenburg Terraces
The recently refurbished 6 free standing buildings known as Edenburg Terraces, are well located on
Rivonia Boulevard in Rivonia, a growing commercial and residential node in northern Johannesburg.
The property’s location and its close proximity to Sandton and major road networks (N1 and Rivonia
Road) make it a sought after business address, and an attractive alternative to Sandton. The property,
built above a super basement with surround access controlled parking, is tenanted by international
and national corporates.
The property has a small retail component on the ground floor which comprises restaurants and
banks.
MBD House
MBD House comprises a multi-storey, face brick office block which is exclusively tenanted by MBD
Credit Solutions, a leading independent provider of credit management solutions in Southern Africa
with (subject to signature of an agreed addendum) 7 years remaining on its lease, subject to a rental
escalation of CPI plus 1% from 1 June 2017, capped at 8% per annum compounded over the remaining
period of the lease.
MBD House is located in Hyde Park and within close proximity to the popular Hyde Park Corner
shopping centre and other amenities. The building is set within a large self-contained site and recently
underwent a full refurbishment internally.
Bedfordview portfolio
The properties in Bedfordview (18 Skeen Boulevard, 16 Skeen Boulevard, Whirlpool Building and the
Babcock Building) are well located in the Bedfordview commercial node offering easy access to the
N3 and R24 and are within close proximity to the OR Tambo International Airport.
18 Skeen Boulevard and 16 Skeen Boulevard
The 18 Skeen Boulevard and 16 Skeen Boulevard properties, which consist of multi-storey office
buildings with modern finishes, which were recently refurbished in 2015.
The 18 Skeen Boulevard property is exclusively tenanted by PG Glass, a national glass installation
solutions provider, with 6.5 years remaining on its lease and the 16 Skeen Boulevard property is multi-
tenanted with a weighted lease expiry of 4.2 years.
Whirlpool Building and Babcock Building
The Whirlpool Building and Babcock Building consist of double-storey modern office buildings located
within Riley Office Park, Bedfordview.
The Whirlpool Building was developed in 2009 and is anchored by Whirlpool, a multi-national
manufacturer and marketer of home appliances, with 3.2 years remaining on its lease and with rental
escalating at a rate of 8.0%.
The Babcock Building, refurbished in 2013, is anchored by Babcock Africa Services, a multi-national
corporation which specialises in support services managing complex assets and infrastructure in
safety- and mission-critical environments, with 2.5 years remaining on its lease and with rental
escalating at a rate of 8.2%.
3. PROPOSED FUNDING OF THE ACQUISITIONS
The aggregate purchase consideration in respect of the Acquisitions of
R863.4 million will be funded utilising a combination of debt and the issue of new Texton
ordinary shares.
Texton has obtained commitments to place in excess of R170 million and has expressions of
interest of over R200 million. It is confident that it will be able to fund the overall
aggregate purchase price through a combination of shares to be placed with the interested parties,
debt and cash generated from the sale of non-core properties.
4. CONDITIONS PRECEDENT
The conditions precedent to the SA Acquisition include, inter alia, the:
- Competition Authority approval in terms of the Competition Act 89 of 1998;
- Raising of the necessary equity capital to fund the Acquisitions (the “Acquisitions Equity Raising”);
and
- Shareholder approval in relation to the placing of the shares under the authority of directors to
pursue the Acquisitions Equity Raising.
The conditions precedent to the UK Acquisition include:
- Approval from the Financial Surveillance Department of the South African Reserve Bank; and
- The SA Acquisition becoming unconditional.
5. CATEGORISATION
The Acquisitions constitute a category 2 transaction in terms of the JSE Listings Requirements and,
accordingly, does not require approval by Shareholders.
6. INDEPENDENT VALUATIONS OF THE ACQUISITIONS
The board of directors of Texton (“the Board”) is satisfied that the property values of the Acquisitions
are in line with the purchase prices being paid by Texton. The Board is not registered as professional
valuers or as professional associate valuers in terms of the Property Valuers Profession Act, No 47 of
2000.
Dunkeld
27 May 2016
Investment Bank and Sponsor to Texton
Investec Bank Limited
Corporate advisor to the Blend group of companies
Java Capital
Legal advisors for the SA Acquisition
Cliffe Dekker Hofmeyr
Legal advisors for the UK Acquisition
Osborne Clarke LLP
Pinsent Mansons LLP
Competition Law advisors for the SA Acquisition
Baker McKenzie
Date: 27/05/2016 08:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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