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Acquisition of Amazon Distribution Centre In Stoke-On-Trent, England
EQUITES PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
(“Equites” or “the company”)
ACQUISITION OF AMAZON DISTRIBUTION CENTRE IN STOKE-ON-TRENT, ENGLAND
1. INTRODUCTION
Shareholders are advised that Equites, through its Isle of Man based wholly-owned subsidiary, Equites International
Limited (“Equites International”), has concluded an agreement with Perevil Securities Limited (“the seller”) in
terms of which Equites International will be acquiring a 20 410 square meter distribution centre let to Amazon
situated at Stanley Matthews Way, Trentham Lakes, Stoke on Trent ST4 8GR (“the property”) from the seller (“the
transaction”). The purchase consideration is £17 000 000 and the transaction was concluded off-market.
2. RATIONALE
The transaction is consistent with Equites’ stated growth and investment strategy of:
- Diversification into the UK in order to mitigate the risks of its emerging market focus and access the advanced
know-how and technology in respect of logistics facilities in the UK;
- Focus on premium “big-box” distribution centres, let to investment grade tenants on long-dated “triple net
leases”, in proven logistics nodes and built to institutional specifications. In the UK, the locations of preference
are the central Midlands and “last-mile” fulfilment centres near to major conurbations;
- Building a high quality logistics portfolio, consisting of properties with predictable rental growth profiles, that
promotes capital growth and increasing income returns in the medium to long term.
The property will therefore add to the quality, defensiveness and income predictability of Equites.
3. DETAILS OF THE PROPERTY
Equites has agreed to acquire the property at an acquisition yield of c.6.14% based on the first year’s rental income of
£1 043 945 and the purchase consideration excluding acquisition costs. The property has been independently valued
at £17 000 000 and has a weighted average rental per square foot of £4.75. The property, originally built in 2001,
recently underwent extensive renovations and an extension in order to meet the requirements of the tenant, Amazon
UK Services Limited (a wholly-owned subsidiary of Amazon.com Inc.) (“tenant” or “Amazon”).
Equites views the sound fundamentals of the property as follows:
- The price of the property is its fair market value as confirmed by the independent valuation referred to below.
- The property, which meets modern logistics requirements, is located in the well-established Trentham Lakes
Business Park, which affords excellent road links, and lies between the A50 and A5035. These roads provide
direct access to the M1 to the East, with the M6 also being within easy reach. It is situated exactly half way
between Manchester and Birmingham in the West Midlands. The property benefits from being 4 hours’ drive
from 80% of the UK population and is in the highly desirable Midlands area, which benefits from the highest
volume of logistics demand in the UK.
- The property is 20 410 square metres in extent on a 5.76 hectare site which translates into a low coverage of
35.5% providing the tenant with a small high quality office area, 20 dock level and 2 level access doors, an
extensive 50 metre yards and clear height to eaves of 12 metres.
- Amazon, has signed a 10 year lease which commenced on 19 July 2016 and forms part of the American
electronic commerce and cloud computing company with headquarters in Seattle, Washington. It is the largest
Internet-based retailer in the world by total sales. This UK subsidiary has a D&B credit score of 5A1 with a
Failure Score of 100 out of 100, representing a “high” level covenant strength.
- The Amazon lease is subject to an upward only rent review in 2021. The rent review is based on the increase in
the Consumer Price Index over the 5 year period with a notional increases applied every year subject to this
increase not being less than 1% or more than 2.5% (i.e. a collar and a cap).
4. TERMS OF THE TRANSACTION
4.1. The effective date of the transaction will be the date of transfer of the underlying leasehold rights which is
expected to be on or about 10 October 2016.
4.2. On 26 September 2016, Equites International paid a deposit on account of the purchase consideration in the
amount of £1 700 000, with the balance of the purchase consideration being due and payable on the expected
effective date.
4.3. The transaction is subject to the fulfilment or waiver (as the case may be) of the following conditions
precedent by 31 March 2017:
- that the seller completes all outstanding building works on the property to the satisfaction of the tenant;
- that the seller provides the usual warranties, representations and third party assurances including a
survey in respect of the property and the recent major renovation and extension to the building on the
property.
5. VALUATION
The independent valuation of the 110 year leasehold rights comprising the property was undertaken by Jones Lang
LaSalle, an independent external valuer, in accordance with the “RICS Valuation – Professional Standards, the 2012
Edition (the “Red Book”)”. This is an internationally accepted basis of valuation.
6. FUNDING AND FINANCIAL EFFECTS
Funding for the full purchase consideration in pound sterling has been secured at a five year fixed interest rate of less
than 3%. Accordingly, the transaction will contribute positively to Equites’ distributable earnings in the current year,
without detracting from attractive growth prospects over the longer term given the overall mix of assets and
development within the Equites portfolio.
7. CATEGORISATION
The transaction is a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not
require approval by shareholders.
26 September 2016
Corporate advisor and sponsor to Equites
Java Capital
Solicitors to Equites in the UK
Maclay Murray & Spens LLP
Property advisors to Equites in the UK
Jones Lang LaSalle
Date: 26/09/2016 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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