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Acquisition of offshore property portfolio and withdrawal of cautionary announcement
ACCELERATE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 2005/015057/06)
Share code: APF ISIN: ZAE000185815
(“Accelerate”)
ACQUISITION OF OFFSHORE PROPERTY PORTFOLIO AND WITHDRAWAL OF CAUTIONARY
1 INTRODUCTION
Accelerate shareholders (“Shareholders”) are referred to the most recent cautionary announcement
dated 11 October 2016 in terms of which Shareholders were advised that negotiations relating to the
acquisition of an offshore portfolio were ongoing. Accelerate is pleased to announce the conclusion of
a pre-agreement with the applicable companies that form part of the Supernova Privatstiftung group
(“Vendor”) wherein it was agreed that the applicable Accelerate group entity (under incorporation) will
enter into binding transaction agreements (“Transaction Agreements”) with the Vendor (the timing of
which is imminent). In terms of the Transaction Agreements Accelerate will acquire a portfolio of 9
well located retail warehouse properties tenanted by OBI GmbH & Co. Deutschland KG’s (“OBI”)
applicable subsidiaries (6 properties in Austria and 3 in Slovakia) (“Initial Portfolio”) for an aggregate
acquisition value of €82.1 million (“Purchase Consideration”) at a blended acquisition yield of 7.0%
based on contractual rentals (the “Transaction”).
OBI is the largest specialist do-it-yourself (“DIY”) retailer in Central and Eastern Europe (“CEE”) with
total revenues of over €4 376 million and EBITDA of over €265 million.
2 RATIONALE FOR THE TRANSACTION
In the first quarter of 2016 the Accelerate board of directors approved a plan to invest in CEE by
acquiring Euro or Euro linked real estate, based on a defined strategy (“Strategy”) that matches
Accelerate’s focus in South Africa on quality retail and strategic nodes/properties.
The Strategy is underpinned by a defined investment philosophy to develop and acquire single tenant
net leased properties that are strategic to blue-chip multinational or large regional tenants in countries
that meet defined minimum investment criteria and that are considered core markets to such tenants
(specialist focus within an established and defensive asset class and exposure to blue-chip
investment grade tenants).
The Initial Portfolio is in line with the execution of the Strategy.
Austria and Slovakia are attractive investment destinations for Accelerate due to a range of positive
underlying fundamentals. Austria has one of the highest GDP per capita figures in Europe with above
average growth forecasts and low political risk. Slovakia is one of the fastest growing economies in
Europe with rising real wage growth, rising disposable income, strong domestic private consumption
and strong manufacturing and industrial activity.
3 INTRODUCTION TO ACCELERATE EUROPE
Accelerate has incorporated a Netherlands domiciled subsidiary (“Accelerate Europe”) through which
Accelerate will acquire the Initial Portfolio and execute the Strategy. Accelerate Europe has been
integrated seamlessly into Accelerate’s existing operating, investment, governance and reporting
structure, including the retention of a committed and experienced local management team with
significant local knowledge, experience, networks, relationships, deal flow and presence in the region.
Management have significant experience in property development, property acquisition, property
asset management, tenant relations, finance, treasury, reporting and risk management having
concluded in excess of €2.5 billion in property transactions across CEE. This significant experience
and local knowledge provides access to networks and off-market acquisition and development
opportunities and avoids the setup costs and pitfalls of investing in a new market.
Accelerate will seek to create an independent listing for Accelerate Europe (subject to market
conditions) on a recognized stock exchange once the appropriate scale and asset/country
diversification is achieved thereby providing Accelerate and Accelerate’s shareholders with an
opportunity to realise significant benefit from the further capitalisation rate compression on Accelerate
Europe’s future acquisitions and developments.
4 KEY TRANSACTION AND FUNDING TERMS
Subject to the fulfilment of the conditions precedent contemplated below, Accelerate Europe will
acquire the Initial Portfolio through the acquisition of 9 special purpose vehicles (“SPVs”) which in turn
will hold the properties in question.
The effective date for the Transaction will be the date on which the last of the conditions precedent
are fulfilled, expected to be in or about November 2016.
The Purchase Consideration for the 9 SPVs is subject to an appropriate working capital adjustment at
closing which is expected to be immaterial.
The Purchase Consideration will be fully settled in cash through a combination of non-recourse euro-
denominated debt funding against the Initial Portfolio and an issue of new Accelerate shares by way
of a vendor placement, or rights offer or an issue of shares for cash.
The Initial Portfolio generates net operating income of €5.7 million.
5 CONDITIONS PRECEDENT
The Transaction is subject to the fulfilment of, inter alia, the following conditions:
- all regulatory approvals required for the implementation of the Transaction;
- local bank financing being finalised on terms acceptable to Accelerate Europe;
- the successful completion of a final confirmatory due diligence by Accelerate Europe;
- the conclusion of service agreements with the current property manager of the Initial
Portfolio; and
- other necessary consents and approvals customary for a Transaction of this nature.
6 INFORMATION RELATING TO THE INITIAL PORTFOLIO
The Initial Portfolio includes 9 big-box DIY retail stores (6 in Austria and 3 in Slovakia) tenanted by
OBI, the largest DIY retailer in the CEE with a weighted average lease expiry (“WALE”) of 12.9 years.
The portfolio is characterised by coveted locations with good access, exceptional visibility and
situated in established retail nodes within a large catchment area or close proximity to retail that is
complementary to DIY i.e: shopping centres, food retail, furniture retail, convenience retail etc.
Included in the Initial Portfolio is the flagship and largest OBI store in Austria. The flagship store has
an independent valuation of €41 million and accounts for 47% of the Initial Portfolio.
Independent valuations have been completed by CBRE which indicate the significant off-market
nature of the Transaction as the Initial Portfolio is priced at a 6.7% discount to market value (€5.9
million discount). The simple warehouse construction and loading capabilities provide opportunity for
conversion to other value retail / logistics if required.
All leases are guaranteed by OBI with escalations at 75% of Austrian CPI once a threshold of
cumulative Austrian CPI of 10% is achieved. For a selection of Austrian stores (see* in the table
below), from 2019 onwards, rentals will be adjusted to 8% of net sales with a floor of 84.3% and a cap
of 102.5% of current fixed rent. Per OBI’s guidance, 8% of the current and projected trading figures
for these stores would result in an increase of current fixed rent.
The details of the Initial Portfolio including location, gross lettable area (“GLA”), net operating income,
purchase price, acquisition yield, remaining lease term, independent CBRE valuation and discount to
market value per property are as follows:
Discount to
Net operating Net operating Acquisition Remaining Independent
GLA 2 Purchase price independent
Property Location 2 income income per m yield lease term CBRE valuation
(m ) (€’000) valuation
(€) per month (€) (%) (years) (€’000)
(%)
Vienna Austria 16,357 2,475,645 13 37,783 6.6% 10.6 40,910 7.6%
Mauthausen/
Austria 5,146 518,435 8 6,824 7.6% 14.5 7,210 5.4%
Oberösterreich*
Mürzzuschlag* Austria 5,822 505,338 7 6,715 7.5% 14.5 7,434 9.7%
Bruck / Mur* Austria 6,823 462,587 6 6,174 7.5% 14.5 6,584 6.2%
Rosental* Austria 3,316 252,852 6 3,421 7.4% 14.5 3,688 7.2%
Hallein/ Salzburg* Austria 3,739 211,583 5 2,702 7.8% 14.5 3,118 13.3%
Nitra Slovakia 8 687 478,390 5 6,842 7.0% 14.5 7,088 3.5%
Martin Slovakia 7 950 422,204 4 5,932 7.1% 14.5 6,001 1.1%
Kosice Slovakia 8,054 406,050 4 5,707 7.1% 14.5 5,920 3.6%
Total 65,894 5,733,084 82,100 7.0% 12.9 87,953 6.7%
7 INCENTIVISATION AND ALIGNMENT
In order to align local management with the interests of shareholders, Accelerate Europe have
introduced a long term share incentive scheme which encourages key individuals responsible for
Accelerate Europe to “outperform” and to create shareholder value in a “paid for performance”
manner. The scheme includes both retention and performance elements with value creation achieved
through capitalisation rate compression.
8 WARRANTIES
The Vendor has provided warranties and indemnities to Accelerate that are standard for a transaction
of this nature.
9 VALUATION
The board of directors of Accelerate is satisfied that the aggregate value of the Initial Portfolio as
shown above is in line with the directors own assessment of the aggregate value of the portfolio and
the purchase price being paid by Accelerate.
10 CATEGORISATION
The Initial Portfolio acquisition is classified as a category 2 transaction in terms of the JSE Listings
Requirements and, accordingly, is not subject to approval by Accelerate’s shareholders.
11 WITHDRAWAL OF CAUTIONARY
Following the release of this announcement, the cautionary announcements published on the Stock
Exchange News Service of the JSE Limited, the most recent being on 11 October 2016, are
withdrawn and caution is no longer required to be exercised by shareholders when dealing in their
Accelerate shares.
Johannesburg
24 October 2016
Financial Advisor and Sponsor Legal advisor
Transaction Sponsor
Investec Bank Limited The Standard Bank of South Partos & Noblet Hogan Lovells
Africa Limited
Date: 24/10/2016 10:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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