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Acquisition of DSV 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 DSV 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 Tango Real Estate LLP (“the seller”), which is
a joint venture vehicle between Prologis UK Limited (“Prologis”) and Wittington Investments (Developments)
Limited, in terms of which Equites International will be acquiring a 19 511 square meter distribution centre let to
DSV Solutions Limited situated at Prologis Park, Sideway, Stoke-on-Trent, England (“the property”) from the seller
(“the transaction”).
The purchase consideration is £18 141 000 and the transaction was concluded off-market. The distribution centre is
in the process of being developed by Prologis on behalf of the seller.
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;
- Focusing 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 major metropolitan areas;
- 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 on completion of the development at a purchase consideration of
£18 141 000 based on the first year’s rental income of £1 035 943. The completed development has been
independently valued at £18 141 000 on the assumption that the development works have been completed and has a
weighted average rental per square foot of £4.90. The property is being purpose built by Prologis for DSV Solutions
Limited, which is a wholly-owned subsidiary of DSV Solutions Holdings A/S (“tenant” or “DSV”).
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 Prologis Park
Sideway, 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 has the highest volume of logistics
demand in the UK.
- The property is 19 511 square metres in extent on a 3,87 hectare site which translates into a low coverage of 50%
providing the tenant with a small high quality office area, 24 dock level and 3 level access doors, extensive 50
metre yards and clear height to eaves of 15 metres.
- DSV has signed a binding agreement for lease to conclude a 10 year lease which will commence on practical
completion of the development in June 2017 (“DSV lease”). The tenant forms part of the Danish based DSV
Group which is a global supplier of transport and logistics services. The group has facilities in more than 80
countries across the world and an international network of partners and agents, enabling them to offer services on
a global platform. With over 22 000 employees the group recorded worldwide annual revenue of over € 6 billion
for 2015. DSV Solutions Holdings A/S has a Dun & Bradstreet AAA Credit Rating.
- The DSV lease is subject to an upward only open market rental review in 2022. Independent expert advice has
been that the current estimated rental value for the property is £5.25 per square foot which confirms the growth
profile of the property.
4. TERMS OF THE TRANSACTION
4.1. The effective date of the transaction will be the date of transfer of the property on completion of the
development of the distribution centre, which is expected to be in June 2017.
4.2. On 1 November 2016, Equites International paid a deposit on account of the purchase consideration in the
amount of £1 814 100, with the balance of the purchase consideration being due and payable against
transfer.
4.3. The transaction is subject to the fulfilment or waiver (as the case may be) of the following conditions
precedent by 30 September 2017:
- practical completion of the development and delivery to Equites of the Certificate of Practical
Completion and snagging list (if any);
- the lease between the seller and the tenant becoming unconditional;
- receipt by Equites of a legal opinion confirming the enforceability of the guarantee from DSV
Solutions Holding A/S;
- receipt of warranties in favour of Equites from the building contractor and each professional team
member.
4.4 Prologis is obliged to deliver the development in line with the agreed plans and specifications and Equites
has approval control in respect of any deviations from the plans and specifications and lease terms. Equites
has appointed a local monitoring building surveyor to act on its behalf during the development process.
5. VALUATION
The independent valuation of the property was undertaken by Cushman & Wakefield, 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
The company has commenced the process of securing funding for the full purchase consideration in pound sterling.
The current offers from UK financial institutions indicate a five year fixed interest rate of less than 3%. Accordingly,
the transaction will contribute positively to Equites’ distributable earnings in the next financial 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.
2 November 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
DTRE
Cushman & Wakefield
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