Wrap Text
NEPI\ROCKCASTLE - Merger of NEPI and Rockcastle and withdrawal of joint cautionary announcement
NEW EUROPE PROPERTY INVESTMENTS PLC ROCKCASTLE GLOBAL REAL ESTATE COMPANY
Incorporated and registered in the Isle of Man with registered LIMITED
number 001211V Incorporated in the Republic of Mauritius
Registered as an external company with limited liability under Registration number: 108869 C1/GBL
the laws of South Africa, registration number 2009/000025/10 JSE share code: ROC
JSE share code: NEP BVB share code: NEP SEM share code: ROCK.N0000
ISIN: IM00B23XCH02 ISIN: MU0364N00003
(“NEPI”) (“Rockcastle”)
MERGER OF NEPI AND ROCKCASTLE AND WITHDRAWAL OF JOINT CAUTIONARY ANNOUNCEMENT
INTRODUCTION
NEPI and Rockcastle shareholders are referred to the joint cautionary announcement released on the Stock Exchange News
Service (“SENS”) of the JSE Limited (the “JSE”) and the websites of the Bucharest Stock Exchange (the “BVB”) and the Stock
Exchange of Mauritius Ltd (the “SEM”) on 20 October 2016, as well as the joint renewal of cautionary announcement released on
SENS and the websites of the SEM and the BVB on 2 December 2016, wherein they were advised that NEPI and Rockcastle (the
“Parties”) were in advanced negotiations in respect of an all-share transaction.
NEPI and Rockcastle are pleased to announce the conclusion on 13 December 2016 of a framework agreement (the “Framework
Agreement”), pursuant to which their respective businesses will effectively be merged in an entity newly-incorporated in the Isle
of Man, NEPI Rockcastle PLC (“NewCo”) (the “Transactions”), to be implemented with reference to an effective share swap
ratio of 4.5 existing Rockcastle shares for every 1 existing NEPI share (the “Swap Ratio”).
RATIONALE FOR THE TRANSACTIONS
NEPI is a commercial property investor and developer that owns, develops and manages dominant retail assets and A-grade
offices in Central and Eastern Europe (“CEE”). Rockcastle is a commercial property investor and developer that owns, develops
and manages dominant retail assets in the CEE region and invests in global real estate listed securities. The market capitalisation
of NEPI is circa R49.0 billion (€3.4 billion) and of Rockcastle is circa R32.3 billion (€2.2 billion).
NewCo is expected to have a substantially enlarged market capitalisation, with all NEPI and Rockcastle shareholders benefitting
from enhanced liquidity. The merged entity is expected to become the largest listed real estate player in CEE. Exposure to high-
quality listed and liquid global real estate securities will lead to a diversified risk profile. The Transactions will also see the
integration of two complementary management teams, positioned to unlock strategic synergies and create further value for both
NEPI and Rockcastle shareholders.
Management’s assessment of the envisaged Transactions indicates a strong operational and capital markets rationale, driven by the
following factors:
Portfolios are complementary
– NEPI investors will gain immediate exposure to a significant portfolio in Poland, the most liquid and largest real estate
market in the CEE region, with a positive economic outlook. Rockcastle shareholders will gain exposure to the largest
retail real estate portfolio in Romania (which is the second real estate market in CEE by size and the fastest growing
economy in Europe in 2016 and 2017, according to IMF forecasts), and the second largest retail real estate portfolio in
Slovakia.
– NewCo will benefit from NEPI’s operational expertise and both companies’ strong track-record of completing value–
enhancing acquisitions and developments, as well as from Rockcastle’s highly-liquid listed securities portfolio, which
provides growth resources in the medium-term.
Scale
– NewCo is expected to become the largest CEE retail real estate company, and one of the top retail real estate
companies in Europe.
– Geographically diverse management skills will allow NewCo to pursue CEE property opportunities more efficiently,
giving it a strategic advantage in the acquisition, development and management of properties.
Value creation
– NewCo is expected to benefit from a lower cost of capital, resulting from an anticipated improvement of the business
and financial risk profile, driven by a larger scale, further geographical diversification, increased liquidity and access to
capital.
– Material financial synergies are envisaged from a lower cost of debt, triggered by a better risk profile and a potential
credit rating upgrade.
– Excellent performance is anticipated, driven by the growth of NEPI’s best-in-class operating platform through
gradually reducing the exposure to listed securities and increasing direct property investments.
– While there is limited operating synergy potential due to geographically complementary portfolios and existing
efficient platforms, long-term synergies are expected to be achieved through knowledge and platform sharing.
Liquidity and access to capital markets
– NewCo is anticipated to be highly liquid.
– NewCo is expected to be included in stock exchange indices, leading to enhanced visibility and liquidity of its shares,
with exposure to a broader base of international investors.
SALIENT TERMS OF THE TRANSACTIONS
Pursuant to the Framework Agreement, both NEPI and Rockcastle will transfer 100% of their respective assets and liabilities,
including ownership interests in their respective subsidiaries (the “Sale Assets”), thereby each effectively transferring ownership
of its entire business, to NewCo. In consideration, NewCo will issue a number of NewCo ordinary shares (together, the “NewCo
Shares”) to each of NEPI and Rockcastle, determined at the Effective Date (as defined below) with reference to the Swap Ratio.
The Transactions will be implemented 3 business days following the fulfilment or waiver of the conditions precedent set out
below (the “Effective Date”).
The Transactions are conditional on the conditions precedent summarised below being satisfied or waived on or before 30 June
2017:
– the Transactions being approved by all relevant competition authorities, either unconditionally or subject to conditions
acceptable to both NEPI and Rockcastle, or the Transactions being deemed to be so approved or deemed not to require
approval, such that the Transactions may be implemented;
– all other necessary regulatory consents in relation to the Transactions in any jurisdiction whatsoever having been
obtained;
– all shareholder and board approvals of the Transactions being obtained, whether in terms of any governing law, the
rules of any recognised securities exchange or otherwise;
– all necessary consents, waivers and releases pursuant to the NEPI and Rockcastle funding facilities having been
received, as may be required to complete the Transactions;
– no appraisal rights being exercised or other actions taken which could impede the completion of the Transactions;
– all third party consents in all relevant jurisdictions having been received, as may be required to complete the
Transactions;
– the listing of the NewCo Shares on the JSE and Euronext Amsterdam having been formally approved by the relevant
authorities; and
– either NEPI or Rockcastle not having given written notice to the other that it does not wish to proceed with the
Transactions, where any matter, fact or circumstance has arisen which has or is likely to have a material adverse effect
on the financial, legal or business condition of NewCo, the NEPI group or the Rockcastle group.
As soon as reasonably practicable following the Effective Date:
– NEPI will effect a repurchase of the entire shareholding of Fortress Income Fund Limited (“Fortress”) in NEPI, in
consideration for the distribution to Fortress of their pro rata entitlement to the NewCo Shares held by NEPI (the
“Fortress Share Repurchase”);
– NEPI and Rockcastle will initiate a distribution in specie to their respective shareholders, whether by way of a dividend
from retained earnings, a return of capital or in consideration for the buyback of shares, such that the shareholders of
NEPI and Rockcastle as at the record date for participation in such distribution will receive, pro rata, a number of
NewCo Shares determined with reference to the Swap Ratio; and
– following such distribution in specie, the NewCo Shares will be listed on the Main Board of the JSE and, to the extent
not yet effected, on Euronext Amsterdam and any other stock exchange as agreed between the Parties.
It is intended that the implementation of the Transactions and those post-implementation corporate actions contemplated above be
effected concurrently, or as close to concurrently as possible, having regard to the rules and requirements of the JSE, Euronext
Amsterdam, the BVB and the SEM. NEPI and Rockcastle will each declare and distribute dividends for the period ending
31 December 2016 in the ordinary course.
Alexandru Morar and Spiro Noussis, the current chief executive officers of NEPI and Rockcastle, respectively, will be appointed
as joint chief executive officers of NewCo, with Dan Pascariu appointed as independent non-executive chairman, on and with
effect from the Effective Date. The remainder of the board of directors of NewCo will be constituted in due course in accordance
with applicable corporate governance principles.
The total dividends per share declared and paid for the six months ended 30 June 2016 is 18.68 € cents for NEPI and
4.782 US$ cents for Rockcastle.
The Framework Agreement contemplates warranties, standstill arrangements and other provisions that are typical for transactions
of this nature.
NEPI PROPERTY PORTFOLIO
As at 30 September 2016, NEPI owned and operated 34 income producing properties, with 6 developments under construction
(of which 4 are extensions of existing properties) and 7 developments under permitting and pre-leasing (of which 4 are
extensions of existing properties). NEPI’s total investment property portfolio (including investment properties at fair value,
investment properties under development, and investment properties held for sale, each restated to include property held through
joint ventures, on a pro rata basis) was valued at approximately €2.2 billion as at 30 September 2016.
Since 30 September 2016, NEPI has acquired Arena Centar in Zagreb, Croatia, together with 4.4ha of adjacent land, as well as
concluded the acquisition of Aupark Shopping Centre in Piestany, Slovakia. In addition, Shopping City Piatra Neamt opened on
1 December 2016. The value of the investment property portfolio as at 30 November 2016 was approximately €2.5 billion.
All properties are managed internally by NEPI. Full details of the property portfolio as at 30 September 2016, weighted by
ownership, are set out below.
Investment properties in use
Weighted average rental Gross lettable area Valuation(1)
Property name Location
(€/m2/month) (m2) (€m)
1 Mega Mall Bucharest, Romania 19.9 75,500 252.2
2 City Park Constanta, Romania 18.4 52,000 130.4
3 Promenada Mall Bucharest, Romania 21.6 40,400 160.2
4 Aupark Kosice Mall Kosice, Slovakia 23.4 33,800 145.1
5 Shopping City Sibiu Sibiu, Romania 8.9 79,100 100.6
6 Shopping City Timisoara Timisoara, Romania 11.4 57,700 98.6
7 Aupark Zilina Zilina, Slovakia 24.9 25,100 105.4
8 Iris Titan Shopping Center Bucharest, Romania 13.9 45,000 91.2
9 Shopping City Deva Deva, Romania 9.6 52,300 68.2
10 Braila Mall Braila, Romania 8.6 54,400 73.1
11 Forum Usti nad Labem Usti nad Labem, Czech
Republic 16.5 27,800 82.6
12 Vulcan Value Centre Bucharest, Romania 13.2 24,600 48.5
13 Pitesti Retail Park Pitesti, Romania 12.4 24,800 42.7
14 Shopping City Galati Galati, Romania 11.3 27,200 51.4
15 Ploiesti Shopping City(2) Ploiesti, Romania 12.3 23,200 44.0
16 Kragujevac Plaza Kragujevac, Serbia 12.9 21,900 40.0
17 Shopping City Targu Jiu Targu Jiu, Romania 9.6 26,900 39.3
18 Korzo Shopping Centrum Prievidza, Slovakia 12.9 16,500 29.5
19 Severin Shopping Center Drobeta Turnu- 8.7 20,900 27.8
Severin, Romania
20 Aurora Shopping Mall Buzau, Romania 7.4 18,000 8.8
21 Regional strip centres Romania 8.2 24,900 30.7
Total retail 13.8 772,000 1,670.3
22 City Business Centre Timisoara, Romania 13.8 47,100 88.7
23 Floreasca Business Park Bucharest, Romania 17.4 36,200 102.4
24 The Lakeview Bucharest, Romania 16.8 25,600 66.8
25 The Office(2)–Phase I and Phase II Cluj-Napoca, Romania 13.5 20,350 38.8
26 Aupark Kosice Tower Kosice, Slovakia 11.7 12,800 20.3
Total office 15.0 142,050 317.0
27 Rasnov Industrial Facility Rasnov, Romania 4.6 23,000 11.8
28 Otopeni Warehouse Otopeni, Romania 9.3 4,900 4.6
Total industrial 5.5 27,900 16.4
TOTAL INCOME-PRODUCING PROPERTIES 941,950 2,003.7
NON-CORE PROPERTIES HELD FOR SALE 35,400 21.2
Investment property under development
Valuation/
Property name Location Sector Gross lettable area Cost to date(1)
(m2) (€m)
1 Shopping City Piatra Neamt(3) Piatra Neamt, Romania Retail 27,900 20.8
2 Victoriei Office(4) Bucharest, Romania Office 7,600 34.9
3 The Office(2) – Phase III Cluj-Napoca, Romania Office 9,250 5.6
4 Braila Mall extension Braila, Romania Retail 2,400 4.6
5 Severin Shopping Center extension – Phase II Drobeta-Turnu Severin, Retail 1,500 1.6
Romania
6 Regional strip centre extension (Sfantu Gheorghe) Sfantu Gheorghe, Romania Retail 1,000 0.2
TOTAL DEVELOPMENTS UNDER CONSTRUCTION 49,650 67.7
7 Promenada Mall extension Bucharest, Romania Retail 60,000 34.0
8 Novi Sad Mall Novi Sad, Serbia Retail 56,000 31.3
9 Ramnicu Valcea Mall Ramnicu Valcea, Romania Retail 27,900 9.6
10 Shopping City Galati extension Galati, Romania Retail 21,000 8.6
11 Shopping City Satu Mare Satu Mare, Romania Retail 17,400 6.7
12 Shopping City Sibiu extension Sibiu, Romania Retail 11,000 -
13 Regional strip centre extension (Vaslui) Vaslui, Romania Retail 2,800 -
TOTAL DEVELOPMENTS UNDER PERMITTING AND PRE-LEASING 196,100(5) 90.2
Land bank 23.8
TOTAL INVESTMENT PROPERTY UNDER DEVELOPMENT 181.7
Notes:
1. The valuation of investment properties in use and of the land bank reflects the value attributed to each of the properties
by the directors of NEPI as at 30 September 2016, having regard to the valuation performed semi-annually by DTZ
and Jones Lang LaSalle, being external independent property valuers and members of the Royal Institute of Chartered
Surveyors. Buildings under development are valued at cost. The directors of NEPI are not independent and are not
registered as professional valuers or as professional associate valuers in terms of the South African Property Valuers
Profession Act, No 47 of 2000.
2. The NEPI group holds a 50% interest in Ploiesti Shopping City (in partnership with Carrefour Property) and The
Office, Cluj-Napoca (in partnership with Ovidiu Sandor, an experienced Romanian office developer).
3. Shopping City Piatra Neamt was opened on 1 December 2016.
4. Development of Victoriei Office is largely completed as at the date of this announcement. The project awaits permitting
for fit out works.
5. The gross lettable area (“GLA”) of developments under permitting and pre-leasing depends on permitting.
6. NEPI acquired Aupark Shopping Center Piestany (Slovakia), valued at €39.5 million, with an effective date of
31 August 2016. The transfer of shares was finalised on 5 October 2016 and as a result, the transaction was reflected as
“Advance for investment property” as at 30 September 2016, with the consideration paid of €18.9 million. The
weighted average rental of the property is €22.6/m2/month.
7. In November 2016, NEPI acquired the largest shopping mall in Zagreb, Arena Centar, for €218.5 million, as well as
4.4ha of adjacent land, for €19 million. The weighted average rental of Arena Centar is €20.5/m2/month.
8. As the properties are effectively being acquired by NewCo through its acquisition of NEPI’s Sale Assets, no purchase
price per property has been ascribed.
ROCKCASTLE ASSET PORTFOLIO
Listed security portfolio
Rockcastle’s listed security portfolio is focused on large, liquid companies that dominate their markets and consistently
outperform their competitors. As at 30 September 2016, the market value of Rockcastle’s listed security portfolio was
US$1,832.9 million, with the group’s top ten investment holdings by market value as at that date set out below.
Market Value % of total listed
Company Share code Sector Jurisdiction (US$m) security portfolio
Hammerson HMSO Retail UK 436.5 24
Simon Property SPG Retail USA 353.0 19
Unibail UL Retail Europe 262.4 14
Prologis Inc PLD Industrial USA 198.2 11
Ventas Inc VTR Healthcare USA 131.4 7
Avalonbay Communities Inc AVB Residential USA 117.4 6
Host Hotels & Resorts Inc HST Hotel USA 101.3 6
KIMCO KIM Retail USA 84.1 5
Westfield Group WFD Retail Australia 38.4 2
Land Securities Group LAND Other/Diversified UK 37.5 2
Total 1,760.2 96
Since 30 September 2016 and as previously disclosed, Rockcastle has continued to implement its strategy of selling listed
investments and re-investing the proceeds in direct properties and developments. In particular, a reduction of its holdings in its
listed portfolio has funded the acquisition of the Focus Shopping Centres detailed below, as well as the soon to be concluded
acquisition of Galeria Warminska in Poland, resulting in an increase in Rockcastle’s direct property asset investments closer to
management’s short-term target of 50% of its total investment assets.
As at the date of this announcement, the constituents of the group’s top ten investment holdings remain largely as is set out above.
Investment properties
As at 30 September 2016, Rockcastle’s portfolio of investment properties comprised 7 income producing properties,
2 developments under construction and 3 properties under permitting and pre-leasing, together valued at €878.6 million.
Since 30 September 2016, 2 development properties, Galeria Wolomin and Galeria Tomaszow, have opened. In addition,
Rockcastle acquired the Focus Shopping Centres in Poland, together valued at over €160 million.
All properties are in the retail sector. Full details of the property portfolio as at 30 September 2016, weighted by ownership, are set
out below.
Income producing properties
Property name Location Weighted average rental Gross lettable area Valuation(1)
(€/m2/month) (m2)
Bonarka City Centre Krakow, Poland 20.56 71,714 372.3
Karolinka Shopping Centre Opole, Poland 10.69 69,994 145.5
Forum Liberec Shopping Centre Liberec, Czech Republic 10.48 46,800 82.1
Pogoria Shopping Centre Dabrowa Gornicza, Poland 11.23 36,706 76.7
Cosmopolitan Mall Lusaka, Zambia 16.56 13,076 28.2
Platan Shopping Centre Zabrze, Poland 11.09 25,300 55.6
Solaris Shopping Centre Opole, Poland 18.59 17,700 58.0
Total 281,290 818.4
Developments under construction
Property name Location Weighted average rental Gross lettable area Valuation/Cost to date(1)
(€/m2/month) (m2) (€m)
Galeria Wolomin(2) Wolomin, Poland 11.67 25,000 33.3
Galeria Tomaszow(3) Tomaszow Mazowiecki, Poland 11.20 18,500 21.1
Total 43,500 54.4
Developments under permitting and pre-leasing
Property name Location Sector Gross lettable area Valuation(1)
(m2) (€m)
Platan Shopping Centre extension Zabrze, Poland Retail 16,400 4.8
Solaris Shopping Centre extension Opole, Poland Retail 8,500 0.1
Wolomin Retail Park Wolomin, Poland Retail 6,548 0.9
Total 31,448 5.8
Notes:
1. The valuation of income producing properties reflects the value attributed to each of the properties by the directors of
Rockcastle as at 30 September 2016. The valuation of developments under construction and under permitting and pre-
leasing are reflected as costs capitalised to 30 September 2016. The directors of Rockcastle are not independent and
are not registered as professional valuers or as professional associate valuers in terms of the South African Property
Valuers Profession Act, No 47 of 2000.
2. Galeria Wolomin (in which the Rockcastle group holds a 90% interest) opened on 6 October 2016.
3. Galeria Tomaszow (in which the Rockcastle group holds an 85% interest) opened on 27 October 2016.
4. Focus Mall Piotrkow Trybunalski in Piotrkow Trybunalski, Poland was acquired on 30 November 2016. The property
has a monthly weighted average rental of €11.58/m2, a GLA of 35,168 m2 and is valued at €49.0 million.
5. Focus Park Zielona Gora in Zielona Gora, Poland was acquired on 30 November 2016. The property has a monthly
weighted average rental of €20.44/m2, a GLA of 28,800 m2 and is valued at €111.6 million.
6. As the properties are effectively being acquired by NewCo through its acquisition of Rockcastle’s Sale Assets, no
purchase price per property has been ascribed.
CATEGORISATION OF THE TRANSACTIONS
For both NEPI and Rockcastle, the Transactions are classified as category 1 disposals in terms of paragraph 9.5(a) of the JSE
Listings Requirements and accordingly require the approval of shareholders of NEPI and Rockcastle, respectively. The
Transactions (including those post-implementation corporate actions detailed in this announcement) may also require additional
NEPI and Rockcastle shareholder approvals in terms of relevant laws, the JSE Listings Requirements and the rules and regulations
of other relevant securities exchanges.
The Fortress Share Repurchase will constitute a specific repurchase of shares by NEPI from a related party, in terms of
paragraph 5.69 of the JSE Listings Requirements, requiring approval of NEPI shareholders, excluding the votes of Fortress and its
associates.
WITHDRAWAL OF JOINT CAUTIONARY ANNOUNCEMENT AND FURTHER PROCESS
Following the release of this announcement, the joint cautionary announcements published on SENS and on the websites of the
BVB and the SEM on 20 October 2016 and 2 December 2016 are withdrawn and caution is no longer required to be exercised by
shareholders when dealing in their NEPI and Rockcastle shares.
Circulars providing further information on the Transactions, including a listing document for NewCo and containing notices of
general meetings of shareholders to be convened in order to consider and, if deemed fit, passing, with or without modification, the
resolutions necessary to implement the Transactions, will be distributed to both NEPI and Rockcastle shareholders in due course.
NEPI has its primary listings on the JSE and the BVB. Rockcastle has its primary listings on the JSE and the SEM.
If you are a NEPI shareholder, for further information please contact:
JSE sponsor
Java Capital
Andrew Brooking +27 11 722 3052
BVB advisor
SSIF Intercapital Invest SA
Razvan Pasol +40 21 222 8731
If you are a Rockcastle shareholder, for further information please contact:
JSE sponsor
Java Capital
Andrew Brooking +27 11 722 3052
SEM authorised representative and sponsor
Perigeum Capital Ltd +230 402 0890
Shamin A. Sookia
14 December 2016
This notice is issued pursuant to the JSE Listings Requirements, the SEM Listing Rule 11.3, the Mauritian Securities Act 2005
and the Listing Rules of the Bucharest Stock Exchange.
The boards of directors of NEPI and Rockcastle accept full responsibility for the accuracy of the information contained in this
announcement.
Corporate advisor to NEPI and JSE sponsor to NEPI and Rockcastle Legal advisor to NEPI
Java Capital Clifford Chance Badea SPRL
Independent JSE transaction sponsor to Rockcastle Independent advisor to NEPI
Nedbank CIB J. P. Morgan
Legal advisor to Rockcastle Bucharest Stock Exchange advisor to NEPI
Dentons SSIF Intercapital Invest
SEM authorised representative and sponsor to Rockcastle South African legal advisor to NEPI
Perigeum Capital Ltd Cliffe Dekker Hofmeyr
Euronext Amsterdam listing agent of NewCo
ING
Date: 14/12/2016 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
