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Further announcement - Acquisition of a Polish retail property portfolio and withdrawal of cautionary announcement
ECHO POLSKA PROPERTIES N.V.
(Incorporated in The Netherlands)
(Company number 64965945)
JSE share code: EPP
ISIN: NL0011983374
LEI Code: 7245003P7O9N5BN8C098
(“EPP or “the company”)
FURTHER ANNOUNCEMENT - ACQUISITION OF A POLISH RETAIL PROPERTY PORTFOLIO AND WITHDRAWAL
OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Shareholders are referred to the initial announcement issued by EPP on 11 October 2017 (the “initial
announcement”) in which it was announced that, inter alia, EPP had reached an agreement to acquire a
portfolio of retail properties (the “Specified Portfolio”) for a combined consideration that values the
portfolio at Euro 692.1 million (collectively, the “Transaction”).
For the sake of clarity and comprehension, much of the initial announcement will be repeated herein to
ensure a full understanding of the Transaction.
The Specified Portfolio comprises eight M1 superregional shopping centres (with GLAs ranging from 30
000 m² to 55 000 m²) and four PP power retail parks (with GLAs ranging from 20 000 m² to 35 000 m²)
with over 620 stores situated in strong regional cities across Poland. The Specified Portfolio has an
aggregate gross lettable area of 446 500 square metres.
Further details of the Specified Portfolio are set out in paragraph 2 below.
The sale of the Specified Portfolio will occur in three separate tranches of –
- firstly, the First Tranche Portfolio comprising 4 properties (identified in paragraph 2 below) with an
aggregate GLA of 194 400 m2, an aggregate value of Euro 358.7 million and an aggregate purchase
consideration of Euro 135.0 million (the “First Tranche Acquisition”);
- secondly, the Second Tranche Portfolio comprising a further 6 properties (identified in paragraph 2
below) with an aggregate GLA of 184 000 m2, an aggregate value of Euro 222.5 million and an
aggregate purchase consideration of Euro 75.2 million (the “Second Tranche Acquisition”); and
- thirdly, the Third Tranche Portfolio comprising a further 2 properties (identified in paragraph 2
below) with an aggregate GLA of 68 100 m2, an aggregate value of Euro 110.9 million and an
aggregate purchase consideration of Euro 44.1 million (the “Third Tranche Acquisition”).
The expected completion date of the –
- First Tranche Acquisition is late December 2017 or January 2018;
- Second Tranche Acquisition by either 27 June 2019 or 10 July 2019 (if the completion date is extended
in accordance with the terms of the Master Purchase Agreement, as defined below) (the “STP effective
date”); and
- Third Tranche Acquisition by either 29 June 2020 or 9 July 2020 (if the completion date is extended in
accordance with the terms of the Master Purchase Agreement, as defined below) (the “TTP effective
date”).
The delay in completing the Second and Third Tranche Acquisitions is to enable the Seller to implement
various contracted asset management initiatives (including certain lease renewals or renegotiations) to
align those acquisitions with EPP’s investment requirements and strategy. To the extent, that the Seller
(as defined below) is unable to do so, the Seller will guarantee minimum rental amounts in respect of the
Specified Portfolio, referred to in paragraphs 3.4, 3.5 and 3.6 below.
2. PROPERTY SPECIFIC INFORMATION
Purchase
consideration
Weighted of the shares
average in property
rental owning
Net per m2 company (net Value
operating per of company attributed to
Property name GLA income month debt) the property
and locations Sector (m2) (EUR’ M) (EUR) (EUR’ M) (EUR’M)
First Tranche Portfolio
M1 Czeladz Retail 53 600 8.1 12.6 56.2 123.5
M1 Krakow Retail 49 600 8.1 13.6 57.7 126.3
M1 Lodz Retail 38 400 3.1 6.8 3.1 33.7
M1 Zabrze Retail 52 800 5.8 9.1 18.0 75.2
194 400 25.1 10.8 135.0 358.7
Second Tranche Portfolio
M1 Bytom Retail 28 200 2.1 6.1 1.9 22.9
M1 Czestochowa Retail 29 900 3.3 9.1 25.6 51.4
M1 Radom Retail 37 000 4.1 9.3 24.2 58.3
Power Park Olsztyn Retail 32 500 2.4 6.1 9.0 31.8
Power Park Opole Retail 20 700 1.7 6.8 5.2 22.6
Power Park Kielce Retail 35 700 2.7 6.4 9.3 35.6
184 000 16.3 7.4 75.2 222.5
Third Tranche Portfolio
M1 Poznan Retail 45 400 5.9 10.9 40.2 89.2
Power Park Tychy Retail 22 700 1.7 6.2 3.9 21.7
68 100 7.6 9.3 44.1 110.9
Total 446 500 49.0 9.1 254.3 692.1
The values attributed to each of the properties as at 10 October 2017 is considered to be its fair market
value, as determined by the directors of the company. The directors of the company are not independent
and are not registered as professional valuers or as professional associate valuers in terms of the Property
Valuers Act, No.47 of 2000.
The company is expected to incur a further circa Euro 26 million in expenditure in connection with the
Transaction (which amount includes transfer taxes and stamp duties, agent’s commission and other
transaction and advisory costs).
3. TRANSACTION TERMS AND CONDITIONS
An agreement was entered into on 10 October 2017 between, inter alia, EPP, as the purchaser (the
“Purchaser”) and Chariot Top Group B.V. (held as to 37,5% by LVS II Lux XXVII S.à r.l) an entity managed
by Pacific Investment Management Company, LLC (“Pimco”), 37,5% by funds managed by Oaktree Capital
Management L.P. (“Oaktree”) and 25% by Redefine Properties Limited), as the seller, (the “Seller” or
“Chariot”) (the “Master Purchase Agreement”) in terms of which, as part of a broader transaction in which
Chariot will acquire a large property portfolio of 28 properties (including, not only, the Specified Portfolio)
(the “Chariot Transaction”), Chariot sells to EPP, shares in 12 companies (wholly-owned by the Seller)
which companies will own directly or through their respective wholly-owned subsidiaries the Specified
Portfolio.
3.1. First Tranche Acquisition
3.1.1. The “First Tranche Portfolio” (“FTP”) is as indicated in paragraph 2.
3.1.2. A preliminary share purchase agreement, relating to 100% of the shares in those wholly-owned
subsidiaries of the Seller (the “FTP companies”) which will hold 100% of the shares in each
company holding a property comprising the FTP, has been entered into (the “FTP PSPAs”).
3.1.3. Subject to the satisfaction of certain conditions precedent (the “FTP conditions”), which are
going to be fully fulfilled in late December 2017 or January 2018, the Seller and the Purchaser
shall be obliged to enter into a final share purchase agreement in respect of each of the FTP
companies (the “FTP final agreement”) in terms of which the Seller sells to the Purchaser, all
of the shares in all FTP companies with effect from the execution of the FTP final agreement
which is expected to be by end of December 2017/January 2018 (the “FTP effective date”) for
the aggregate purchase consideration of Euro 135 million (the “FTP purchase price”) to be
settled in cash, Euro 97.5 million of which will be funded by the issue of EPP shares for cash
at an issue price of Euro 1.270 per EPP share to GPF EPP BV (an entity managed by LVS II
Luxembourg II S.à r.l (“Pimco”) and Oaktree) and Euro 37.5 million of which will be funded
from the cash resources of EPP derived from the proceeds of recycling office assets.
3.1.4. The FTP purchase consideration is payable by EPP to the Seller on the FTP effective date.
3.1.5. The FTP conditions include –
- the completion of the Chariot Transaction;
- an anti-monopoly clearance in respect of the transfer of the shares in the FTP companies
to the Purchaser having been obtained;
- senior lenders to the FTP companies consenting to the sale of the shares in the FTP
companies to the Purchaser.
3.1.6. The FTP purchase price for each FTP company is calculated as the gross asset value of the
relevant underlying property letting enterprise decreased by the value of indebtedness of each
FTP company under the loans provided by the senior lenders and the FTP company’s
shareholders; and further adjusted in accordance with the formula provided by the FTP
PSPAs.
3.1.7. Net operating income for the FTP on an annualised basis going forward from 10 October 2017
amounts to Euro 25.1 million.
3.1.8. The Seller has provided normal warranties and indemnities for a transaction of this nature. The
FTP companies will also benefit from title insurance and warranty and indemnity insurance
arranged by the Seller.
3.2. Second Tranche Acquisition
3.2.1. The “Second Tranche Portfolio” (“STP”) is as indicated in paragraph 2.
3.2.2. A preliminary share purchase agreement, relating to 100% of the shares in those wholly-owned
subsidiaries of the Seller (the “STP companies”) which will hold a property comprising the
STP, has been entered into (the “STP PSPA”).
3.2.3. Subject to the fulfilment of certain conditions precedent (the “STP conditions”) by 20 June
2019, the Seller and the Purchaser shall be obliged to enter into final share purchase
agreements in respect of each of the STP companies (the “STP final agreement”) in terms of
which the Seller sells to the Purchaser, all of the shares in all STP companies with effect from
the execution of the STP final agreements and receipt of the STP purchase price (defined
below) on the STP effective date.
3.2.4. The aggregate purchase consideration payable by the Purchaser to the Seller for the shares in
the STP companies is Euro 75.2 million (the “STP purchase price”).
3.2.5. The STP purchase price is payable by the Purchaser to the Seller once the STP final agreement
is executed by the parties thereto.
3.2.6. The STP conditions include –
- the completion of the sale of the Chariot Transaction;
- no new encumbrances having been created and not discharged on any of the shares or
material assets of the STP companies;
- an anti-monopoly clearance in respect of the transfer of the shares in the STP companies
and the TTP companies to the Purchaser having been obtained;
- a pay-off letter stipulating for, inter alia, the total amount due to the senior lender by
the STP company as at the STP effective date, having been issued by the senior lender;
senior lenders to the STP companies consenting to the sale of the shares in the STP
companies to the Purchaser.
3.2.7. The Seller may exclude the STP company which holds Power Park Olsztyn with a value of
Euro 31.8 million from the sale by means of a written notice to the Purchaser by not later than
31 June 2018.
3.2.8. The STP purchase price for each STP company is calculated as the gross asset value of the
relevant underlying property letting enterprise decreased by the value of indebtedness of each
STP company under the loans provided by the senior lenders and the STP company’s
shareholders; and further adjusted in accordance with the formula provided by the STP PSPA.
3.2.9. Net operating income for STP on an annualised basis going forward from 10 October 2017
amounts to Euro 16.3 million.
3.2.10. The STP companies will also benefit from title insurance and warranty and indemnity
insurance arranged by the Seller.
3.3. Third Tranche Acquisition
3.3.1. The “Third Tranche Portfolio” (“TTP”) is as indicated in paragraph 2.
3.3.2. A preliminary share purchase agreement, relating to 100% of the shares in those wholly-owned
subsidiaries of the Seller (the “TTP companies”) which will hold a property comprising the
TTP, has been entered into (the “TTP PSPA”).
3.3.3. Subject to the fulfilment of certain conditions precedent (the “TTP conditions”) by 20 June
2020, the Seller and the Purchaser shall be obliged to enter into final share purchase
agreements in respect of each of the TTP companies (the “TTP final agreement”) in terms of
which the Seller sells to the Purchaser, all of the shares in all TTP companies with effect from
the execution of the TTP final agreements and receipt of the TTP purchase price (defined
below) on the TTP effective date.
3.3.4. The aggregate purchase price payable by the Purchaser to the Seller in respect of the TTP
companies is Euro 44.1 million (the “TTP purchase price”).
3.3.5. The TTP purchase price is payable by the Purchaser to the Seller once the TTP final agreement
is executed by the parties thereto.
3.3.6. The TTP conditions are –
- the completion of the Chariot Transaction;
- no new encumbrances having been created and not discharged on any of the shares or
material assets of the TTP companies;
- an anti-monopoly clearance in respect of the transfer of the shares in the STP companies
and the TTP companies to the Purchaser having been obtained;
- a pay-off letter stipulating for, inter alia, the total amount due to the senior lender by
the TTP company as at the TTP effective date, having been issued by the senior lender;
- senior lenders to the TTP companies consenting to the sale of the shares in the TTP
companies to the Purchaser.
3.3.7. The TTP purchase price for each TTP company is calculated as the gross asset value of the
relevant underlying property letting enterprise decreased by the value of indebtedness of each
TTP company under the loans provided by the senior lenders and the TTP company’s
shareholders; and further adjusted in accordance with the formula provided by the TTP
PSPAs.
3.3.8. Net operating income for TTP on an annualised basis going forward from 10 October 2017
amounts to Euro 7.6 million.
3.3.9. The Seller has provided normal warranties and indemnities for a transaction of this nature.
The TTP companies will also benefit from title insurance and warranty and indemnity
insurance arranged by the Seller.
3.4. Rental guarantee
3.4.1. A rental guarantee has been furnished by the Seller to the Purchaser in respect of each of the
underlying properties of the Specified Portfolio so that if the amount of actual annual rent
received is less than the amount of sustainable annual rental income (as specified in the Master
Purchase Agreement and calculated in accordance with the current market rent levels) in
respect of an underlying property, then the Seller shall pay to the Purchaser an amount equal
to such deficit. Correspondingly, if there is an excess amount (i.e. the amount of the actual
rent exceeds the sustainable rental income) then the Purchaser shall pay to the Seller an
amount equal to such excess.
3.4.2. The rental guarantee in respect of –
- the First Tranche Portfolio commences on the FTP effective date;
- the Second Tranche Portfolio commences on the STP effective date;
- the Third Tranche Portfolio commences on the TTP effective date;
and ends on the earlier of (i) the fourth anniversary from the FTP effective date or (ii) the date
on which the arrangements under the Metro Lease Agreements (as defined below) have been
negotiated and concluded on terms and conditions meeting minimum requirements of EPP.
3.5. The Metro Lease Agreements
3.5.1. Each of the underlying properties of the Specified Portfolio was developed by affiliates of
Metro AG between 2004 and 2005 before being sold to A-R-A Retail Centers S.a.r.l (“ARA”)
from whom Chariot is purchasing its larger portfolio of 28 properties (including the Specified
Portfolio).
3.5.2. Certain of the underlying properties of the Specified Portfolio are subject to a master lease
agreement with Metro Properties sp.z.o.o (“Metro”) (together the “Metro Lease
Agreement/s”) which Metro Lease Agreements will be transferred to the Purchaser upon the
relevant effective date. Each Metro Lease Agreement is secured by an agreement in terms of
which Metro Wholesale & Food Specialist AG (the parent company of Metro) is jointly liable
for all Metro’s current and future payment obligations under the Metro Lease Agreements as
a joint and several debtor against the Seller. Such security arrangements will be transferred to
the FTP companies, STP companies and TTP companies together with the Metro Lease
Agreements.
3.5.3. The Master Purchase Agreement provides specific terms and conditions for a potential early
termination of the Metro Lease Agreements including, inter alia, the conclusion of new lease
agreements with certain named tenants and the renewal of certain of the existing sub-leases
on stipulated terms and conditions including, inter alia, as to minimum duration and minimum
rentals.
3.6. Conclusion of New or Amendments to Certain Material Lease Agreements
The Master Purchase Agreement makes provision for a specific framework in which certain material
new lease agreements and/or amendments to such material lease agreements may be concluded. The
purchase price payable by EPP for the equity in the relevant property owning company will be
adjusted to reflect the impact that the adjusted rent payable under any such new or amended lease
arrangement/s.
3.7. Right of rescission
The Seller and the Purchaser are entitled to rescind from the acquisition of a given FTP company,
STP company and/or TTP company if a material adverse change occurs (as defined in the Master
Purchase Agreement) unless the negative results of such material adverse change are neutralized.
4. WITHDRAWAL OF CAUTIONARY
This announcement incorporates all disclosures required under the JSE Listings Requirements and
accordingly the cautionary issued on 11 October 2017 (which cautionary announcement was renewed on
22 November 2017) is hereby withdrawn. Shareholders are no longer required to exercise caution when
dealing in their EPP shares in relation to the Transaction.
The bye-laws of each of the FTP companies, the STP companies and the TTP companies shall be amended,
if necessary, to ensure that each of them is consistent with the provisions required by the JSE Listings
Requirements.
4 December 2017
JSE Sponsor and Corporate Advisor
Java Capital
LuxSE Listing Agent
For more information:
Magda Cieliczko, Marketing & Communications Director EPP
Mobile: +48 603 203 619
magda.cieliczko@echo-pp.com
Java Capital, JSE Sponsor
Phone: +27 11 722 3050
M Partners, LuxSE Listing Agent
Phone: +352 263 868 602
Singular System IR
Michèle Mackey / Jacques de Bie
+27 (0)10 003 0700/+27 (0)82 497 9827
michele@singular.co.za; Jdebie@singular.co.za
Date: 04/12/2017 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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