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Hystead: Acquisition of shopping centres in Croatia
HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
JSE share code: HYP ISIN: ZAE000190724
(Approved as a REIT by the JSE)
(“Hyprop”)
HYSTEAD: ACQUISITION OF SHOPPING CENTRES IN CROATIA
1. INTRODUCTION
Shareholders are advised that Hyprop has, through its UK joint venture company, Hystead Limited (“Hystead”)
entered into an agreement (the “acquisition agreement”) to acquire a 90% interest in a company that owns two
shopping centres (the “shopping centres”) situated in Croatia (the “acquisition”). Hystead is held 60% by
Hyprop and 40% by PDI Investment Holdings (“PDI”), a company associated with Louis Norval, a non-executive
director of Hyprop. The purchase consideration net of the EUR154.4 million asset-based finance is
EUR129.1 million, of which Hyprop’s 60% effective share is approximately EUR77.5 million (R1.12 billion).
2. RATIONALE
The acquisition is in line with Hyprop’s strategy to own high-quality, income producing shopping centres in
Central and Eastern Europe. The acquisition will grow Hystead’s portfolio of prime, dominant regional shopping
centres in Central and Eastern Europe to six shopping centres in five countries, with Hystead’s share of gross
asset value exceeding EUR740 million.
The shopping centres being acquired are City Center one Zagreb West and City Center one Zagreb East, both
located in Zagreb, Croatia. The shopping centres were acquired at a combined property yield of approximately
7% and are expected to enhance Hyprop’s distributions to shareholders.
The shopping centres occupy dominant positions in the west and east of Zagreb, respectively, with substantial
catchment areas and strong tenant mixes, including key international brands. City Center one Zagreb West has
expansion potential of 13 600m2 GLA, which would allow the introduction of a special mall area for upper level
brands in Croatia. City Center one Zagreb East has expansion potential of 10 000m2 GLA, which would include
an extended food court, new fashion anchors and improved visibility from the main road. The majority of the
leases are denominated in Euros or are Euro-linked, providing currency stability and offering growth potential.
Zagreb, with 800,000 inhabitants, is the capital of Croatia. Croatia is part of the European Union (EU) and its
economy has produced strong GDP growth of 3.0% in 2016 and 3.2% year-on-year in the third quarter of 2017.
The economy is supported by a growing tourism sector, rising real wages and improving regional trade.
This is Hystead’s second entry into a EU country following the acquisition of a mall in Bulgaria, and will enhance
the overall quality, diversification and profile of the Hystead portfolio. Three of the shopping centres, representing
approximately 60% by value, will now be located in the EU.
As previously announced, Hyprop intends to secure a separate listing of Hystead on the Euro MTF market of the
Luxembourg Stock Exchange and on the Main Board of the JSE within the next six months.
3. TERMS OF THE ACQUISITIONS
3.1. The transaction
The acquisition will be effected through a joint venture company (“JVCo”) to be incorporated by Hystead
(as to 90%) and WKB 3 GmbH (“WKB3”), a company associated with CC Real GmbH (“CC Real”),
one of the premier property and asset management companies in Croatia (as to 10%). The acquisition
will be effective upon the fulfilment of all conditions precedent.
The transaction agreements contain undertakings, warranties and indemnities which are normal for an
acquisition of this nature.
3.2. Joint venture arrangement
Hystead has entered into a joint venture agreement with WKB 3, an Austrian-based company that
developed, and has been the property and asset manager of the two shopping centres. Its operating
company, CC Real, was founded in 2006 by Wolfgang Kaufmann, Fabian Kaufmann and Sven Vorih
and is based in Vienna (Austria), with additional offices in Zagreb.
The founders of CC Real have successfully developed numerous real estate projects in Austria and
elsewhere in Europe. They have expertise in the fields of planning, developing and managing
entertainment and shopping centres and employ 140 people. CC Real is currently a 20% shareholder in
the shopping centres, and will retain a 10% interest after the acquisition.
3.3. Conditions precedent
Completion of the acquisition is subject to approval from the Competition Agency of Croatia.
3.4. Exclusivity on additional shopping centre
Hystead has secured exclusivity on a further shopping centre in the Croatian city of Split, also owned and
managed by companies associated with CC Real. The terms of this potential transaction have not been
finalised, however the acquisition would add to Hystead’s scale and distributions should agreement be
reached with the owners.
4. FUNDING OF THE ACQUISITION
Asset based funding (loan to value of 55%) has been secured on a 5-year term, with no amortisation in the first
three years.
A bridge loan facility for the balance of the purchase consideration payable by Hystead has been secured until the
listing occurs, and will be repaid on listing. Should the listing be delayed, the facility will be replaced with a term
loan facility.
Hyprop and PDI have agreed that each would provide guarantees on future acquisitions by Hystead in proportion
to their shareholdings in Hystead. Due to the size of this transaction Hyprop will provide a guarantee for 69% of
the bridge loan facility, relative to its shareholding of 60%. Hyprop will receive a fee for the 9% out-of-parity
proportion of its guarantee.
5. MANAGEMENT OF THE SHOPPING CENTRES
The asset management of the shopping centres will be undertaken by JVCo through Hystead’s European-based
executive management team (which consists of a CEO, CFO and asset manager) and the existing CC Real asset
management team.
The property management of the shopping centres has been outsourced to CC Real for an initial period of 18
months, providing for a continuation of the property management framework and team at the centres.
6. PROPERTY-SPECIFIC INFORMATION
Property name and address City Center one Zagreb West
Geographical location Jankomir 33 10000 Zagreb, Croatia
Retail rentable area (GLA) m2 46 779
Weighted average rental per m2 €15.27
WAULT (years) 6.0
Vacancy rate (all GLA) 1.5%
Independent valuation (90%) EUR 145 800 000
Property name and address City Center one Zagreb East
Geographical location Slavonska avenija 11d 10000 Zagreb, Croatia
Retail rentable area (GLA) m2 48 574
Weighted average rental per m2 €17.39
WAULT (years) 6.5
Vacancy rate (all GLA) 0.6%
Independent valuation (90%) EUR 135 000 000
7. CATEGORISATION OF THE ACQUISITION
The transaction is not categorisable in terms of the JSE Listings Requirements and the information in this
announcement is presented for information purposes only.
21 February 2018
Sponsor
Java Capital
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