Acquisition of Simba Logistics facility in Gauteng
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 SIMBA LOGISTICS FACILITY IN GAUTENG
Shareholders are advised that Equites has concluded an agreement to acquire a 40 428m² distribution centre
let to Simba Proprietary Limited ("Simba" or "Tenant") from Investec Property Fund Limited ("Seller") for an
estimated aggregate purchase consideration of R461 923 200 (net of transaction fees) ("Purchase Price") (as at
the estimated effective date of 1 November 2018) ("the Transaction").
The distribution centre is situated on a 101 769m² site in Elandsfontein, Germiston (comprising erven 117 and
118 Henville extension 25 Township Province Gauteng) and is let to Simba on a ten-year lease, which commenced
in November 2017 ("the Property").
2. RATIONALE OF THE TRANSACTION
As logistics properties of this nature and quality rarely come to market, Equites is pleased to have acquired this
well-located, high-quality, modern logistics facility, occupied by an A-grade tenant on a fully repairing and
maintaining lease that is long-dated and consistent with the lease expiry profile that Equites targets. Contractual
annual rental escalation is above inflation at 7.5%.
Equites has targeted key logistics nodes in Gauteng, Cape Town and Durban as its areas of focus in South Africa.
The acquisition of the Property adds to its high-quality property portfolio in Gauteng.
The addition of this high-income producing property enhances the company's existing real estate portfolio and is
expected to result in enhanced returns over the medium to long-term.
The Transaction is therefore consistent with Equites' stated growth and investment strategy of:
- 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; and
- building a high-quality logistics portfolio in both South Africa and the UK, consisting of properties with
predictable rental growth profiles, that promotes capital growth and increasing income returns over the
medium to long-term.
Equites views the property as evidencing the following sound investment/property fundamentals:
- Situated in one of South Africa's premier logistics nodes, Germiston, the Property affords exceptional road
networks and close proximity to OR Tambo International Airport;
- This 40 428m² facility meets Simba’s exacting specifications and operational requirements and is close to
their production facility;
- The site extends to a total area of 101 769m², which provides an internationally acceptable site cover of
significantly less than 50%;
- Simba is part of the PepsiCo Inc. ("PepsiCo") international stable. PepsiCo is the second largest food and
beverage business in the world, with a presence in over 200 countries and annual net revenues in excess of
$63 billion. PepsiCo is listed on the Nasdaq and has a market capitalisation of $160 billion; and
- The existing lease expires on the 31 October 2027, with an option to renew for a further 5 years from that
3. DETAILS OF THE PROPERTY
The Purchase Price constitutes an acquisition yield of 7%. This is based on the first year's contractual net rental
income for the 12 months commencing 1 November 2018.
Gross Weighted average Total
Geographical Lettable rental per square consideration
Property name location Sector Area (m²) metre (monthly) payable
Germiston 17 Greenhills, 17 Logistics 40 428 R66.65 R462 923 200
Property Greenhills Road,
The Purchase Price payable is considered to be in line with fair market value, as determined by the directors of
the company. The total consideration payable reflected above includes R1 million of transaction fees, which is
considered in line with property transactions of this nature. 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
Profession Act, No.47 of 2000.
4. SALIENT TERMS OF THE AGREEMENT
4.1 The Transaction is subject to the following outstanding conditions precedent:
- Equites confirming that it is satisfied with the results of its due diligence investigation;
- the approval of the Competition Authorities; and
- general conditions considered ordinary in the course of property transfers.
4.2 The effective date of the Transaction will be the date on which the Property is transferred from the Seller
to Equites, from which date the ownership of the Property (and all risk and benefits in respect of the
Property) will pass to Equites. It is estimated that the effective date will be 1 November 2018 ("Estimated
4.3 The Purchase Price has been determined in terms of a formula set out in the agreement and on the
assumption that the Property will transfer to Equites on the Estimated Effective Date. The Purchase Price
will be adjusted with reference to the actual date on which the Property transfers to Equites, to the extent
that this date differs from the Estimated Effective Date, with an adjustment amount paid by either Equites
to the Seller, or by the Seller to Equites, as the case may be.
4.4 The Seller has provided warranties and indemnities to Equites that are standard for a transaction of this
5. FINANCIAL INFORMATION
Set out below is the forecast for the transaction ("the Forecast") for the 4 months ending 28 February 2019 and
year ending 29 February 2020 ("the Forecast Period").
The Forecast has been prepared on the assumption that transfer of the Property will be completed, and rental
income in terms of the lease received, from 1 November 2018.
The Forecast, including the assumptions on which it is based and the financial information from which it has been
prepared, is the responsibility of the directors of the company. The Forecast has not been reviewed or reported on
by independent reporting accountants.
The Forecast presented in the table below has been prepared in accordance with the company's accounting
policies, which are in compliance with International Financial Reporting Standards.
Forecast for the Forecast for the
4 months ending year ending
28 February 2019 29 February 2020
ZAR '000 ZAR '000
Rental revenue 10 778 33 142
Straight-line adjustment 3 406 9 410
Net property income/net operating profit 14 184 42 553
Less: finance costs -4 066 -12 472
Net operating profit after tax 10 118 30 081
Add back: Straight-line adjustment -3 406 -9 410
Profit available for distribution 6 712 20 671
The Forecast incorporates the following material assumptions in respect of revenue and expenses:
1. The contractual lease agreement is assumed to be valid and enforceable. The escalations provided for during the
Forecast Period are in line with the lease agreement.
2. The lease is a fully repairing and insuring lease and normal property operating expenses are assumed to be
recoverable from the tenant.
3. The property and asset management functions for the Property will be performed internally.
4. The Transaction will be financed in line with the current capital structure of Equites. This assumes a loan-to-
value of 30% throughout the Forecast Period. The marginal cost of debt assumed in the Forecast is 9.0%, which
is in line with Equites’ current marginal cost of funding.
5. No fair value adjustment is recognised.
6. There will be no unforeseen economic factors that will affect the tenant's ability to meet its commitments in
terms of the lease.
The Transaction is a category 2 transaction for Equites in terms of the JSE Listings Requirements and accordingly
does not require approval by Equites shareholders.
6 August 2018
Date: 06/08/2018 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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