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Sale of Belgium Properties and a 10% interest in PEL
INVESTEC PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Reg. No: 2008/011366/06)
Approved as a REIT by the JSE
Share Code: IPF
Bond Code: INV
ISIN: ZAE000180915
("Investec Property Fund" or "the Fund")
SALE OF BELGIUM PROPERTIES AND A 10% INTEREST IN PEL
Investors are referred to the announcement published on SENS on 10 September 2020, w herein the Fund noted
that the sale of the Belgium properties into the Pan-European Logistics (“PEL”) platform (“Belgium Disposal”) and
the separate sale of a 10% interest in the PEL platform (“PEL Sale”) w ere anticipated to be concluded shortly. The
Fund is now pleased to announce that the Fund has agreed terms in respect of both of the Belgium Disposal and
PEL Sale, individual details of w hich are set out hereunder.
A. Belgium Disposal
1. Background and rationale
Investors are referred to the announcement released on 12 December 2019 in respect of the acquisition
of two Belgian logistics properties (“Belgium Properties”). The acquisition formed part of the Fund’s PEL
real estate strategy, and it has alw ays been the Fund’s intention to transfer the Belgium Properties into
the PEL platform upon refinancing of the debt w ithin the PEL platform.
Investors are advised that the Fund reached agreement on 22 September 2020 w ith the PEL co-investor
to transfer the Belgium Properties into the PEL platform at the Fund’s acquisition cost of €70.7m. The
Belgium Disposal terms contains undertakings, w arranties and indemnities normal for a transaction of this
nature, and is only subject to the finalisation of the PEL refinancing. The transfer w ill become effective
simultaneously w ith the refinancing, anticipated to be mid-October 2020.
The Belgium Disposal forms part of the Fund’s existing de-gearing flightpath and proceeds realised from
the disposal and refinancing of these assets w ill be applied tow ards reducing the Fund’s LTV . The salient
outcomes of the Belgium Disposal are as follow s:
- The Fund w ill retain a 65% interest in PEL, from the existing 75% interest (taking into account the
PEL Sale below ); and
- The Fund w ill receive cash proceeds of €8m for the net equity interest payable by the PEL co-investor
in respect of their pro rata interest to be settled at the earlier of any exit by the PEL co-investor or
February 2025;
2. Financial inform ation
The impact of the Belgium Disposal on the Fund’s results for 31 March 2020 is set out below :
Im pact of the Belgium
Disposal as at
31 March 2020
(Rm )(1)
Operating profit(1) (19.6)(2)
Net asset value (NAV) - (3)
Notes:
1. The Belgium Properties were 100% indirectly owned by the Fund and were therefore consolidated. As such, the
Fund previously recognised income from these assets in its net property income and operating profit.
2. Extracted from the audited financial results for the year ended 31 March 2020 and represents 100% of the net
property income earned from the Belgium Properties since acquisition in December 2019, notwithstanding that
the Fund will effectively retain 65% of the earnings from the Belgium Properties in the form of investment income
from the PEL platform.
3. Investment property value will be reduced by €70.7m (approximately R1.4bn) and aggregate proceeds received
from debt refinancing within PEL platform and equity contributions from co-investors will be used to settle debt
thus the net impact to the Fund’s last reported NAV is nil.
3. Property inform ation
Details of the Belgium Properties are set out below :
Weighted
Geograph Disposal
GLA average rental WAULT
Name ic Sector value
(m 2) per m onth (years)
location (EURm )(1,2)
(EUR/m 2)
Flanders,
Opglabeek Industrial 78,000 3.3 3.0 49.2
Belgium
Flanders,
Houthalen Industrial 27,000 3.5 3.4 21.6
Belgium
Total 105,000 3.4 3.1(3) 70.7
Notes:
1. Gross acquisition cost was €70.7m (including transaction costs) when originally acquired by the Fund in
December 2019, transferred into the PEL platform at cost.
2. The disposal consideration payable in respect of each of the Properties is considered to be its fair market value,
as determined by the directors of the Fund. The directors of the Fund 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.
3. Excludes rental guarantee in Opglabbeek property. If the duration of the rent guarantee is included, then
Opglabbeek WAULT is 2.5 years and aggregate WAULT is 2.7 years.
B. PEL Sale
1. Background and rationale
The Fund is now pleased to inform investors that it has now concluded a sale and purchase agreement
in respect of a 10% effective interest in PEL to Pan-European Logistics Property Holdings Limited (“PEL
HoldCo”), for an aggregate cash consideration of €40m (the “PEL Sale”). PEL HoldCo is a Mauritian -
domiciled entity established for purposes of facilitating a passive investment into the PEL platform by
various private clients of Investec Wealth & Investment (“IWI”), with the ultimate investors unsighted by
IPF.
The PEL Sale w as facilitated and implemented by IWI, through a private placement, which placement was
oversubscribed and continues to evidence the demand for access to this platform.
The Fund currently held its 75% interest in the PEL platform via its Luxembourg-domiciled subsidiary, IPF
Lux 2 Sarl (“IPF LuxCo”). PEL HoldCo w ill acquire its effective 10% interest in the PEL platform via the
acquisition of a 13.33% interest in IPF LuxCo. As such, IPF LuxCo w ill continue to hold a 75% interest in
the PEL platform w ith the Fund representing 86.67% of IPF LuxCo and holding an effective 65% interest
in the PEL platform.
The PEL Sale forms part of the Fund’s existing de-gearing flightpath, and as such, the PEL Sale proceeds
w ill be utilised to settle existing Euro bridge debt facilities and further strengthen the Fund’s balance sheet.
2. Key terms
The agreements in respect of the PEL Sale contain terms w hich are normal for a transaction of this nature.
Key terms include:
- Drag along rights in favour of the Fund and tag along rights for both parties; and
- A yield top-up mechanism for a period of up to 5 years w hich is expected to result in PEL HoldCo
receiving a specified minimum yield. If this yield is not achieved before the top-up, the Fund w ill
settle the shortfall up to a maximum of €280,000 p.a. The top-up provided necessary protection
to PEL HoldCo during a time of increased global uncertainty due to the COVID-19 pandemic and
ensured that the Fund received fair value for its disposal shares. The Fund is confident that,
given the current strong underlying cash flow s and projected grow th in rental streams going
forward, it is unlikely that the top-up w ill be called upon.
3. Financial information
The impact of the PEL Sale on the Fund’s net asset value and investment income for 31 March 2020 is
set out below :
Im pact of the
31 March 2020(1) PEL Sale as at 31
(Rm ) March 2020 (Rm)
Net assets 6,142.1 - (2)
Investment income3 202.8(4) (41.5)(5)
Notes:
1. Extracted from the audited financial results for the year ended 31 March 2020.
2. Investment value will be reduced by R818.9m (being 1 3.33% of the 75% interest held by the Fund) and proceeds
received will be used to settle debt thus the net impact to the Fund’s last reported NAV is nil.
3. The Fund has joint control over the PEL investment, as such the investment is recorded as an equity accounted
loan to a joint venture and income from the PEL platform is recognised as investment income.
4. The Fund increased its interest in the PEL platform to 75% on 24 February 2020, thus full year income is primarily
attributable to the 42.9% interest held for most of the year and includes only 5 weeks where the Fund held a 75%
interest in the PEL platform.
5. Excludes income attributable to the Belgium Properties.
C. Categorisation of the Belgium Disposal and PEL Sale
The Belgium Disposal and PEL Sale are unrelated, each of w hich are individually classified as Category 2
transactions in terms of the JSE Listings Requirements. Accordingly, neither are subject to shareholder
approval.
Sandton
23 September 2020
Financial Advisor and Sponsor
Investec Bank Limited
Date: 23-09-2020 12:02:00
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