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Sale of land and turnkey developments for Arrow Capital Partners in Basingstoke, England
EQUITES PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
Share code: EQU ISIN: ZAE000188843
JSE alpha code: EQUI
(Approved as a REIT by the JSE)
(“Equites” or the “Company”)
SALE OF LAND AND TURNKEY DEVELOPMENTS FOR ARROW CAPITAL PARTNERS IN BASINGSTOKE, ENGLAND
1. INTRODUCTION
Shareholders are advised that Equites Newlands Group Limited (“ENGL”), a subsidiary of Equites, has concluded
the following agreements:
• Sale of land agreement, in terms of which ENGL will sell undeveloped, vacant land at Plots 2 and 3,
Equites Park J7 M3, Basingstoke RG23 7LR England ("the Property") to Promontoria Logistics UK 6
Limited ("Purchaser” or “Promontoria"), 18.6 acres (7.5 ha) in extent, for a purchase consideration of
£48,464,000 (ZAR 969 million), (“Sale Agreement”); and
• Development agreement, in terms of which ENGL is appointed by the Purchaser to develop two
distribution centres for the Purchaser on a turnkey basis on the Property at a total cost of £47,750,000
(ZAR 955 million) (“Development Agreement”).
together the (“Transaction”).
The expected post-tax profit attributable to Equites from the Transaction is £10.6 million (ZAR 212 million), which
will contribute to the Company’s growth in net asset value (“NAV”) per share in the current financial year (“FY23”).
2. RATIONALE
Equites’ offshore strategy is to build scale in the top-end of the United Kingdom (“UK”) logistics market through
its partnership with Newlands Property Developments LLP (“Newlands”). This partnership affords Equites the
opportunity to unlock world-class distribution facilities in the UK at a discount to open market values. The potential
pipeline of development opportunities is estimated to be c. £1 billion (ZAR 20 billion) over the next five years, on
a cost basis. To implement and fund this strategy, Equites will from time-to-time undertake turnkey developments
for third parties and/or land disposals.
The key reasons supporting this Transaction, are as follows:
• Source of capital: Equites is currently exploring various alternatives to fund its attractive pipeline of
development opportunities in the UK. Equites will not distribute capital profits on turnkey developments
and/or land disposals but will use the proceeds as part of the equity required for new projects. From a tax
perspective, the profits are deemed to be capital in nature and non-distribution thereof will not result in
any tax leakage in South Africa.
• Crystalise development profits: Crystalising development profits will unlock a portion of ENGL’s value
creation on a cash basis.
• Contribute to NAV growth: The Transaction will contribute to NAV per share growth in FY23, upon
completion of the Transaction.
• Strong counterparty: Promontoria, forms part of the Strategic Industrial Real Estate Group (“SIRE”),
which is a joint venture operated by Arrow Capital Partners (“Arrow Capital”) and funded by Cerberus
Global Investments (“Cerberus”). Arrow Capital is a global private real estate company that invests in
equity and debt opportunities. Arrow Capital is positioned in the market as both an investor and an
operator and focus on attractive investment opportunities in Europe and Asia-Pacific.
3. DETAILS OF THE PROPERTY
The total net site area is 18.6 acres (7.5 ha) of undeveloped land. Following the implementation of the
infrastructure and associated works, ENGL will be developing two distribution centres with a combined extent of
375,000 sq. ft (c. 35,000 sq. m), on the Property, which development will be funded and owned by Promontoria.
It is estimated that the developments will be completed during the fourth quarter of 2023.
4. TERMS OF THE TRANSACTION
Sale Agreement
The Purchaser will acquire the freehold interest in the Property for a purchase consideration of £48,464,000
(ZAR 969 million), after the fulfilment of all conditions precedent.
The Transaction is subject to the fulfilment of the following conditions precedent:
• Planning and associated consent for the development of the distribution centres;
• The conclusion of a legal agreement with a third party in respect of the diversion of an unused oil pipeline
that traverses the Property; and
• The conclusion of an agreement between ENGL and the Highways Authority in respect of the upgrading
of road infrastructure adjacent to the Property,
by no later than 31 December 2022 (subject to extension until 31 December 2023), failing which the Transaction
will fail. It is expected that all the conditions will be met by the third quarter of 2022.
The Purchaser has paid a deposit in the amount of £1,000,000 (ZAR 20 million), provided that if ENGL serves a
notice compelling the Purchaser to complete, the Purchaser is required to increase the deposit to an amount
equal to 10% of the purchase price.
Development Agreement
The Development Agreement provides that ENGL implements –
• the requisite infrastructure on the Property, including the diversion of the oil pipeline; and
• the development of the two distribution centres for the Purchaser (“Development Works”).
Development Works are to be carried out on the Property in accordance with the agreed specifications, the
relevant building/works contract and all applicable statutory consents and requirements. ENGL has no obligation
or liability in respect of the design of the Development Works.
The Development Agreement provides that the Purchaser will fund all costs and expenses in respect of the
Development Works subject to an overall cap of £47,750,000 (ZAR 955 million), increased by the cost of any
agreed variation requested by the Purchaser and all associated professional fees.
The obligations of the Purchaser in the Sale Agreement and Development Agreement are guaranteed by Cerebus
Institutional Real Estate Partners and Promontoria Holding Logistics Topco BV, subsidiaries of Cerebus and
Promontoria.
5. VALUATION
The directors of Equites are satisfied that the purchase consideration for the Property will approximate its fair
value at the date of transfer. 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.
6. FINANCIAL IMPACT
Equites’ attributable share of post-tax land sale and development profits is expected to be £10.6 million
(ZAR 212 million).
The profits will not be included in the calculation of distributable earnings and will not be distributed by Equites,
but will contribute significantly to Equites’ growth in NAV per share for FY23.
Furthermore, implementation of the Transaction will decrease Equites’ gearing and bring its LTV ratio down by
approximately 1.4%.
7. CONCLUSION
This Transaction demonstrates the value being created through the partnership between Equites and Newlands
and affords Equites the opportunity to crystalise development profits and generate capital internally for further
opportunities in the attractive pipeline of development opportunities within ENGL.
8. CATEGORISATION
The Transaction is a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not
require approval by shareholders.
4 May 2022
Corporate advisor and sponsor to Equites
Java Capital
Debt sponsor
Nedbank Corporate and Investment Banking
(a division of Nedbank Limited)
Date: 04-05-2022 07:05:00
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