To view the PDF file, sign up for a MySharenet subscription.

REDEFINE PROPERTIES LIMITED - Conclusion of investment agreement with Madison International, disposal of 48.5% interest in European Logistics

Release Date: 21/01/2020 17:25
Wrap Text
Conclusion of investment agreement with Madison International, disposal of 48.5% interest in European Logistics

REDEFINE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/018591/06)
JSE share code: RDF ISIN: ZAE000190252
Debt company code: BIRDF 
(Approved as a REIT by the JSE)
("Redefine")


CONCLUSION OF AN EQUITY INVESTMENT AGREEMENT WITH MADISON INTERNATIONAL HOLDINGS VII LLC AND DISPOSAL OF 48.5% 
EQUITY INTEREST IN EUROPEAN LOGISTICS INVESTMENT B.V.


1.   INTRODUCTION AND RATIONALE FOR THE TRANSACTION

     1.1. Shareholders are advised that Redefine has entered into an agreement with Madison International
          Holdings VII LLC ("Madison") in terms of which Madison will acquire a 46.5% equity interest in
          Redefine’s Polish logistics property portfolio held through European Logistics Investment B.V
          ("ELI"), of which Redefine Europe B.V ("Redefine Europe"), a wholly-owned subsidiary of
          Redefine currently holds 95%, with the remaining 5% of ELI currently held by associates of Griffin
          Real Estate sp. z o.o. ("Griffin"). In terms of the agreement, Madison has agreed to a total equity
          commitment of EUR150 000 000. Griffin has agreed to acquire a further 2% interest in ELI from
          Redefine Europe and has agreed to a total equity commitment of EUR13 374 000 (the "Transaction").

     1.2. ELI is a real estate company which indirectly holds a portfolio of 10 logistics properties, 6 properties
          under construction and in addition has acquired 4 properties for future development, located
          throughout Poland. The introduction of Madison as an equity investor in ELI is in line with Redefine’s
          stated intention to enhance its European logistics property portfolio by the introduction of a leading
          international real estate private equity firm and to strengthen its balance sheet by improving its loan-
          to-value ratio.

     1.3. Following the conclusion of the Transaction, Redefine will continue to hold a 46.5% interest in ELI.

     1.4. Andrew Konig, CEO of Redefine says, "The deal fits perfectly with our investment strategy and
          provides us with an opportunity to reduce our loan-to-value ratio. It also means we are able to source
          additional, well priced capital in order to secure the exclusive priority right to development
          opportunities with Panattoni over the next three years."

2.   TERMS OF THE DISPOSAL

     2.1. Redefine has entered into a share purchase agreement to dispose of (i) 46.5% of its equity interest in
          ELI to MIRELF VII S.A.R.L, an associate of Madison ("Buyer 1"); (ii) 1% of its equity interest in
          ELI to Linfield Enterprises Limited ("Buyer 2"), an associate of Griffin, and (iii) a further 1% of its
          equity interest in ELI to Nebil Senman, an associate of Griffin ("Buyer 3") (collectively, the
          "Buyers') for a total aggregate sale consideration of EUR87 265 000, with effect from the completion
          date as further detailed below.

     2.2. Subject to the fulfilment or wavier (if applicable) of the conditions precedent set out in paragraph 3
          hereunder, Redefine Europe will sell:

          2.2.1.    46.5% of its interest in ELI, comprising 4 650 shares in ELI, and 46.5% of the existing assets
                    (including land acquired for future developments at cost), as further detailed in paragraph 4
                    below, to Buyer 1 on or before the fifteenth business day following the date on which the
                    conditions precedent to the Transaction have been satisfied or waived (the "completion
                    date") for an initial share purchase price of EUR51 823 000;

          2.2.2.    1% of its interest in ELI, comprising 100 shares in ELI, and 1% of the of the existing assets
                    (including land acquired for future developments at cost), as further detailed in paragraph 4
                    below, to Buyer 2 on or before the completion date for an initial share purchase price of
                    EUR1 114 500; and

          2.2.3.    1% of its interest in ELI, comprising 100 shares in ELI, and 1% of the of the existing assets
                    (including land acquired for future developments at cost), as further detailed in paragraph 4
                    below, to Buyer 3 on or before the completion date for an initial share purchase price of
                    EUR1 114 500 (the "Initial Purchase Price").

     2.3. Following completion of the assets under construction (as further detailed in paragraph 4 below) the
          Buyers agree to pay Redefine Europe an additional consideration in proportion to their shareholding
          in ELI provided that the aggregate amount to be paid to Redefine Europe in respect of the assets under
          construction, estimated at EUR31 843 000 in respect of Buyer 1 and EUR685 000 in respect of each
          of Buyer 2 and Buyer 3 respectively. The estimated consideration is subject to meeting development
          and leasing targets.

     2.4. The additional consideration payable in respect of each asset under construction upon completion will
          be calculated in the relevant shareholding percentage with reference to:

          2.4.1.    the net operating income generated by the development (assuming 100% leased premises),
                    divided by 7.1% (being the cap rate agreed to between the parties) after deducting an amount
                    relating to 50% of the deferred tax liabilities. This amount is limited to EUR2 500 000 in
                    respect of all the assets under construction, plus;

          2.4.2.    the working capital and cash amounts available in respect of each development, minus;

          2.4.3.    any debt amount owed by ELI; minus

          2.4.4.    any rent reductions agreed to with tenants; minus

          2.4.5.    any loans granted by the shareholders of ELI for the purposes of financing the developments.

     2.5. The Buyers have agreed to commit additional equity funding to expand ELI’s property portfolio over
          the next three years. Buyer 1 has agreed to an equity commitment which is estimated at
          EUR66 300 000, and Buyer 2 and Buyer 3 have each agreed to an equity commitment estimated at
          EUR4 882 500. Redefine has agreed to match the equity commitment of Buyer 1 and will reinvest
          EUR66 300 000 of the proceeds received in terms of the Transaction, over the next three years.

     2.6. The sale consideration will be settled in cash and the portion of the proceeds of the Transaction
          received by Redefine and not reinvested in ELI as set out in paragraph 2.4 above will be used to reduce
          Redefine’s local debt facilities.

3.   CONDITIONS PRECEDENT

     3.1. The disposal remains subject to the satisfaction or waiver of the following conditions precedent by
          31 March 2020 ("long stop date"):

          3.1.1.    obtaining antimonopoly clearance from the Polish Office for Competition and Consumer
                    Protection in accordance with the Antimonopoly Act of 16 February 2007; and

          3.1.2.    obtaining the consent of the ELI’s lenders, to the extent applicable.

     3.2. If the conditions precedent have not been satisfied or waived (as the case may be) on or before 5:00pm
          Central European Time on the long stop date, the share purchase agreement shall automatically
          terminate, unless the parties agree prior to such time in writing that the long stop date be extended.

     3.3. The share purchase agreement contains undertakings, warranties and indemnities that are normal for
          a transaction of this nature.

4.   PROPERTY SPECIFIC INFORMATION

     Details of the properties, including the name, geographical location, sector, gross lettable area ("GLA"), weighted
     average rental per square metre, the net operating profit, the disposal consideration and the valuations, are set out
     in the table below:

     Existing assets(2)
                                                                                                           Value
                                                                                                   attributed to
                                                                       Weighted                     the property
                                                                        average            Net          as at 31
                                                                         rental      operating            August
           Property          Geographical                         GLA    per m2      profit(1)           2019(2)
           name              location          Sector            (m2)    (R/m2)            (R)               (R)
     1     Lodz Business     Lodz, Poland      Industrial      63 044     76.31     62 041 375       693 474 000
     &     Centre II & III                                     
     2
     3     Krakow II         Skawina,         Industrial       15 303     65.22     12 879 380       165 588 060
                             Poland
     4     Sosnowiec II      Sosnowiec,       Industrial       64 796     58.62     43 540 936       698 548 200
                             Poland
     5     Warsaw            Sokolow,         Industrial       20 766     64.70     13 820 771       240 178 800
           Airport I         Poland
     6     Poznan IV         Plewiska,        Industrial       32 221     73.81     20 656 142       380 565 000
                             Poland
     7     Krakow III        Skawina,         Industrial       33 713     68.62     22 940 515       383 947 800
                             Poland
     8     Bydgoszcz II      Bydgoszcz,       Industrial       45 642         *     34 233 295       478 666 200
                             Poland
     9     Bydgoszcz III     Bydgoszcz,       Industrial       37 995         *     23 025 436       377 182 200
                             Poland
     *     Single tenanted properties weighted average rental rate of R82.70/m2

     Assets under construction(2)
     1     Bielsko-Biala     Bielsko-Biala,   Industrial       25 273     28.46      1 021 018       314 600 400
           Phase I           Poland
     2     Bielsko-Biala     Bielsko-Biala,   Industrial          N/A       N/A            N/A        87 141 621
           Phase II          Poland
     3     Warsaw Phase      Warsaw,          Industrial       47 148       N/A      (564 740)       470 224 689
     &     I & II            Poland                               
     4
     5     Lublin            Lublin,          Industrial       27 701         *        403 748       502 345 800
           Phase I           Poland
     6     Lublin            Lublin,          Industrial          N/A       N/A              -        50 572 860
           Phase II          Poland

     Land acquired for future developments
     1     Opole             Opole, Poland    Industrial        7 998       N/A      (143 141)        73 716 608
     2     Gdansk            Pruszcz          Industrial          N/A       N/A      (211 227)        75 168 361
                             Gdanski,                        
                             Poland
     3     Torun B(4)        Torun, Poland    Industrial          N/A       N/A            N/A                 -
     4     Ruda(4)           Ruda, Poland     Industrial          N/A       N/A            N/A                 -
      
     Notes:
     1. Extracted from the 31 August 2019 annual financial statements which was prepared in terms of International
        Financial Reporting Standards.
     2. The properties were valued as at 31 August 2019 by the following professional valuers who are registered
        members of the Royal Institution of Chartered Surveyors:
     3. The Strykow property has been excluded from the above list as it is in the process of being sold separately to
        another buyer. Should the sale of the Strykow property not be successful, the property will be included in the
        existing assets, increasing the Initial Purchase Price by EUR7 800 000 and adjusting the equity commitment
        accordingly.
     4. Land was acquired subsequent to 31 August 2019

        Valuer                           Valuer name (individual            Valuer qualifications
                                         expert used)
        Savills.pl – Poland              Kamil Kowa                         MRICS, RICS registered valuer
        Savills.pl – Poland              Karina Szafranska                  MRICS, RICS registered valuer
        Savills.pl – Poland              Malgorzata Linska-Bator            MRICS, RICS registered valuer
        Savills.pl – Poland              Tomasz Paszkowski                  MRICS, RICS registered valuer
        BNP Paribas Real Estate – Poland Izabela Mucha                      MRICS, RICS registered valuer

5.   FINANCIAL INFORMATION

     5.1. As at 31 August 2019, the net asset value of Redefine’s equity interest in ELI was EUR 121 497 273
          or R2 055 004 870 (at exchange rate of EUR1:ZAR16.914, being the spot rate on 31 August 2019).
          The proceeds of the disposal of the ELI shares is EUR 62 027 555 or R994 804 130 (at exchange rate
          of EUR1: ZAR16.0381, being the spot rate on 20 January 2020).

     5.2. The profit after tax attributable to the net assets of ELI for the 12 months ended 31 August 2019 was
          EUR 22 271 421 or R361 888 319 (at exchange rate of EUR1:ZAR16.249, being the average rate for
          the 12 months ended 31 August 2019).

     5.3. Following the disposal, Redefine will retain a 46.5% interest in ELI, which at 31 August 2019 had a
          value of EUR 59 469 718 or R953 781 284 (at exchange rate of EUR1:ZAR16.0381, being the spot
          rate on 20 January 2020).

     5.4. The above financial information has been extracted from the audited results of Redefine for the year
          ended 31 August 2019 which were prepared in terms of Redefine’s accounting policies and
          International Financial Reporting Standards.

6.   In terms of the JSE Listings Requirements, no shareholder approval is required in respect of the
     Transaction.

21 January 2020


Sponsor
Java Capital

Date: 21-01-2020 05:25:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

Share This Story