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Sale of two UK distribution warehouses to Blackstone
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”)
SALE OF TWO UK DISTRIBUTION WAREHOUSES TO BLACKSTONE
1 INTRODUCTION
As dealt with in detail below, Equites has sold two high-quality UK distribution warehouses (with remaining
lease periods of five and six years) to real estate funds managed by Blackstone (“purchaser” or “Blackstone”)
for £43,400,000, being a 4.79% net exit yield and 6% premium to Equites’ book value. The sale proceeds will be
re-invested into the development of prime distribution warehouses by the Equites/Newlands JV, with the new
warehouses let on 20- and 15-year leases to Hermes and Amazon. The recycling of capital allows Equites to
optimise its positioning for UK opportunities available to it through the Equites/Newlands JV.
This transaction will realise net cash proceeds of £23,679,779 to Equites, while lowering the loan-to-value ratio
across its portfolio.
2 SALE TRANSACTIONS
Equites, through its Isle of Man based wholly-owned subsidiary, Equites International Limited (“Equites
International”), has concluded a share purchase agreement (“share purchase agreement”) with an affiliate of
Blackstone Group International Partners LLP, Algarve Holdco Limited , in terms of which Equites International
will be selling the entire issued share capital of each of Equites UK SPV2 Limited (“Equites SPV 2”) and Equites
UK SPV 3 Limited (“Equites SPV 3”) (“the target companies”) to real estate funds managed by Blackstone
(“the transaction”).
Equites SPV 2 owns the property called Big Stan situated at Stanley Mathews Way, Stoke-On-Trent ST4 8GR
England. This property comprises a distribution warehouse totalling 20,463 square metres which is let to Amazon
UK Services Limited until 18 July 2026 (“Amazon property”). Equites SPV 3 owns the property called DSV
Stoke situated at Prologis Park Sideway Park Sideway, Stoke-On-Trent ST4 4FA England. This property
comprises a distribution warehouse totalling 19,511 square metres which is let to DSV Solutions Holdings
Limited until 15 June 2027 (“DSV property”) (“the sale properties”).
3 RATIONALE FOR THE SALE OF PROPERTIES IN STOKE-ON-TRENT
The Equites board continuously evaluates its portfolio and applies a range of investment criteria against every
property in the portfolio to determine a specific strategy in respect of each property. Factors considered include,
inter alia, length of lease, prospect of rental growth, desirability of location, prospect of tenant renewing their
lease, potential selling price, and the potential of recycling proceeds from a sale into superior product and/or at
superior returns.
The board decided to dispose of the sale properties for the following reasons:
- the remaining lease lengths in respect of the properties (c. 5 and 6 years respectively) are significantly
below the average weighted expiry profile of our UK portfolio of 13.7 years; and
- the strategic partnership with UK-based development company, Newlands Developments LLP
(“Newlands”), has gained significant momentum and the proceeds of these sale transactions will be
invested into UK logistics products that will be developed by the Equites/Newlands JV. As is evident
from the below mentioned Amazon Peterborough and Hermes Hoyland transactions, the logistics
facilities which Equites will ultimately own through its strategic partnership with Newlands are premium
brand-new logistics facilities, built to institutional standards and let to high-quality tenant on long-term
leases.
4 RECYCLING OF CAPITAL INTO THE NEWLANDS JV
Since entering the United Kingdom (“UK”) logistics market in June 2016, Equites has assembled a portfolio of
11 prime logistics facilities and several strategic development sites valued at c. £320 million. In November 2018
Equites concluded the Newlands joint venture which provides Equites with access to sought-after land parcels
earmarked for logistics warehouses and tenanted development opportunities in key logistics nodes in targeted
areas of the UK.
This Newlands joint venture provides Equites with opportunities to achieve scale in the sought-after UK logistics
market. Equites has recently concluded its first two development transactions though the Equites/Newlands JV,
viz:
Amazon Peterborough
The Equites/Newlands JV has concluded legal agreements to develop a modern distribution warehouse facility
and ancillary accommodation that will total approximately 13,629 square meters for Amazon UK Services
Limited at Peterborough Gateway in Peterborough, England on a 15-year FRI lease. Upon completion the facility
will be owned by Equites and the total development cost is £41,283,310.
Hermes Hoyland
The Equites/Newlands JV has concluded legal agreements to develop a modern distribution warehouse facility
and ancillary accommodation that will total approximately 31,570 square meters for Hermes Parcelnet Limited
at Hoyland Common, Barnsley, England on a 20-year FRI lease. Upon completion the facility will be owned by
Equites and the total development cost is £72,326,428.
5 TERMS OF THE TRANSACTION
5.1 Equites International will be selling the entire issued share capital of each of the target companies to real
estate funds managed by Blackstone.
5.2 The purchase price under the share purchase agreement is the net asset value of the target companies as at
the effective date of the share purchase agreement (“completion”), including an agreed amount attributable
to the properties owned by the target companies of £43,400,000 in aggregate, £22,300,000 in respect of the
property owned by Equites SPV 2 and £21,100,000 in respect of the property owned by Equites SPV 3.
5.3 A deposit of £4,340,000 is payable by the purchaser on the conclusion of the share purchase agreement. The
amount payable on completion is the estimated net asset value of £13,063,779 less the deposit. In addition,
£10,616,000 of intercompany loans will be settled as well as £18,606,675 of third-party debt. The remainder
of the purchase price is attributable to working capital adjustments. The final consideration amount will be
determined in accordance with a completion accounts mechanism following completion.
5.4 Completion is scheduled for Friday, 26 February 2021. The share purchase agreement allows for the
purchaser to seek external financing, but completion is not conditional on external finance being received by
the purchaser.
5.5 The purchaser has a right to terminate the share purchase agreement between the conclusion of the share
purchase agreement and completion in limited circumstances, including in the event of a breach of certain
fundamental warranties and covenants set out in the share purchase agreement or there being a breach by
Equites International of the interim period protections that result in a diminution in the market value of the
properties of 5% or more in aggregate or either individual property of 5% or more, as determined by an
independent expert.
5.6 Under the share purchase agreement Equites International has given a suite of warranties and a tax covenant
which are considered standard in transactions of this nature, subject to a schedule of limitations. The liability
of Equites International for a breach of warranty or the tax covenant is limited to £1.00, with the purchaser
having obtained warranty and indemnity insurance for the transaction at its cost.
6 VALUATION
The independent valuations of the sale properties were recently undertaken by Cushman Wakefield, an
independent external valuer, in accordance with the “RICS Valuation – Professional Standards, the 2012 Edition
(the “Red Book”). This is an internationally accepted basis of valuation. The independent valuations were in line
with book values as set out in section 7 below.
7 FINANCIAL INFORMATION
At 31 August 2020, the fair value of the property assets less the liabilities in the target companies amounted to
£12,088,480, based on property values of £20,549,637 for the Amazon property and £20,513,723 for the DSV
property. The weighted average rental per square metre for the total rentable area of the sale properties amounts
to £52.1 per annum. The contribution to profit after tax for the six months ended 31 August 2020 amounted to
£640,149. This information has not been audited and was extracted from the Company’s interim results for the
six months ended 31 August 2020 prepared in terms of IFRS and as announced on SENS.
8 CATEGORISATION
The transaction is a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not
require approval by shareholders.
2 February 2021
Corporate advisor and sponsor to Equites
Java Capital
Date: 02-02-2021 07:15:00
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