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ATTACQ LIMITED - Attacq / Equites transaction relating to industrial properties in Waterfall

Release Date: 06/07/2021 17:25
Code(s): ATT EQU EQT004 EQT006 EQT002 EQT003 EQT005 EQT007     PDF:  
Wrap Text
Attacq / Equites transaction relating to industrial properties in Waterfall

(Incorporated in the Republic of South Africa)
(Registration number 1997/000543/06)
JSE share code: ATT  ISIN: ZAE000177218
(Approved as a REIT by the JSE)

(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU  ISIN: ZAE000188843
JSE alpha code: EQUI
(Approved as a REIT by the JSE)



     Shareholders and noteholders are advised that Attacq (through its wholly owned subsidiary Attacq Waterfall
     Investment Company Proprietary Limited (“AWIC”)) and Equites have reached conditional agreement
     whereby Attacq will dispose of an undivided half share of the leasehold rights and rental enterprises in respect
     -     two logistics properties being the Amrod and Massbuild distribution centres; and
     -     56 723 m2 of undeveloped land to be co-developed by Attacq and Equites with Cotton On as a tenant
           within the Waterfall Logistics Hub (collectively, the “disposal assets”) to Equites, with effect from
           1 September 2021 (the “transaction”) and for a total purchase consideration of R444 505 437
           (“purchase consideration”). AWIC will continue to hold the remaining 50% interest in the disposal


     The transaction is aligned with Attacq’s stated intention of reducing its debt levels and improving its interest
     cover ratio, whilst retaining 50% of the disposal assets. This transaction, combined with the previously
     communicated asset disposals, will contribute to a further de-gearing of the Attacq balance sheet and in
     addition substantiates Attacq’s ability to transact at the carrying value of its quality assets.

     On a pro-forma basis, taking into account this transaction and the proceeds generated by Attacq’s disposals
     of its 50% interest in the Deloitte building, shares in MAS Real Estate Inc. and 2 Eglin, Attacq’s gearing
     ratio of 50.4% at 31 December 2020 would reduce to 43.4%.

     Attacq continues to attract quality light industrial tenants to its Waterfall Logistics Hub. It has a further
     275 923 m2 of light industrial leasehold rights (effective share measured in terms of surface area), providing
     Attacq with an opportunity to increase its light industrial portfolio, which, once developed, will complement
     its existing quality portfolio. The Waterfall City development pipeline continues to attract experienced joint
     venture partners, such as Equites, who understand and value the unique investment opportunity in the
     Waterfall node.


     The transaction meets Equites' strategic objectives due to the following reasons:
     -     Equites has communicated its strategy of pursuing growth in South Africa through high-quality
           acquisitions and developments;
     -     The logistics sector is the best performing sector in the South African property market and high-quality
           logistics assets rarely come to market;
     -     The Waterfall Logistics Hub is regarded as one of the preeminent logistics parks in South African and
           this acquisition will increase Equites’ exposure to this node;
     -     The disposal assets comprise two modern distribution centres and a development lease, let to A-grade
           tenants, with a WALE of 9.4years across the three properties; and
     -     The transaction serves to create further scale in Equites’ high-quality logistics portfolio with stable and
           predictable rental growth profiles which enhances capital and income growth in the medium to long-

     This acquisition opportunity was secured given Equites’ existing strong relationship with Attacq. Equites
     will fund the transaction from available debt facilities. Equites’ LTV ratio, on a pro-forma basis at
     1 September 2021, will increase marginally from 31.2% to 32.7%.


     The salient terms of the transaction are as follows:
     -     The purchase consideration will be payable by Equites in cash on the date of transfer of the disposal
     -     AWIC will continue to manage the disposal assets;
     -     The lease agreements with Amrod and Massbuild are triple net leases with the tenants responsible for
           all operating costs, assessment rates, insurance, repairs and maintenance. The Amrod lease expires in
           December 2028 and the Massbuild lease expires in March 2033. The net initial yield on the assets is
           8.9% and 8.2% respectively;
     -     Cotton On has entered into a 10 year and 2 months lease in respect of a 20 796 m2 distribution centre
           with an estimated commencement date of 1 May 2022. The land purchase price payable by Equites is
           R32 904 375 and Equites’ share of the estimated development spend is R66 241 670, resulting in an
           estimated total development cost to Equites of R99 146 045 (representing an undivided half share).
           The estimated yield on the total development cost is 8.1%;
     -     Equites and AWIC will jointly undertake the Cotton On development and following the acquisition of
           the aforesaid land, Equites will fund 50% of the total development costs in respect of the Cotton On
           development, which is estimated to be completed in May 2022; and
     -     The agreement contains undertakings, warranties and indemnities which are normal for a transaction
           of this nature.


     The property fundamentals of the Amrod and Massbuild distribution centres are robust. Both income-
     producing properties are classified as modern logistics facilities with at least 15.5 metre clear height to eaves
     and ample yard space. The disposal assets are situated in the Waterfall Logistics Hub, which is an established
     logistics node. The Cotton On development will also be in the heart of the Waterfall Logistics Hub. The
     transaction will therefore add to the quality, defensiveness and income predictability of Equites’ earnings.

     The purchase consideration for the disposal assets is R444 505 437. Based on the two income-producing
     properties, the transaction consideration equates to an initial yield of c.8.5%.
                                                                            Net profit           Total  value for an
                                                                           for the six   consideration     undivided
                                                                 Weighted       months         payable    half share
                                                         GLA      average     ended 31          for an         at 31
                                                    (100% of   rental per     December       undivided      December
     Property      Geographical                    property)           m2         2020      half share          2020
     name          location             Sector            m2            R        R’000               R             R
     Massbuild     Waterfall, Gauteng   Logistics     50 033        61.04       11 987     214 601 062   212 470 000
     Amrod         Waterfall, Gauteng   Logistics     37 937        82.34          978     197 000 000   199 951 000
     Cotton On     Waterfall, Gauteng   Logistics     56 732*           -          n/a      32 904 375    31 769 920^
     (land only)
     Total                                                                      12 965     444 505 437   444 190 920
     * Surface area of undeveloped land
     ^ Carrying value adjusted for cost to complete

     The purchase consideration is considered to be in line with fair market value, as determined by the directors
     of Equites and Attacq. The directors 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.


     The transaction is subject to the fulfilment of the following conditions precedent:
     -     The funders having provided such consents or approvals, in writing, as may be required for the release
           of the existing mortgage bonds and the assumption of the assumed debt;
     -     The landowner and the tenants having provided such consents or approvals, in writing, as may be
           required in respect of the transaction; and
     -     The approval of the Competition Authorities.


     The transaction is a category 2 transaction for Attacq in terms of the JSE Listings Requirements and
     accordingly, does not require approval by Attacq shareholders.

     This transaction is not categorisable for Equites in terms of the JSE Listings Requirements and accordingly,
     does not require approval by Equites shareholders. For Equites, this announcement is voluntary and for
     information purposes only.

6 July 2021

Sponsor to Attacq and Equites                            Debt Sponsor for Equites
Java Capital                                             Nedbank Corporate and Investment Banking,
                                                         a division of Nedbank Limited

Date: 06-07-2021 05:25:00
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