Equites Property Fund Limited (JSE:EQU) News - Sale of land to Lidl Great Britain Limited 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 TO LIDL GREAT BRITAIN LIMITED 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 Plot 1, Equites Park
             J7 M3 Basingstoke RG23 7LR England ("the Property") to Lidl Great Britain Limited ("Purchaser" or
             "Lidl"), 40 acres (16.19 ha) in extent, for a purchase consideration of £81,000,000 (ZAR 1,555,200,000)
             ("Sale Agreement"); and

           - Infrastructure works agreement, in terms of which ENGL is appointed by the Purchaser to implement
             certain infrastructure, landscaping and other works on the Property at a total cost of £38,000,000 (ZAR
             729,600,000) ("Infrastructure Works Agreement").

      together the ("Transaction").

      The expected post-tax profit attributable to Equites from the Transaction is £20.8 million (ZAR 400 million), which
      will contribute significantly 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 19.2 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. Lidl was founded in Germany in 1973 and has grown to become one of Europe's
              leading food retailers. The first Lidl store in the UK opened its doors in 1994 and 28 years later, Lidl now
              has more than 900 stores and 13 regional distribution centres across Britain, employing over 22,000
              people.

3.   DETAILS OF THE PROPERTY

     The total net site area is 40.0 acres (16.19 ha) of undeveloped land. Following the implementation of the
     infrastructure and associated works, the Purchaser will be developing a modern distribution warehouse, which
     will be owned by the Purchaser and form an integral part of its supply chain network in the UK.


      Property name                Geographical location        Sector                      Site area
      Plot 1                       Equites Park J7 M3           Land                        40.0 acres
                                   Basingstoke, RG23 7LR                                    (16.19 ha)
                                   England


4.   TERMS OF THE TRANSACTION

     Sale Agreement

     The Purchaser will acquire the freehold interest in the Property for a purchase consideration of £81,000,000
     (ZAR 1,555,200,000), which amount will be payable to ENGL 10 business days 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 centre;
          - The conclusion of a legal agreement with a third party in respect of the diversion of an unused oil pipeline
            that traverses the Property;
          - 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 £4,050,000 (ZAR 77,760,000), which equates to 5% of the
     purchase consideration.

     Infrastructure Works Agreement

     The Infrastructure Works Agreement provides that ENGL implements –

          - demolition of the existing buildings on the Property;
          - the provision of the required road and associated infrastructure works; and
          - all works in respect of the diversion of the oil pipelines and landscaping,
          ("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.


      ENGL will pay all of the costs and expenses incurred in carrying out the Development Works. The price payable
      by the Purchaser to ENGL pursuant to the implementation of the Infrastructure Works Agreement is
      £38,000,000.00 (R729,600,000), with the Purchaser being obliged to pay £19,000,000.00 (ZAR 364,800,000)
      as an interim payment following the achievement of certain agreed milestones with the balance being payable
      10 business days after the completion of the Development Works.

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 £20.8 million
      (ZAR 400 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 2.5%.

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.

19 April 2022


Corporate advisor and sponsor to Equites
Java Capital

Debt sponsor
Nedbank Corporate and Investment Banking
(a division of Nedbank Limited)

Date: 19-04-2022 05:35:00
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