Accelerate Property Fund Ltd (JSE:APF) News - Disposal of European property portfolio

Accelerate Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/015057/06)
ISIN: ZAE000185815
Share Code: APF
(Approved as a REIT by the JSE)
("Accelerate", "APF", the "Company")


DISPOSAL OF EUROPEAN PROPERTY PORTFOLIO


1.   INTRODUCTION

     Accelerate has through its 96.3% owned subsidiary, Accelerate Property Fund Europe B.V.
     ("APFE"), entered into a definitive sale and purchase agreement with two wholly-owned
     subsidiaries of investment funds managed by Slate Asset Management ("Slate" or the
     "Purchasers"), dated 18 November 2021 ("Signature Date") (the "Transaction Agreement"),
     in terms of which it will dispose of its nine European retail properties located in Austria and
     Slovakia (the "Offshore Portfolio") for an aggregate disposal valuation of €87 400 000
     ("Portfolio Disposal Value") (the "Disposal"). The Offshore Portfolio is held through special-
     purpose vehicles ("SPV") in Austria and Slovakia which are the subject of the Transaction
     Agreement.

     Slate is a global alternative investment platform focused on real estate with a strong history of
     successful acquisitions across Canada, the United States and Europe. The acquisition by the
     Purchasers of the Offshore Portfolio expands Slate’s European platform into two new, centrally
     located, fast-growing markets and further increases Slate’s exposure to high-quality essential real
     estate.

     In terms of the Transaction Agreement, and subject to the fulfilment of the conditions precedent
     set out in paragraph 4 below, APFE will dispose of all its equity shares in Accelerate Property
     Holdings 1 GmbH ("Austrian HoldCo"), SK4 Kosice II s.r.o., SK5 Martin s.r.o. and SK6 Nitra
     s.r.o. (the "Slovak SubCos") (together the "Sale Shares") which entities collectively own the
     Offshore Portfolio. APFE will further, in terms of the Transaction Agreement, dispose of all its
     shareholder claims against the Austrian HoldCo and the Slovak SubCos (the "Sale Claims").

     The Disposal will become effective on the date on which the transfer of the Sale Shares has been
     registered into the name of the Purchasers, pursuant to the fulfilment or waiver (where capable
     of waiver) of all the conditions precedent to the Disposal ("Closing Date"). The Closing Date is
     anticipated to be on or about 31 January 2022.

2.   STRATEGIC RATIONALE FOR THE DISPOSAL

     The Disposal is in line with the Company's stated intention to prioritise the reduction of its overall
     level of gearing, as measured by the Company’s loan to value ("LTV") ratio. The Company is of
     the view that it is important to expedite the reduction of its LTV ratio, to improve its credit rating
     and to strengthen the balance sheet, all of which are expected to return market confidence in
     Accelerate. The Disposal Consideration, as defined in paragraph 3 below, will be applied to the
     settlement of APFE’s debt obligations in respect of the Offshore Portfolio specifically and also to
     the further reduction of a portion of Accelerate’s South African debt.
                                                  
3.   TERMS OF THE DISPOSAL

     APFE will dispose of the Sale Sales for a preliminary total equity consideration of €26 290 394,
     which implies a total portfolio sales price of €87 400 000 for the Offshore Portfolio, and the Sale
     Claims will be sold for a preliminary total consideration of €13 636 470 (together the "Disposal
     Consideration") resulting in total gross proceeds of €39 926 864 for APFE. This preliminary
     Disposal Consideration will be payable, in cash, to APFE on the Closing Date.

     The final Disposal Consideration will be determined within sixty days from the Closing Date, based
     on the financial position of the Austrian HoldCo and Slovak SubCos on the Closing Date.
     Accelerate does not expect a material deviation between the preliminary Disposal Consideration
     and the final Disposal Consideration given the contractual nature of APFE’s net rental revenue.

4.   CONDITIONS PRECEDENT

     The implementation of the Disposal is subject to the fulfilment or waiver (where capable of
     waiver), by 31 March 2022, of the following outstanding conditions precedent:
     4.1.     the Purchasers having concluded binding and valid agreements with Erste Bank AG for
              the waiver and release of certain provisions of the financing of the Offshore Portfolio;
     4.2.     APFE providing a release letter to the Purchasers with respect to the Sale Claims;
     4.3.     APFE providing a written waiver of any claims and remuneration for the function of the
              managing director of the Offshore Portfolio;
     4.4.     APFE providing the requisite approval for the transfer of the rights and obligations in
              terms of the SK6 Nitra s.r.o. land lease agreement or an appropriate amendment to that
              agreement;
     4.5.     Accelerate obtaining approval for the Disposal from its shareholders in the course of a
              general meeting by way of an ordinary resolution;
     4.6.     APFE obtaining approval for the Disposal from its shareholders in the course of a
              general meeting with at least a qualified majority (i.e. at least 75% of the voting rights);
              and
     4.7.     the Purchasers providing satisfactory evidence of warranty and indemnity insurance.

5.   WARRANTIES AND INDEMNITIES

     The Transaction Agreement includes warranties and indemnities that are normal for a transaction
     of this nature. The obtaining of a warranty and indemnity insurance policy by the Purchasers,
     which is a condition precedent to the Disposal, shall provide for limited recourse to APFE in
     respect of any warranty claims.

6.   THE OFFSHORE PORTFOLIO AND RELATED FINANCIAL INFORMATION

     The Offshore Portfolio includes nine big-box Do-It-Yourself ("DIY") retail stores which are
     tenanted by OBI GmbH & Co. Deutschland KG ("OBI"), one of the largest DIY retailers in Central
     and Eastern Europe.

     Independent valuations of the Offshore Portfolio have been completed by CBRE Limited, an
     independent registered valuer in terms of the Royal Institute of Chartered Surveyors, which
     indicate that the Portfolio Disposal Value is close to the Offshore Portfolio’s independent
     valuation.
                                                
     The financial information provided below has been extracted from Accelerate’s audited results,
     which have been prepared in terms of IFRS, for the year ended 31 March 2021. The details of
     the Offshore Portfolio including location, sector, gross lettable area, weighted average rental per
     m2/month, net operating income (profits attributable) and the independent CBRE valuation, as at
     1 June 2021, are as follows:

Property           Location    Sector     Single           Gross     Weighted              Net     Value of the
                                          or multi-       lettable    average       operating        Properties
                                          tenanted           area    rental per       income              as at
                                                                        m2 per                      1 June 2021
                                                                        month
                                                             (m2)           (€)        (€’000)          (€’000)
Vienna             Austria     Retail     Single          16 357            11           2 204           40 000
                                          tenanted
Mauthausen         Austria     Retail     Single           5 146             8             524            7 200
                                          tenanted
Murzzuschlag       Austria     Retail     Single           5 822             7             504            7 500
                                          tenanted

Bruck              Austria     Retail     Single           6 823             5             450            6 540
                                          tenanted
Rosental           Austria     Retail     Single           3 316             6             246            3 720
                                          tenanted
Hallein            Austria     Retail     Single           3 739             5             203            3 090
                                          tenanted
Nitra              Slovakia    Retail     Single           8 687             4             466            7 650
                                          tenanted
Martin             Slovakia    Retail     Single           7 950             4             414            6 850
                                          tenanted
Kosice             Slovakia    Retail     Single           8 054             4             406            6 500
                                          tenanted
Total                                                     65 894                         5 417           89 050
                                                      
7.    CATEGORISATION

      In terms of the JSE Listings Requirements, the Disposal is classified as a Category 1 transaction
      for Accelerate, which accordingly requires approval by Accelerate shareholders. Details of the
      Disposal, together with inter alia, the pro forma financial effects of the Disposal and an
      independent valuer’s summary valuation report on the Offshore Portfolio will be included in a
      circular to be distributed to Accelerate shareholders ("Circular"). The Circular will incorporate a
      notice convening a general meeting of Accelerate shareholders for the purpose of considering
      and, if deemed fit, passing the resolutions necessary to approve and implement the Disposal.

Fourways
22 November 2021

Financial Adviser and Transaction Sponsor
Rand Merchant Bank (A division of FirstRand Bank Limited)

Legal Adviser to Accelerate as to Austrian Law
Grama Schwaighofer Vondrak Rechtsanwälte GmbH




                                                   

Date: 22-11-2021 08:30:00
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