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Property, Development and Asset Management Services Agreement and potential disposal of a minority interest in FWM
ACCELERATE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2005/015057/06)
JSE share code: APF
ISIN: ZAE000185815
("Accelerate" or "the Company")
CONCLUSION OF PROPERTY, DEVELOPMENT AND ASSET MANAGEMENT SERVICES AGREEMENT AND POTENTIAL
DISPOSAL OF A MINORITY INTEREST IN FOURWAYS MALL
1. INTRODUCTION
1.1. Shareholders are referred to the announcement released on the Stock Exchange News Service
("SENS") on 18 December 2023, in which shareholders were advised that the Company and
Azrapart Proprietary Limited ("Azrapart"), co-owners of Fourways Mall ("the Mall" or "FWM"),
had entered into a heads of agreement in relation to the appointed of Flanagan and Gerard
Frontiers Proprietary Limited ("F&G") as the asset and property manager for the Mall.
1.2. Shareholders are hereby advised that the Company, Azrapart, F&G, Fourways Precinct
Proprietary Limited ("Fourways Precinct"), Fourways Mall Managing Agent Proprietary Limited
("FMMA") and Luvon Investments Proprietary Limited ("Luvon") have now entered into a
Property, Development and Asset Management Services Agreement ("the Agreement"), in terms
of which F&G and Luvon (collectively the "Property Manager") have been jointly appointed by
the current property manager (namely Fourways Precinct, who will be replaced by FMMA), as the
property and asset manager, and by the Company and Azrapart ("Co-Owners"), as the
development manager, for the properties and letting enterprises that make up the Mall
("Properties and Letting Enterprises").
1.3. The beneficial owners of F&G are Flanagan and Gerard Group Proprietary Limited and the family
trusts of the management of F&G and the beneficial owners of Luvon are the family trusts of the
management and founders of Luvon. F&G and Luvon and their beneficial owners are not related
parties of the Company.
2. RATIONALE AND OVERVIEW OF THE MALL
The Mall is the largest super-regional shopping centre in South Africa, with a total gross lettable area of
177,570 m².
Strategically located in the upmarket suburb of Fourways, one of the fastest developing commercial and
residential hubs in Sandton, north of Johannesburg, the centre underwent extensive refurbishments and
upgrades from 2017 to 2019.
Positioned as a destination retail centre, FWM's tenant mix focuses on shoppertainment, making it an
attractive choice for shoppers beyond its immediate catchment area.
The Mall has approximately 400 stores, including local and international fashion brands, electronics,
homeware, department stores and specialty shops.
Notably, it offers a diverse range of entertainment options, including The Fun Company, La Liga Experience,
Altitude Beach Club, Ster Kinekor (including a dedicated kid's cinema), Hamleys Play Park, Adventure Golf
and Bounce Inc, with a free jumping arena, X-park, Big Bag, and an exclusive Clip 'n Climb arena featuring
more than 20 uniquely themed indoor climbing walls. FWM also provides 8,000 parking bays for added
convenience.
Accelerate owns 50% of FWM. Independently valued at R3,9 billion (Accelerate's 50%), Fourways Mall
represents the largest and most significant asset in the Company's portfolio.
Recognising the imperative to unlock the full potential of the Mall's redevelopment, and harness additional
value by repositioning its offering, Accelerate, and co-owner, Azrapart, jointly agreed on the importance of
independent management for FWM.
With a distinguished track record, F&G and Luvon are well-established, independent, and experienced
retail experts, responsible for all aspects of asset and property management and development. The
appointment remains subject to approval by Accelerate shareholders.
3. TERMS OF THE AGREEMENT
3.1. Services
In terms of the Agreement, the Property Manager will perform property management services,
asset management services and development management services in respect of the Properties
and Letting Enterprises (collectively the "Services").
3.2. Duration
In terms of the Agreement, the Services will be provided from the Commencement Date (as
defined below) and will terminate on the earlier of:
3.2.1. the fifth (5th) anniversary of the Commencement Date (or such later date as the parties
may agree);
3.2.2. the date upon which the parties agree in writing to terminate the Agreement (subject
to the lenders agreeing in writing thereto);
3.2.3. the date of termination of the Agreement pursuant to the occurrence of an event of
default as contemplated in the Agreement; and
3.2.4. the date of termination of the Agreement pursuant to the Co-Owners simultaneously
disposing of their entire undivided shares in the Properties and Letting Enterprises as
contemplated in the Agreement.
3.3. Remuneration
3.3.1. The fees payable to the Property Manager by Fourways Precinct or FMMA, as the case
may be, for the duration of the services period, are as follows:
3.3.1.1. a property management fee calculated as 1% of gross monthly collections for the
previous month ("GMC") plus value-added tax ("VAT");
3.3.1.2. an asset management fee calculated as 1.75% of GMC plus VAT;
3.3.1.3. a leasing fee calculated as 0.5% of GMC plus VAT; and
3.3.1.4. a development management fee calculated as 2.5% of the total cost incurred in
respect of each capital project, excluding costs in excess of the total development
costs reflected in the budget approved by the executive committee in respect of
each project (the executive committee has been established for the purposes of
governing the operations of the Properties and Letting Enterprises).
3.3.2. In addition, provided that (1) the Agreement is not terminated due to an event of
default and (2) that the normalised net monthly collections (calculated utilising the
average of the immediately preceding 6 months of gross monthly collections, excluding
recoveries of arrears, adjusted for any turnover rentals received/receivable during that
period, less the operating expenses incurred in respect of the Mall for that period and
as further determined in terms of the Agreement) ("NNMC") as at the final date the
services are provided in terms of the Agreement ("Upside Participation Fee
Determination Date") are no less than the average minimum NNMC for the 6-month
period concerned (as determined in terms of the Agreement), the Co-Owners (on a pro
rata basis) shall pay an upside participation fee ("UPF" or "Upside Participation Fee") to
the Property Manager, which fee shall be calculated as follows:
UPF = (NNMC – (minus) the base normalised net monthly collection amount of
R15 621 611, - (minus) the monthly project funding costs (being the aggregate cost of
each project funded by the Co-Owners during the relevant period, multiplied by the
interest costs of the Co-Owners (capped at 11%), / (divided) by 12), x (multiplied) by 9.5,
plus VAT.
3.3.3. In the event that the Agreement is terminated prior to the 5 th anniversary of the
Commencement Date, the minimum UPF shall be -
3.3.3.1. from the Commencement Date until the first anniversary of the
Commencement Date: R110 000 000.00 (one hundred and ten million
Rand);
3.3.3.2. from the first anniversary until the second anniversary of the
Commencement Date: R120 000 000.00 (one hundred and twenty million
Rand);
3.3.3.3. from the second anniversary until the third anniversary of the
Commencement Date: R130 000 000.00 (one hundred and thirty million
Rand);
3.3.3.4. from the third anniversary until the fourth anniversary of the
Commencement Date: R140 000 000.00 (one hundred and forty million
Rand); and
3.3.3.5. from the fourth anniversary until the fifth anniversary of the
Commencement Date: R150 000 000.00 (one hundred and fifty million
Rand).
3.3.4. The Upside Participation Fee (which includes VAT) shall be payable by the Co-Owners
at the election of the Property Manager either in cash or via delivery by the Co-Owners
of an undivided share in the Properties and Letting Enterprises ("USDP"), the
percentage of which will be calculated as follows:
UDSP = UPF / (divided) by (NNMC x (multiplied) by 12 / (divided) by 0.08) x (multiplied)
by 100 (rounded to the nearest hundredth).
3.3.5. To the extent that the Property Manager elects an undivided share in the Properties
and Letting Enterprises ("Potential Disposal"), each Co-Owner will be required to sell a
pro rata portion of their undivided share in the Properties and Letting Enterprises.
3.4. Effective date
The effective date of the Agreement will be the date on which all of the conditions precedent, as
set out below, have been fulfilled ("Commencement Date"), which date is anticipated to be 31
October 2024.
3.5. Conditions precedent
The Agreement is subject to the fulfilment of the following conditions precedent:
3.5.1. the board of directors of each of Fourways Precinct, FMMA, Accelerate, Luvon and F&G
pass a resolution authorising the entry of the Agreement and the shareholders of
Azrapart, FMMA and Fourways Precinct have respectively passed an ordinary resolution
ratifying the aforesaid board resolutions despite their director having a personal
financial interest in the matters contemplated therein;
3.5.2. the shareholders of Accelerate pass a resolution approving the entry into by it of the
FMMA property and asset management agreement (an agreement in terms of which
the Co-Owners will appoint FMMA to render property and asset management services
in respect of the Properties and Letting Enterprises) and the Agreement in accordance
with the JSE Listings Requirements ("Listings Requirements");
3.5.3. the Co-Owners providing, or procuring the provision of, security in the form of a bank
guarantee, which shall be satisfactory to the Property Manager (in its sole and absolute
discretion, as confirmed by the Property Manager by written notice to the Co-Owners)
for the due and punctual payment by the Co-Owners of the Upside Participation Fee,
capped at the applicable minimum upside participation fee amounts (as set out in
paragraph 3.3.3 above); and
3.5.4. the co-ownership agreement (an agreement that regulates the arrangement between
the Co-Owners) has been implemented on terms and conditions acceptable to the
Property Manager and certain third-party lenders.
3.6. Material terms
3.6.1. Property Manager's call option
3.6.1.1. In terms of the Agreement, the Co-Owners grant the Property Manager (or
one or more of the nominees of the Property Manager) a call option to
acquire, as soon as reasonably possible after the Upside Participation Fee
Determination Date, an undivided share of no more than 15% ("Call
Option") in the Properties and Letting Enterprises.
3.6.1.2. The Property Manager shall be entitled to exercise the Call Option within
30 days of the Upside Participation Fee Determination Date, provided that
the NNMC as at the Upside Participation Fee Determination Date are no
less than the average minimum NNMC for the 6-month period concerned
(as determined in terms of the Agreement), on written notice to the Co-
Owners specifying the percentage undivided share ("Percentage Share") in
the Properties and Letting Enterprises it wishes to acquire.
3.6.1.3. The call option consideration for the Percentage Share in the Properties
and Letting Enterprises shall be calculated as follows ("Call Option
Consideration") –
Call Option Consideration = the net operating income of the Properties and
Letting Enterprises for the 12-month period following the Upside
Participation Fee Determination Date (as determined in terms of the
Agreement) / (divided) by 0.08 x (multiplied) by the Percentage Share, plus VAT.
3.6.1.4. The Call Option Consideration for the Percentage Shares will be settled in
cash on the transfer date. No determination as to the use of the proceeds
of the potential disposal has been made as at the date of this
announcement.
3.6.2. Warranties
The Company has warranted to and in favour of the Property Manager that
shareholders holding not less than 50% of the voting rights to be exercised have
provided irrevocable undertakings to vote in favour of the Agreement.
4. PROPERTY SPECIFIC INFORMATION
Property Location Sector Gross lettable Weighted Fair value
Name area (m2) average gross attributable to
rental (m2) FWM
Fourways Mall Gauteng Retail 177,570 R223,0 R7.8 billion
Notes:
1. The gross lettable area of 177,570m² represented the total area of the Mall of which Accelerate owns
50% undivided share being 88,785m², valued at R3.9 billion.
2. No additional property related expenditure has been incurred by the Company in connection with the
Potential Disposal and Call Option.
3. The fair value of FWM has been determined by the directors of the Company with effect from 31 March
2024. The directors of the Company are not independent and are not registered as professional valuers
or as professional associated valuer in terms of the Property Valuers Profession Act, No. 47 of 2000.
5. FINANCIAL INFORMATION
In terms of the latest audited annual financial statements of the Company, for the financial year ended 31
March 2024, the attributable net property income of the Company's interest in the Properties and Letting
Enterprises amounted to R247 million for the year ended 31 March 2024. Based on internal management
accounts, the net asset value (assets less liabilities) of the Company's interest in the Properties and Letting
Enterprises amounted to R1,9 billion by applying the Loan-to-value of SPV1 (the security SPV of which the
Mall forms part of) to the value of the Mall.
6. SHAREHOLDERS APPROVAL
6.1. In terms of paragraph 13.40 of the Listings Requirements, the entering into of the Agreement
requires shareholder approval by way of an ordinary resolution (excluding any parties or their
associates who are party to or have an interest in the Agreement).
6.2. In addition, in terms of paragraph 9.8(c) of the Listings Requirements, the Potential Disposal and
the Call Option are treated as category 1 transactions in terms of the Listings Requirements that
require shareholder approval by way of an ordinary resolution, given that ("Category 1 Disposals") –
6.2.1.1. in the case of the Potential Disposal, the Upside Participation Fee payable
to the Property Manager by the Company and Azrapart is not subject to a
maximum; and
6.2.1.2. in the case of the Call Option, the Call Option Consideration payable to the
Company and Azrapart is also not subject to a maximum.
6.3. Accordingly, the Company is in process of preparing a circular to shareholders ("Circular"), which
will contain a notice of general meeting of shareholders ("General Meeting") to approve the
Agreement and the Category 1 Disposals. An announcement containing further details regarding
the distribution of the Circular, incorporating the notice of General Meeting, will be released on
SENS in due course.
Johannesburg
20 August 2024
Transaction Sponsor
Valeo Capital (Pty) Limited
Date: 20-08-2024 05:47:00
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