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ATLANTIC LEAF PROPERTIES LIMITED - Acquisition of an industrial property in Droitwich Spa, UK and supplementary information on a previous disposal

Release Date: 24/05/2019 09:00
Code(s): ALP     PDF:  
 
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Acquisition of an industrial property in Droitwich Spa, UK and supplementary information on a previous disposal

Atlantic Leaf Properties Limited
(Incorporated in Jersey)
(Registration Number: 128426)
SEM share code: ALPL.N0000
JSE share code: ALP
ISIN: MU0422N00009
www.atlanticleaf.mu ("Atlantic Leaf" or the "Company")

ACQUISITION OF AN INDUSTRIAL PROPERTY BASED IN DROITWICH SPA, UNITED KINGDOM AND SUPPLEMENTARY INFORMATION 
ON A PREVIOUS DISPOSAL

INTRODUCTION

Shareholders are advised that on 23 May 2019, Atlantic Leaf, through its wholly-owned subsidiary
Basswood Limited (collectively, "Atlantic Leaf"), concluded agreements and simultaneously
completed the acquisition of an industrial property known as Koito in Droitwich Spa, United Kingdom
(the "Property") from Telereal Droitwich Limited (the "Seller") (the "Transaction").

RATIONALE FOR THE TRANSACTION

The Transaction is consistent with Atlantic Leaf's strategy of investing in real estate assets that aim to
deliver good returns for investors through predictable income from long-term leases while also offering
potential for rental and capital growth. The acquisition of the Property supports the Company's strategy
to further concentrate its investment focus on the industrial sector. This has been achieved through
redeploying a portion of the proceeds from the Company's disposal of its joint venture investment in a
property portfolio leased to DFS Trading Limited (refer to the Company's announcement released on
23 April 2019).

The Property is located in the established business area of Hampton Lovett Industrial Estate, in central
England. The estate also accommodates other large well-known industrial occupiers such as Amazon
and Muller. This location benefits from nearby access to the M5 motorway, providing transport
connections with the South West and North of the country.

The Property comprises a purpose-built manufacturing facility constructed in three phases between
1987 and 2000. It is fully let to Koito Europe Limited (the "tenant"), a significant supplier to the
European automotive industry specialising in the design and manufacture of vehicle lighting equipment.
The tenant occupies the Property as its European headquarters and has been manufacturing vehicle
components for over 20 years for customers include Nissan, Suzuki, Toyota and Peugeot. The tenant is
wholly-owned by Koito Manufacturing Co. Limited, a Japanese multi-national listed on the Tokyo
Stock Exchange.

The remaining lease term of 14.6 years provides sustainable income and the current rent provides
potential for some reasonable uplift at rent review time. The board of directors of Atlantic Leaf (the
"Board") considers the Transaction to be good value considering the strong covenant and property
fundamentals.

SALIENT TERMS OF THE TRANSACTION

The purchase consideration (excluding transaction related costs) for the Transaction is GBP 11,890,000
(the "Purchase Consideration"). The Purchase Consideration and transaction related costs will be
settled with existing cash reserves, however the intention is to bring in external debt funding at a later
date. Further, it is intended that additional equity could be raised at an appropriate time in the future to
replenish Atlantic Leaf's cash reserves used to fund this acquisition.

All conditions precedent relating to the Transaction have been completed. The Seller has provided
normal warranties and indemnities for a transaction of this nature.

DETAILS OF THE PROPERTY

Key information regarding the Property is set out below:

Property location                          Droitwich Spa, United Kingdom
Property valuation                         GBP 11,890,000
Sector                                     Industrial
Tenant                                     Koito Europe Limited
Rentable area                              177,694ft2 (16,508m²)
Rental (p.a.)                              GBP 824,500
Rental per square metre                    GBP 49.95
Rental per square foot                     GBP 4.64
Lease term remaining (years)               14.6 (9.6 to the tenant break option)
Valuation net initial yield                6.5%
Estimated transaction related costs        GBP 850,000

Stamp duty land tax payable in the United Kingdom of approximately GBP 594,000 is the largest
component of estimated transaction costs. The Purchase Consideration attributed to the Property is
considered to be the fair market value, as determined by the Board. The Board is not independent and
its members are not registered as professional valuers or as professional associate valuers in terms of
the Property Valuers Profession Act, No 47 of 2000.

FINANCIAL INFORMATION

Set out below is the financial forecast of Atlantic Leaf's acquisition of the Property (the "forecast") for
the nine months ending 28 February 2020 and the year ending 28 February 2021 (the "forecast
period").

The forecast has been prepared on the basis that the effective date of the Transaction was 23 May 2019
and that it includes forecast results for the duration of the forecast period.

The forecast, including the assumptions on which it is based and the financial information from which
it has been prepared, is the responsibility of the directors of the Company. The forecast has not been
reviewed or reported on by independent reporting accountants or the auditors of the Company.

The forecast presented in the table below has been prepared in accordance with the Company's
accounting policies, which are in compliance with International Financial Reporting Standards, and
represent only the forecast income from the Transaction.
                                                                Forecast for the       Forecast for the
                                                               9 months ending            year ending
                                                                     28-Feb-20              28-Feb-21
                                                                           GBP                    GBP
   Property rental                                                      636 397                 824 500
   Other operating expenses (excluding debt                             (67 106)                (86 941)
   financing costs)
   Profit before taxation                                               569 291                 737 559
   Taxation                                                                   -                       -
   Profit for the period                                                569 291                 737 559
   Distributable earnings                                               569 291                 737 559


The forecast incorporates the following material assumptions in respect of revenue and expenses:
1. Rental income comprises contracted revenue based on the existing lease agreement including
    stipulated increases, all of which are valid and enforceable. There is no uncontracted revenue. It is
    also assumed that there will be no unforeseen economic factors that will affect the lessee's ability
    to meet their commitments in terms of existing lease agreement.
2. Other operating expenses include expenditure which has been forecast by management on a line-
    by-line basis based on management's expectations. This expenditure excludes any forecasted debt
    financing costs.
3. The Property is recognised at cost being the Purchase Consideration plus transaction costs and it
    is assumed that no impairment is recognised.

CATEGORISATION OF THE TRANSACTION

The Transaction is classified as a category 2 transaction in terms of paragraph 9.5(a) of the JSE Listings
Requirements and accordingly does not require approval by Atlantic Leaf's shareholders.

Atlantic Leaf holds a primary listing on Main Board of the Johannesburg Stock Exchange Limited and
a secondary listing on the Official Market of the Stock Exchange of Mauritius Ltd ("SEM").

SUPPLEMENTARY INFORMATION ON THE DISPOSAL OF RETAIL WAREHOUSE AND INDUSTRIAL PROPERTY PORTFOLIO

Shareholders are referred to the announcement released on SENS on 23 April 2019 relating to the
disposal of Atlantic Leaf's 45.02% interest in the LMP Retail Warehouse JV Property Unit Trust 
(the "Unit Trust"). Atlantic Leaf's equity accounted profit from the Unit Trust for the year ended 
28 February 2019 amounted to GBP 2,663,929 (2018: GBP 1,805,566). This information was extracted
from Atlantic Leaf's summarised results of the audited financial statements for the year ended 
28 February 2019.


By order of the Board

24 May 2019

For further information please contact:

South African Sponsor
Java Capital                                                                         +27 11 722 3050
Company secretary
Ocorian Secretaries (Jersey) Limited                                                +44 1534 507000
SEM authorised representative and Sponsor
Perigeum Capital Ltd                                                                   +230 402 0890
This notice is issued pursuant to the JSE Listings Requirements, SEM Listing Rule 15.24 and the
Mauritian Securities Act 2005. The Board accepts full responsibility for the accuracy of the information
contained in this announcement.

Date: 24/05/2019 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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