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ATLANTIC LEAF PROPERTIES LIMITED - Acquisition of an industrial property based in Denby, United Kingdom and business update

Release Date: 26/08/2019 08:30
Code(s): ALP     PDF:  
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Acquisition of an industrial property based in Denby, United Kingdom and business update

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



Shareholders are advised that on 23 August 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 Gilbert House on Denby Hall Business
Park in Denby, United Kingdom (the "Property") from Garner Holdings Limited (the "Seller") (the


The Property is a brand-new distribution warehouse and consistent with the Company's primary
investment focus in industrial assets. This sector continues to benefit from increasing volumes in e-
commerce and logistics business. Atlantic Leaf’s industrial exposure by value is now 79%, up from
70% at the 2019 year-end.

The Property was built in 2019 to specifications required by modern logistics providers. Attractive
occupier features include eight loading docks, four drive-in doors, 12-metre-high eaves and two storeys
of office space. It is well-located in central England with the M1 motorway nearby and its situation on
Denby Business Park provides access to a large labour pool. Major occupiers in the area include Kuehne
+ Nagel, Arcadia Group, The Co-operative, Rolls Royce and SIG.

In addition to its strong property fundamentals, the new asset offers attractive long-term income. The
Lockwood Group Limited (the "Tenant") signed a 15-year lease on the Property in June 2019, subject
to 5-yearly upward only rent reviews. The Tenant is an established provider of logistics and
warehousing solutions in middle and northern England and has been consistently profitable, generating
significant revenue growth in the last two years.


The net purchase consideration (excluding transaction related costs) is GBP 8,698,800, being
GBP 9,250,000 less GBP 551,200 representing the principal rent which would have been received
pursuant to the leases but for the unexpired rent-free periods in the occupational lease (the “Net
Purchase Consideration”). The Net Purchase Consideration and transaction related costs will be
funded from a combination of existing cash reserves and by drawing down on an existing debt facility.
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, including
the assignment of all construction warranties given that this is a new building.


Key information regarding the Property is set out below:

Property location                                   Denby, Derby United Kingdom
Property valuation                                  GBP 8,960,000
Sector                                              Industrial
Tenant                                              The Lockwood Group Limited
Rentable area                                       108,631ft2 (10,092m²)
Rental (p.a. after expiry of rent-free periods)     GBP 597,470
Rental per square metre                             GBP 59,20
Rental per square foot                              GBP 5,50
Lease term remaining (years)                        14.8
Valuation net initial yield                         6.35%
Estimated transaction related costs                 GBP 642,000

Stamp duty land tax payable in the United Kingdom of approximately GBP 452,000 is the largest
component of estimated transaction costs. The Net Purchase Consideration attributed to the Property is
considered to be the fair market value, as determined by the board of directors of Atlantic Leaf (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.


Set out below is the financial forecast of Atlantic Leaf's acquisition of the Property (the "forecast") for
the period 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 August 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
                                                                  period ending              year ending
                                                                      28-Feb-20                28-Feb-21
                                                                           GBP                       GBP
   Property rental                                                      308 750                   591 637
   Other operating expenses (excluding transaction costs)               (25 891)                 (54 051)
   Operational net income                                               282 859                   537 586
   Financing costs                                                      (72 045)                (138 056)
   Profit after tax                                                     210 814                   399 530
   Distributable earnings                                               210 814                   399 530
The forecast incorporates the following material assumptions in respect of revenue and expenses:
1. Property rental income has been calculated by straight lining the net rent due from the Tenant over
    the remaining period of the lease and takes into account the rent-free periods originally granted by
    the Seller.
2. 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.
3. Other operating expenses include expenditure which has been forecast by management on a line-
    by-line basis based on management’s expectations.
4. Financing costs include senior debt drawn down on the date of the Transaction at an amount equal
    to 48% of the Property value with a cost of debt of approximately 3.21% p.a. (Libor plus a margin
    of 1.8% plus amortised finance costs).
5. The Property is recognised at cost being the Net Purchase Consideration plus transaction costs and
    it is assumed that no impairment is recognised.


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


The following information has not been reviewed or reported on by independent reporting accountants
or the auditors of the Company.

The Transaction is the fifth industrial property asset acquired by Atlantic Leaf in the 2020 financial year
to date. In this regard shareholders are referred to the announcement released on SENS and the SEM
on 24 May 2019 detailing the acquisition of an industrial property situated in Droitwich, and salient
details of the three remaining properties, that were below the category 2 transaction threshold, are
included below:

    1. An industrial distribution warehouse in Manchester was purchased for GBP 4,33 million
       excluding transaction costs (being GBP 4,45 million less GBP 118,600 of unexpired rent-free
       top ups allowed to Atlantic Leaf by the seller) on 6 June 2019 at a valuation net initial yield of
       5,9%. It is located in Trafford Park, one of Europe’s largest industrial estates and the most
       established and recognised industrial and distribution location in the North West of England.
       Kerry Logistics (UK) Limited has a lease at the property with an unexpired term of 4.6 years.
       The tenant is a subsidiary of Kerry Logistics Network Limited, a global supplier of freight and
       warehousing solutions, listed in Hong Kong.

    2. A multi-unit industrial distribution property in Leeds was purchased for GBP 5,8 million
       excluding transaction costs on 13 June 2019 at a valuation net initial yield of 7,4%. It is made
       up of five individual warehouse units located on the Bruntcliffe Industrial Estate, in close
       proximity to the M62 motorway. The estate is a strategic supply point for business in Leeds,
       Bradford and Wakefield. Cassellie Limited has co-terminus leases on all five units, with
       unexpired lease terms of 9.8 years. The tenant is a profitable and growing business-to-business
       trader of custom bathroom products, owned by Mobility Group Limited.

    3. An industrial distribution property in Wolverhampton was purchased on 2 August 2019 for
       GBP 6,60 million excluding transaction costs, at a valuation net initial yield of 7,4%. It is a
        fulfilment and distribution centre, well situated in the West Midlands near the M6 and M54
        motorways. The location is ideal for logistics operations, with valuable links to Birmingham,
        Manchester and the South West. It is let to Assa Abloy Limited with an unexpired lease term
        of 3.9 years. The tenant is a subsidiary of Assa Abloy AB, the global market leader in access
        and locking solutions, listed in Stockholm.

The five acquisitions completed this year were financed with the proceeds from the disposal of the DFS
retail portfolio on 23 April 2019 (the "Disposal") (refer to the Company's announcement released on
SENS and the SEM on 23 April 2019 for further information) and by drawing down on a new 3-year
revolving credit facility with Lloyds Bank Plc (the "Facility"), secured against the five properties. The
Facility terms negotiated are attractive with a total interest-only facility available of GBP 22 million at
a margin of 1.80% and loan-to-value ratio limit of 48%. The Facility also includes the option to extend
the term by up to two years (with lender's consent).

With the completion of the latest acquisition, Atlantic Leaf has fully redeployed the proceeds from the
Disposal into UK industrial assets.

Further details of Atlantic Leaf's property portfolio will be included in Atlantic Leaf's financial results
for the 6-months ending 31 August 2019, which are anticipated to be released in mid-October 2019.

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

By order of the Board

26 August 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: 26/08/2019 08:30:00
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