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ATLANTIC LEAF PROPERTIES LIMITED - Profitable disposal of an industrial property in the United Kingdom and business update

Release Date: 24/02/2020 12:00
Code(s): ALP     PDF:  
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Profitable disposal of an industrial property in the 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
www.atlanticleaf.mu
(“Atlantic Leaf” or the “Company”)


PROFITABLE DISPOSAL OF AN INDUSTRIAL PROPERTY IN THE UNITED KINGDOM AND BUSINESS UPDATE


INTRODUCTION

Shareholders are advised that, on 21 February 2020, Atlantic Leaf concluded an agreement (the
“Transaction Agreement”) to dispose of its wholly-owned subsidiary Hyder Limited (“Hyder”) which
holds an industrial property in Runcorn, United Kingdom (“UK”) leased to DHL Supply Chain Limited
(the “Property”) to Elite Logistics Properties (the “Buyer”) (the “Transaction”).

RATIONALE FOR THE TRANSACTION AND USE OF PROCEEDS

The Property is the sole property asset held by Hyder. The board of directors of Atlantic Leaf (the
“Board”) considered that it was an opportune time to dispose of the Property based on its position
within the valuation cycle, and the value to be gained from the Property’s pending rent review.

Based on the Property’s implied sale price of GBP 34.0 million, the Transaction will realise a profit on
sale of GBP 4.2 million. This demonstrates a common theme in the current market where quality assets
are achieving selling prices in excess of independent valuations. The Transaction is also consistent with
Atlantic Leaf’s track record of being able to sell investments at prices exceeding book values. The
Property has delivered an overall IRR of over 16% after tax since it was acquired in November 2016.

Atlantic Leaf intends to redeploy the majority of the net sale proceeds into other industrial property
investment opportunities, and to use a portion to reduce debt in line with the Company’s strategy of
gradually reducing its loan-to-value ratio.

SALIENT TERMS OF THE TRANSACTION

The Company will dispose of the entire issued share capital of Hyder for a net consideration of
approximately GBP 20.2 million (the “Estimated Purchase Consideration”) at the date of completion
of the Transaction (the “Completion Date”), which will be received in cash. The Estimated Purchase
Consideration will be adjusted upwards or downwards based on the actual net asset value of Hyder as
at the Completion Date, and is based on an underlying property valuation of GBP 34.0 million less the
outstanding debt owed by Hyder to Aviva Commercial Finance Limited of approximately GBP 13.9
million (the “Outstanding Debt”) and other ancillary adjustments.

The Transaction agreement contains undertakings, warranties and indemnities provided by the
Company which are normal for a disposal of this nature. The effective date of the Transaction correlates
with the Completion Date, which is expected to be 28 February 2020.
DETAILS OF THE PROPERTY

The Board’s allocated pricing for the Transaction uses the key property information set out below:

                                                                                          Valuation
                                                                Weighted average           as at 21
                                                      GLA        rental per sq. ft      February 2020
 Location        Tenant             Sector           (sq. ft)                (GBP)               (GBP)
 Runcorn, UK     DHL Supply         Logistics        635,656                  3.20           34,000,000
                 Chain Limited      warehouse

The aggregate transaction costs payable is approximately GBP 495,000. The Estimated Purchase
Consideration receivable for Hyder is considered to be the fair market value based on the value of the
underlying Property, 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.

The profit attributable to Hyder for the 6 months ended 31 August 2019 was GBP 594,865. Hyder’s net
asset value as at 31 August 2019 was GBP 18,103,555 based on a Property valuation of GBP
31,980,000. This information has not been audited and was extracted from the Company’s interim
results for the six months ended 31 August 2019 as announced on SENS and on the website of the Stock
Exchange of Mauritius Ltd (“SEM”) on 15 October 2019 (the “October 2019 Announcement”).

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.

BUSINESS UPDATE

A key focus for the 2021 financial year is re-letting the space at the Peterborough property, previously
tenanted by Thomas Cook Group UK Limited (“Thomas Cook”). Thomas Cook occupied
approximately 65% of the floor space, with the remainder let to Bauer Consumer Media Limited which
has an unexpired lease term of over three years. Thomas Cook’s liquidators occupied the premises and
paid rent until 31 January 2020, therefore the vacancy will have a small impact on earnings for the 2020
financial year.

Marketing of the space began in December 2019, and it was determined that the occupier market is
strongest for mid-sized lettings. To meet this demand, the space of roughly 110,000 ft2 will be converted
into a multi-let format, designed to take 6 - 8 occupiers. We have confidence in the quality of the
building and its re-letting prospects, and interest from potential occupiers has been encouraging to date.

The planning phase is in progress and the space is expected to be ready by the middle of the next
financial year. Fairly significant capital expenditure will be required for the refurbishment project
however the Board is confident that this approach will generate the greatest value. The Company will
have sufficient cash reserves to fund this, especially given the proceeds from the profitable disposal of
Hyder.

DISTRIBUTION FORECAST FOR THE 2020 FINANCIAL YEAR

As outlined in the October 2019 Announcement, the Company has been targeting a distribution for the
2020 financial year of 10 GBP pence per share. However, it was also noted that this could be affected
by the result of some key asset management initiatives, including the outcome of the Thomas Cook
liquidation.

Shareholders are advised that the full year distribution is likely to be slightly lower, at approximately
9.5 GBP pence per share (ahead of the 9.3 GBP pence per share distribution in the prior year) as a result
of the decision to retain some reserves for capital expenditure and debt reduction as noted earlier. The
final distribution for the 2020 financial year will be included as part of the annual results announcement
in April 2020.

The have been no other material changes to the key assumptions to the distribution forecast as contained
in the October 2019 Announcement.

The distribution forecast contained in this announcement has not been reviewed or reported on by the
Company’s auditors.

While the distribution forecast is lower, the Board is naturally pleased with the significant profit realised
on the sale of the Runcorn property.

Atlantic Leaf has a primary listing on the Main Board of the JSE Limited (“JSE”) and a secondary
listing on the Official Market of the SEM.

By order of the Board

24 February 2020

For further information please contact:

South African sponsor
Java Capital                                                                           +27 11 722 3050
Corporate 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 Rule 5(1)
and Rule 9(2) of the Securities (Disclosure Obligations of Reporting Issuers) Rules 2007. The Board
accepts full responsibility for the accuracy of the information contained in this announcement.

Date: 24-02-2020 12:00:00
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