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Acquisition of a retail portfolio in Portugal
VUKILE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE share code: VKE NSX share code: VKN
Bond company code: VKEI
(Granted REIT status with the JSE)
("Vukile" or the "Company")
ACQUISITION OF A RETAIL PORTFOLIO IN PORTUGAL
1. Introduction
Shareholders are advised that Vukile's 99.5% held subsidiary, Castellana Properties SOCIMI, S.A. ("Castellana"),
has concluded a share purchase agreement (the "SPA") with Suitable World, Unipessoal, Lda, a Portuguese company
ultimately owned by Harbert European Real Estate Fund V LP, which is a European real estate fund sponsored by
Harbert Management Corporation (collectively, the "Seller"), pursuant to which Castellana will acquire a high-
quality, blue-chip tenanted shopping centre portfolio, comprising three assets located in Portugal (collectively, the
"Properties") (the "Transaction").
The Seller will sell the entire issued share capital of each of the three property owning companies - namely, Rio Sul
- Centro Comercial, S.A., Loureshopping - Centro Comercial, S.A. and 8ª Avenida - Centro Comercial, S.A
(collectively, the "Companies") – to Castellana.
Castellana is entitled to assign its rights under the SPA to a nominee. Castellana will nominate a newly incorporated
subsidiary ("Newco") as the purchaser. Eighty per cent (80%) of the shares in Newco will be held by Castellana and
twenty per cent (20%) of the shares in Newco will be held by RMB Investments and Advisory Proprietary Limited
("RMBIA"). RMBIA is a company incorporated in the Republic of South Africa within the FirstRand Limited Group.
2. RioSul – Lisbon
RioSul is a well located and highly visible shopping centre in Lisbon. Located 20 minutes from central Lisbon, the
centre was opened in 2006 and is a two-story shopping centre in southern Lisbon in Seixal, with good visibility and
access from the A2 highway. The centre comprises a total gross lettable area ("GLA") of 46 006m², of which
Castellana will be acquiring 23 515m², and includes national tenants such as Zara, Bershka, Pull&Bear, Stradivarius,
Ikea, Foot Locker and C&A amongst others, as well as a strong food offering and cinema complex. The remaining
GLA of 22 491m² is anchored by a Continente Hypermarket, with a strong trading performance as well as other
smaller adjacent stores, which do not form part of the Transaction.
RioSul has a strong and loyal customer base, with an annual footfall of close to 8 million people and total annual
sales of c. €98 million. The centre is dominant in its catchment area and has a resident population of approximately
460 000 inhabitants within a thirty-minute drive. The South Bank of Lisbon is growing in both population and
purchasing power and has witnessed population growth of 5.5% from 2012 to 2022.
3. Loures – Lisbon
Loures is a well-located shopping centre located in the suburb of Loures in the north of Lisbon. The centre was
opened in 2005 and is a two-story shopping centre with good visibility and access from the A8 highway. The centre
comprises a total GLA of 44 745m², of which Castellana will be acquiring 29 398m², and includes national tenants
such as Zara, Bershka, Pull&Bear, Stradivarius, H&M, Foot Locker and C&A amongst others, as well as a strong
food offering and cinema complex. The remaining GLA of 15 747m² is anchored by a Continente Hypermarket, with
a strong trading performance as well as other adjacent stores which do not form part of the Transaction.
Loures Shopping Centre has an annual footfall of c. 6 million and total annual sales of €77 million.
The centre is dominant in its catchment area and has a resident population of approximately 116 000 inhabitants
within a ten-minute drive. The suburb of Loures is a growth node of greater Lisbon, exhibiting a growth rate of 13%
from 2011 to 2021. The area will benefit from a new metro station which will be integrated into the shopping centre,
set to open in 2026.
4. 8ª Avenida – Porto
8ª Avenida is the only shopping centre in São João da Madeira, an industrial and manufacturing town located
40 minutes south of Porto. The centre was opened in 2007 and is a two-story shopping centre, easily accessed from
the N1 highway. The centre comprises a total GLA of 28 923m², of which Castellana will be acquiring 21 170m² and
includes national tenants such as Lefties, Bershka, Pull&Bear, Stradivarius, Cortefiel and C&A amongst others, as
well as a strong food offering and cinema complex. The remaining GLA of 7 753m² is anchored by a Continente
Hypermarket, with a strong trading performance, as well as smaller adjacent stores which do not form part of the
Transaction.
8a Avenida boasts a footfall of 6 million people and total annual sales of c. €58 million.
The centre is dominant in its catchment area and has a resident population of approximately 260 000 inhabitants
within a twenty-minute drive.
5. Rationale
The Transaction is aligned with Castellana's strategy of acquiring dominant centres in regional cities and will
complement Castellana's existing retail portfolio. The Portuguese retail market is well supported by customers with
a strong shopping centre culture and is strengthened by the lack of high-street offerings in the country.
The Transaction offers an attractive entry point for Castellana into Portugal, spread across Lisbon and greater Porto
and increases Castellana's exposure to the Iberian Peninsula. The portfolio offers a compelling retail shopping centre
platform from which to build and grow Castellana´s Portuguese business. The Castellana management team already
has a deep understanding and significant experience in owning and managing shopping centres in Portugal, which
further supports Castellana's expansion into the region.
Portugal forms part of the Iberian and Southern European attractive growth story, with positive GDP growth in line
with Spain and low unemployment rates (c. 6%). The Portuguese economy has benefitted from high migration and
record tourism post-pandemic. The economy is likely to be further bolstered by the EU NextGen funds.
The portfolio offers low rents relative to market and strong sales ratios, presenting opportunities for growth in net
operating income in the medium to long term. Through Castellana´s active asset management approach, it is possible
to extract attractive growth from the centres over time.
6. Purchase Consideration and Closing
The aggregate purchase consideration for the Properties is EUR 176 500 000 (net of acquisition costs of
EUR 4 400 000) (the "Purchase Consideration") and will be settled by Newco in cash and discharged on the
Completion Date, as defined below.
The portfolio is being acquired at an initial net income yield of c. 9%. When applying the anticipated interest cost on
the proposed senior debt, we expect the portfolio to deliver a cash-on-cash yield of c. 10%.
Closing shall take place as soon as possible within 5 (five) business days of the satisfaction of the conditions precedent
(referred to below) (the "Completion Date"), but not earlier than 1 October 2024 nor later than the long stop date,
which unless otherwise extended, is the limit date for completion to take place. The long stop date is 3 (three) months
after the Completion Date.
The parties to the Transaction are working in good faith towards completion on 1 October 2024.
7. Funding
Newco will refinance an existing in-country asset-backed debt package of EUR 72 500 000 (representing an
approximate LTV of c. 38%) with existing lenders (the "Lenders"). The remaining EUR 104 000 000 of the
purchase consideration will be funded by a subscription for shares in Newco, of which 80% will be subscribed for
by Castellana, using existing cash resources of the Vukile group and 20% will be subscribed for by RMBIA.
8. Conditions Precedent
The Transaction is conditional on the approval by the Lenders of the re-finance of the existing in-country asset-
backed debt package, including a change of control of the companies and the release of the Seller from any liabilities
relating thereto. Castellana has received binding term sheets from the Lenders in this regard and the funding is only
subject to the finalisation of legal agreements.
9. Property specific information
Details of the Properties are set out in the table below:
Weighted Value attributed
average to the Property
rental per Purchase as at 31 May
Property Geographical *GLA m2 Consideration 2024
name location Sector (m2) (EUR/m2) (EUR) (EUR)
RioSul Lisbon Retail 23 515 23.50 75 000 000 75 779 000
Loures Lisbon Retail 29 398 17.80 55 205 838 65 437 000
8ª Avenida Porto Retail 21 170 19.60 46 294 162 48 262 000
*Represents NewCo's share of the GLA to be acquired
The Properties were valued in accordance with Royal Institution of Chartered Surveyors standards by Jones Lang
LaSalle Limited, an independent external property valuer.
10. Financial information
Set out below are the forecast rental and recovery income, net property income, net profit after tax and profit available
for distribution relating to the Properties (the "Forecast") for the 6 months ending 31 March 2025 and the 12 months
ending 31 March 2026 (the "Forecast Period").
The Forecast has been prepared on the assumption that the effective date is 1 October 2024 and on the basis that the
forecast 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 the Company's auditors.
The Forecast presented in the table below has been prepared in accordance with Vukile's accounting policies, which
are in compliance with International Financial Reporting Standards, and represents 100% of Newco's share of the
Properties to be acquired by Newco.
EUR Forecast for the 6 months Forecast for the 12 months
ending 31 March 2025 ending 31 March 2026
Rental and recovery income 13 328 693 24 172 400
Net property income 8 995 799 15 319 508
Net after tax profit 6 067 712 9 718 625
Profit available for distribution 6 067 712 9 718 625
The Forecast incorporates the following material assumptions in respect of revenue and expenses:
1. The Forecast is based on information derived from lease contracts, budgets and additional information
provided by the Seller.
2. The Forecast has been prepared on an aggregated basis for the Transaction only. It is assumed that the
Properties will not be disposed of during the Forecast Period.
3. Rental revenue has been forecast on a lease-by-lease basis.
4. Contracted revenue comprises rental and recovery income based on existing lease agreements, including
stipulated increases, all of which are valid and enforceable.
5. Near-contracted revenue comprises rental and recovery income from leases expiring during the Forecast Period
which are assumed to renew at current market rates, unless the lessee has indicated its intention to terminate
the lease. Such revenue is classified as near-contracted rental revenue from the date of expiry of the lease.
6. 88% of rental and recovery income for the Forecast Period is contracted. The remaining 12% of rental and
recovery income is near-contracted and represents renewals which have been forecast at current market rates.
7. The Forecast for the 12 months ending 31 March 2026 includes a temporary loss of income of
EUR 1 572 512.00 due to planned value add projects that will be completed during the period.
8. No fair value adjustment is recognised.
9. There will be no unforeseen economic factors that will affect the lessees' ability to meet their commitments in
terms of existing lease agreements.
11. Categorisation
The Transaction is classified as a Category 2 transaction in terms of the JSE Listings Requirements and accordingly
does not require Vukile shareholder approval.
9 September 2024
JSE sponsor NSX sponsor
Java Capital IJG Securities (Pty) Ltd
Date: 09-09-2024 10:15:00
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