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ATLANTIC LEAF PROPERTIES LIMITED – Acquisition of industrial & retail warehouse property portfolio based in United Kingdom withdrawal of cautionary

SENS announcement for JSE listed company: ALP
                        

ALP 201709120015A
Acquisition of industrial & retail warehouse property portfolio based in United Kingdom, withdrawal of cautionary

Atlantic Leaf Properties Limited
(Incorporated in the Republic of Mauritius)
(Registration Number: 119492 C1/GBL)
SEM share code: ALPL.N0000
JSE share code: ALP
ISIN: MU0422N00009
www.atlanticleaf.mu (“Atlantic Leaf” or the “Company”)

ACQUISITION OF INDUSTRIAL AND RETAIL WAREHOUSE PROPERTY PORTFOLIO BASED IN THE UNITED KINGDOM
AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

INTRODUCTION

Shareholders are advised that, on 11 September 2017, Atlantic Leaf, through its wholly-owned
subsidiary Austen Limited (collectively, “Atlantic Leaf”), concluded agreements to acquire 45.02% of
the units in LMP Retail Warehouse JV Property Unit Trust (the “Unit Trust”) which holds a portfolio
of 11 retail warehouse and industrial properties in the United Kingdom leased to DFS Trading Limited
(the “Portfolio”) as well as 50% of the shares in LMP Retail Warehouse JV Management Limited (the
“Manco”), the management business that manages the Portfolio from LVS II Lux X S.A.R.L (the
“Seller”) (the “Transaction”).

RATIONALE FOR THE TRANSACTION

The acquisition of an interest in the Portfolio is consistent with Atlantic Leaf’s strategy of investing in
high quality, investment grade real estate assets which deliver predictable and defined returns for
investors through long term leases underpinned by quality tenants.

The other unitholder and JV partner is LMP Retail Warehouse JV Holdings Ltd (“LMP”), a UK-focused
property investment company. LMP has been involved in the Portfolio for a number of years and has a
comprehensive understanding of the underlying assets.

The Portfolio has a net internal area of 436,615 square feet (40,563m2) and is made up of prime assets,
including eight freehold and three long leasehold properties, located in prime micro locations
throughout the United Kingdom (excluding Northern Ireland).

The properties are fully let to DFS Trading Limited, a subsidiary of DFS Furniture plc, a company listed
on the London Stock Exchange and the United Kingdom’s largest upholstered furniture designer,
manufacturer and retailer.

All properties have coterminous, fully repairing and insuring (FRI) leases, expiring in March 2030,
providing an unexpired lease term of approximately 12.6 years (taking the overall Atlantic Leaf
portfolio WAULT from 11.3 – 11.6 years). The total rental income of the Portfolio is GBP 8,380,472
per annum equating to a weighted average of GBP 19.19 per square foot and is subject to upwards-only
five yearly open market rent reviews.

SALIENT TERMS OF THE TRANSACTION

Under the terms of the Transaction agreements, Atlantic Leaf will acquire the Seller’s 62.75% interest
in the Unit Trust and simultaneously sell 17.73% of those units to LMP, resulting in Atlantic Leaf’s
45.02% ultimate interest in the Unit Trust. The terms of the back-to-back sale arrangements with LMP
are consistent with the initial unit purchase arrangements with the Seller. Atlantic Leaf views LMP
increasing their holding to a level similar to that of Atlantic Leaf and on the same terms as an
endorsement of the valuation and the overall Transaction.

Atlantic Leaf is acquiring the units in the Unit Trust (and the shares in the Manco) based on a Portfolio
value of GBP 104.5 million. Atlantic Leaf will acquire the Seller’s units in the Unit Trust for an ultimate
price (post the back to back sale arrangements with LMP) equivalent to 45.02% of the net assets in the
Unit Trust (and the Manco) at the date of completion of the Transaction (which is expected to be 22
September 2017) (the “Completion Date”), equating to approximately in aggregate GBP 24.24 million
(the “Purchase Consideration”) which will be settled through cash.

The Manco performs the strategic asset management function for the Unit Trust, and the shareholder
agreement in the Manco provides for a 50:50 deadlock voting arrangement in matters relating to the
Unit Trust. The Manco does not derive any income from the provision of these services, its purpose is
focused on effecting the JV decision making structure.

The cash used to discharge the Purchase Consideration will be raised through a private placement of
new ordinary shares in the Company, details of which will be announced in due course (“private
placement”).

Vukile Property Fund Limited (“Vukile”) has pre-committed to apply for up to GBP 25 million worth
of Atlantic Leaf shares in the relevant private placement at a price not lower than GBP 1.015 per share,
against a pre-commitment fee of GBP 500,000 (2% of maximum commitment amount) payable by
Atlantic Leaf to Vukile. Atlantic Leaf has agreed that Vukile shall be allocated new shares worth no
less than GBP 23 million pursuant to its pre-commitment.

By Vukile complying with its obligations in terms of the pre-commitment, the private placement will
possibly result in Vukile increasing its shareholding in Atlantic Leaf past the 30% threshold that would
result in Vukile being required to make a mandatory offer to the remaining shareholders of the Company
in terms of the Mauritian Securities (Takeover) Rules 2010.

Apart from the requirement to raise sufficient equity to fund the Purchase Consideration by way of a
private placement of new shares, there are no outstanding conditions to completion and the Seller has
provided normal warranties and indemnities for a transaction of this nature. These have been
underwritten with warranty and indemnity insurance.

The effective date of the Transaction correlates with the Completion Date (which is expected to be 22
September 2017).

DETAILS OF THE PORTFOLIO

Key property information of the Portfolio is set out below:

Property Geographical location Sector GLA (sq. ft)
1 Birmingham West Midlands Retail Warehouse 25 770
2 Bristol South West Retail Warehouse 20 398
3 Carlisle DFS North West Retail Warehouse 21 554
4 Carlisle Wickes North West Retail Warehouse 23 401
5 Gateshead North East Retail Warehouse 28 137
6 Glasgow Scotland Retail Warehouse 38 705
7 Preston North West Retail Warehouse 35 903
8 Sunderland North East Retail Warehouse 24 751
9 Swindon South West Retail Warehouse 20 654
10 Doncaster Yorkshire & Humber Industrial 175 842
11 Nottingham East Midlands Industrial 21 500

The aggregate transaction costs payable are approximately GBP 450,000, comprising mainly legal and
due diligence costs. The Purchase Consideration payable for the Portfolio 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.

FINANCIAL INFORMATION

Set out below is the financial forecast of Atlantic Leaf’s 45.02% share in the Unit Trust (the “forecast”)
for the five and a half months ending 28 February 2018 and the year ending 28 February 2019 (the
“forecast period”).

The forecast has been prepared on the assumption that the effective date of the Transaction is 15
September 2017 and on the basis 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 auditors.

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
5 1/2 months year
ending ending
28-Feb-18 28-Feb-19
Earnings from Unit Trust 1 250 105 2 727 501
Other operating expenses including transaction costs (519 294) (151 186)
Profit before taxation 730 811 2 576 315
Taxation (125 933) (272 891)
Profit for the period 604 878 2 303 424
Add back: Transaction costs 450 000 –
Distributable earnings 1 054 878 2 303 424

The forecast incorporates the following material assumptions in respect of revenue and expenses:
1. The forecast is based on information derived from the management accounts, budgets, and rental
contracts provided by the Seller.
2. The investment in the Unit Trust is accounted for as a JV according to the equity method of
accounting whereby the Company recognises its share of the Unit Trust’s net profits, comprising
of Atlantic Leaf’s 45.02% share of gross rental income less senior debt costs and other expenses
incurred at the Unit Trust level.
a. Gross rental income comprises contracted revenue only, which is based on existing lease
agreements including stipulated increases, all of which are valid and enforceable. It is
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 agreements.
b. Senior debt amounts to approximately 50% of the Portfolio value with a cost of debt of
approximately 3.46% p.a (Libor plus 2,75% plus amortised finance costs).
c. Other expenses includes operating expenditure which has been forecast by management on a
line-by-line basis based on management’s review of historical expenditure, where available,
and discussion with the property manager.
3. The investment is recognised at cost being the Purchase Consideration and it is assumed that no
impairment is recognised.

REVISION TO DISTRIBUTION GUIDANCE

Atlantic Leaf’s 45.02% share in the Unit Trust is being acquired at an attractive yield of 7.51% on gross
asset value. The Unit Trust is geared at 50% with a cost of debt of approximately 3.46% p.a. and Atlantic
Leaf’s cash on cash return will be in the order of 9.33% after taking all company expenses and taxation
into account.

Accordingly, when included in the full income projection of Atlantic Leaf and with the Transaction
funding taken into account, the distribution guidance for the year ending 28 February 2018 is revised
upwards from 9.0 to 9.1 GBP pence per share. This 9.1 GBP pence distribution would represent a 7%
increase over the prior financial year. The revised distribution guidance has not been reviewed or
reported on by independent reporting accountants or auditors and is the responsibility of the directors
of the Company.

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. The
Transaction constitutes an undertaking in the ordinary course of business of Atlantic Leaf and therefore
does not fall under the scope of Chapter 13 of the Listing Rules of the Stock Exchange of Mauritius Ltd
(“SEM”).

AVAILABILITY OF INVESTOR PRESENTATION

Further information on the Transaction can be found in an investor presentation available on the
Company’s website www.atlanticleaf.mu.

WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

Atlantic Leaf shareholders are referred to the previous cautionary announcement, published on 31 August 2017,
and are advised that following the release of this announcement, caution is no longer required to be
exercised by Atlantic Leaf shareholders when dealing in their shares in the Company.

Atlantic Leaf has primary listings on both the Official Market of the SEM and on the Main Board of
the JSE Limited.

By order of the Board.

12 September 2017

For further information please contact:

South African JSE Sponsor
Java Capital +27 11 722 3050
Corporate secretary
Intercontinental Trust Limited +230 403 0800
SEM authorised representative and Sponsor
Perigeum Capital Ltd +230 402 0890

This notice is issued pursuant to the JSE Listings Requirements, SEM Listing Rule 11.3 and the
Mauritian Securities Act 2005. The Board of Directors of Atlantic Leaf Properties Limited accepts full
responsibility for the accuracy of the information contained in this announcement.

Date: 12/09/2017 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (‘JSE’).
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.

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