Acquisition of investment property in Edinburgh,UK

Posted On Monday, 07 May 2018 15:09 Published by
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Shareholders are advised that MAS, through a wholly-owned subsidiary, MAS (IOM) Holdings Limited, has concluded a sale and purchase agreement (“SPA”) to acquire from New Uberior House Holding Limited.

The entire issued share capital of New Uberior House Limited, which owns two adjoining commercial buildings known as Princes Exchange and New Uberior House (together “the property”) in Edinburgh, Scotland (“the acquisition”) with effect from 3 May 2018. 

SALIENT TERMS OF THE ACQUISITION

The purchase price for the acquisition is GBP 71 million, or approximately EUR 80.5 million (“purchase price”), which has been settled in cash.  Bank debt of GBP 39 million, or approximately EUR 44.3 million, is being drawn against the property, which will result in a net equity investment of GBP 32 million, or approximately EUR 36.2 million, before acquisition costs.  The debt is for a term of 5 years at a margin of 1.5% over LIBOR.  It is the intention of the directors to fix the interest rate of a substantial portion of the debt.

The property comprises grade A office buildings with an aggregate gross lettable area of 14,718 square metres prominently positioned in the heart of the Exchange financial district of Edinburgh. The property also benefits from 175 basement car parking spaces.  The property is let to a single tenant, Bank of Scotland, over several leases, all of which expire in December 2025.  Bank of Scotland is a subsidiary of the Lloyds Banking Group PLC, a FTSE 100 listed bank. 

The current passing rent is GBP 4.15 million per annum, (at a weighted average rental of GBP 260.95 per square metre excluding the car park), which will be topped up by the vendor to GBP 4.20 million per annum (at a weighted average rental of GBP 264.65 per square metre excluding the car park) to reflect the anticipated settlement of outstanding rent reviews. This reflects a net initial yield of 5.82%. The annual net operating income of the property is GBP 4.1 million.

INVESTMENT RATIONALE

The acquisition represents a unique opportunity to grow the rental income of the property from current levels through active asset management.  The market in Edinburgh has a structural undersupply of grade A office space, compounded by growing demand and declining supply dynamics. This, together with the age of lease, presents the opportunity to re-gear what is considered to be an under-rented property at a higher rent-roll. The acquisition also provides the opportunity for MAS to further leverage its significant experience in the Edinburgh property market, having delivered on the award winning New Waverley mixed-use development comprising hotels, retail, residential and a c.19,000 square metre office building. 

The purchase price reflects the fair value attributed to the property as determined by the directors of MAS. The directors of MAS are not independent or registered as professional valuers or professional associate valuers in terms of the South African Property Valuers Profession Act 2000 or otherwise. The net operating income detailed above approximates the net profits attributable to the acquisition.

CONDITIONS PRECEDENT

As the SPA was signed and the acquisition exchanged and completed simultaneously, conditions precedent are not relevant to this transaction. 

CATEGORISATION OF THE ACQUISITION

The acquisition is categorised as a Category 2 transaction in terms of the JSE Listings Requirements and as such is not subject to shareholder approval.MAS is listed on the Main Board of the JSE and is listed and admitted to trading on the Euro MTF market of the Luxembourg Stock Exchange.

Last modified on Monday, 07 May 2018 15:24
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