Shoprite and Equites start R4.1bn joint venture
Retailer will transfer a distribution centre and land to the deal with the property fund.
South Africa-based retail giant Shoprite Holdings and specialist high-end warehouse owner Equites Property Fund have established a R4 billion joint venture property company to house a R2 billion portfolio of distribution centres and associated undeveloped land in Brackenfell in the Western Cape and Centurion in Gauteng.
The joint venture will manage this logistics portfolio and will undertake future property acquisition and development opportunities as they arise with Equites as the developer.
Equites will inject R2.1 billion in cash into the joint venture, in exchange for a 50.1 percent equity stake in the joint venture property company. Shoprite will hold a 49.9 percent stake in the venture.
The joint venture property company will then acquire the Cilmor distribution centre and the associated undeveloped land for R1.2 billion cash.
The joint venture property company and Shoprite Checkers will conclude "triple net" 20 year lease agreements for the Brackenfell, Cilmor and Centurion distribution centres. The joint venture property company will manage the portfolio, and it will also serve as a platform for the development of the undeveloped land, as well as future property acquisition and development opportunities.
Shoprite said the deal would optimise return on invested capital; release of capital to be deployed into higher yielding retail projects and technology; provide operational and capital flexibility; and result in a partnership with a best-in-class logistics property company.
The properties involved are a logistics campus, two modern distribution centres and undeveloped land. The portfolio did not yet generate any rental profits, as it was being utilised for operational purposes.
Shoprite Checkers intends to retain its shares in the joint venture property company. The initial yield on the leases would be 7.5 percent and the rental would escalate at a rate of 5 percent each year.
In any future development of the land, Equites would be appointed as the developer and the joint venture property company will fund the development.