| Mon 5 Sep 2011, 8:00 | | BCK - Blackstar - Real Estate Acquisition |
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BCK
BCK
BCK - Blackstar - Real Estate Acquisition
Blackstar Group SE
Previously Blackstar Group PLC
(Incorporated in England and Wales)
(Company number SE 30)
(registered as an external company with limited liability in the Republic of
South Africa under registration number 2011/008274/10)
Share code: BCK
ISIN: GB00B0W3NL87
("Blackstar")
Real Estate Acquisition
Introduction
Building on Blackstar`s successful partnership with Litha Healthcare Group
Limited ("Litha"), in which Blackstar owns 39% of the issued share capital,
Blackstar, through its wholly-owned subsidiary, Blackstar Real Estate (Pty)
Limited ("BRE"), is pleased to announce that it has entered into an agreement to
purchase a commercial property (the "Property`) in Midrand, Gauteng, South
Africa for R58 million (the "Property Transaction"). The property will be held
through a new property holding company ("Newco") with BRE owning 70% of the
ordinary shares and Litha owning 30% of the ordinary shares, of Newco. The
Property will be occupied by Litha and will provide operating space for a large
portion of Litha`s operations within Gauteng.
Lease Agreement
Simultaneously with the Property Transaction, Newco has entered into a triple
net lease agreement with Litha Medical (Pty) Limited ("Litha Medical"), a major
operating subsidiary of Litha. The material terms of the transaction are as
follows:
- The lease is for a period of 12 years commencing on the date of transfer of
the Property Transaction;
- Litha Medical has an irrevocable option to renew the lease at the end of
the initial period for a further period of 3 years;
- the monthly rent payable by Litha Medical to Newco during the initial
period will be R460,000 excluding VAT, escalating at 8% per annum, equating
to an initial net yield of 9.5%. The rent will be reviewed on or before the
10th anniversary of the commencement date.
- Newco has granted Litha Medical a right of first refusal to purchase the
Property on the same terms and conditions as are offered to Newco by any
interested third party purchaser during the period of the lease.
Blackstar has secured R45 million of debt funding from Rand Merchant Bank
("RMB") to be held in Newco over a ten year period with the interest rate fixed
over the period. The debt funding will amortise to zero over the ten year period
with the net rent being applied against the interest and capital payments. The
debt funding equates to 78% of the total purchase price of the Property. The
remaining funding will be provided by Blackstar and Litha or their respective
subsidiaries in proportion to their effective ordinary shareholding in Newco.
Blackstar will provide initial funding of R10 million into Newco.
Benefits for Litha
The lettable area of the Property comprises 10,300 square metres and will be
used to consolidate a large part of Litha`s operations within Gauteng. The
consolidation will produce rental cost saving and additional efficiencies to the
group and is in line with its strategy of utilising shared services across the
group to extract synergies.
Blackstar`s Investment Rationale
Blackstar believes that property transactions of this nature make attractive
investment propositions as a significant amount of debt funding can be used
against a solid asset underpin with known cash flows. The debt repayments can be
matched against the future cash flows which will be generated by the rental
streams up until maturity creating a largely cash and tax neutral investment
with the debt being totally repaid over the lease period.
Following the Property Transaction, Blackstar will have gross property assets of
R106 million which offers the Company exposure to the South African commercial,
retail and industrial real estate sectors.
For further information contact:
Blackstar
John Kleynhans +352 402 505 427
Collins Stewart Europe (Nomad and Broker)
Limited
Matt Goode +44 (0) 20 7523 8350
5 September 2011
London
JSE Sponsor: PSG Capital (Pty) Limited
AIM nominated adviser and broker: Collins Stewart Europe Limited
Legal adviser: Werksmans Attorneys
Debt Provider: Rand Merchant Bank
Date: 05/09/2011 08:00:02 Produced by the JSE SENS Department.
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