» Acquisition of BVB REAL ESTATE S.R.L.

Acquisition of BVB REAL ESTATE S.R.L.

Posted on: 18 February 2013


Introduction

Shareholders are advised that, on 14 February 2013, NEPI through its subsidiaries NE Property Cooperatief U.A. (“NEPI Coop”) and NEPI Investment Management S.A. (collectively, “the Purchasers”), concluded an agreement to acquire all the shares in and shareholder’s claim against BVB Real Estate from AIG/Lincoln Lakeview S.a.r.l (“AIG/LL” or “the Seller”) and to acquire the outstanding bank debt of BVB Real Estate from MKB Bank Zartkoruen Mukodo Reszvenytarsasag (“the Transaction”).

BVB Real Estate owns an A–grade office building situated in Bucharest, Romania, known as The Lakeview (“the property”).

Rationale for the Transaction

The Lakeview is a landmark A-grade office building consisting of offices and ground floor retail with a total GLA of 25 564 sqm and 485 parking bays. The Lakeview is located close to NEPI’s Floreasca Business Park in the emerging office corridor between Floreasca and Barbu Vacarescu Streets in the North East of Bucharest. The building is fully occupied with tenants including Alcon, Colgate-Palmolive, Huawei, Philips, PricewaterhouseCoopers and Royal Bank of Scotland. As indicated in the financial effects set out below, it is expected that the acquisition of the property will be earnings enhancing.

Salient Terms of the Transaction

The aggregate purchase price for all the shares in and shareholder’s claim against BVB Real Estate and outstanding bank debt is approximately EUR61.7 million, which will be settled in cash.

The effective date of the Transaction is 1 January 2013.

The purchase agreement for the Transaction contains warranties typical for acquisitions of this nature.

The Seller is in the process of changing the legal form of BVB Real Estate from a limited liability company to a joint stock company, a process which requires, amongst other things, the approval of MKB Bank Zartkoruen Mukodo Reszvenytarsasag.

The Transaction is subject to fulfilment of the following conditions precedent:

  • MKB Bank Zartkoruen Mukodo Reszvenytarsasag approving, in writing, the purchase agreement, the transactions set out in the purchase agreement and any ancillary agreements;
  • the Seller and Purchasers obtaining a non-objection decision from the Competition Council in Romania; and
  • the change in legal form of BVB Real Estate being completed.

The Transaction is expected to complete before 30 June 2013.

Details of the Property

The details of the property including the valuation, effective as at 1 January 2013 attributed to the property by the Company, are as follows:

Property descriptionThe Lakeview
RegionBucharest, Romania
SectorOffice
Weighted average rental per sqmEUR16.07
Rentable area (GLA)25 564 sqm
Purchase priceEUR61.7 million
ValuationEUR63.3 million

Financial Effects of the Transaction

The unaudited pro forma financial effects, which are presented in the table below, have been prepared for illustrative purposes only to provide information on how the Transaction may have impacted on the historical financial results of NEPI for the year ended 31 December 2012. Due to their nature, the unaudited pro forma financial effects may not fairly present NEPI's financial position, changes in equity, results of operations or cash flows after implementation of the Transaction. The unaudited pro forma financial effects are the responsibility of the directors of NEPI. The unaudited pro forma financial effects have not been reviewed or reported on by NEPI's external auditors.

The unaudited pro forma financial effects have been prepared in accordance with the accounting policies of NEPI that were used in the preparation of the audited financial results for the year ended 31 December 2012.

Before the TransactionAfter the TransactionChange after the Transaction (%)
Basic weighted average earnings per share (EUR cents) 28.48 28.95 1.65
Diluted weighted average earnings per share (EUR cents) 27.27 27.72 1.65
Distributable earnings per share (EUR cents) 25.95 27.45 5.78
Headline earnings per share (EUR cents) 22.93 23.40 2.05
Diluted headline earnings per share (EUR cents) 21.96 22.41 2.05
Net asset value per share (EUR) 2.83 2.83 -
Adjusted net asset value per share (EUR) 2.88 2.88 -
Net tangible asset value per share (EUR) 2.73 2.70 (1.09)
Weighted average number of shares in issue 116 238 121 116 238 121 -
Diluted weighted average number of shares in issue 121 391 646 121 391 646 -
Number of shares in issue for net asset value and net tangible asset value per share purposes 139 258 914 139 258 914 -
Number of shares in issue for adjusted net asset value per share purposes 144 362 152 144 362 152 -

Notes and assumptions:

  1. The amounts set out in the "Before the Transaction" column have been extracted, without adjustment, from the audited financial results for the year ended 31 December 2012.
  2. The Transaction is assumed to have been implemented on 1 January 2012 for basic weighted average earnings, diluted weighted average earnings, distributable earnings, headline earnings and diluted headline earnings per share purposes and on 31 December 2012 for net asset value, adjusted net asset value and net tangible asset value per share purposes.
  3. The amounts set out in the "After the Transaction" column were calculated by consolidating the results of NEPI for the year ended 31 December 2012 and the management accounts of BVB Real Estate for the year ended 31 December 2012, subject to the assumptions and adjustments set out below. The management accounts of BVB Real Estate have not been reviewed or reported on by reporting accountants or external auditors. However, the directors of NEPI are satisfied with the quality of the information:
    • 3.1. All the shares in and shareholder’s claim against BVB Real Estate and outstanding bank debt of BVB Real Estate from MKB Bank Zartkoruen Mukodo Reszvenytarsasag were acquired at the aggregate purchase price of approximately EUR61.7 million which is to be settled in cash.
    • 3.2. For the year ended 31 December 2012, BVB Real Estate earned consolidated historical net rental income of approximately EUR4.6 million, incurred non-property related expenditure of approximately EUR1.6 million and incurred interest on external bank debt of approximately EUR2 million. BVB Real Estate earned a consolidated profit before tax for the year ended 31 December 2012 of EUR1 million.
    • 3.3. It has been assumed that NEPI earned EUR0.5 million less in finance income as a result of settling the purchase price in cash.
    • 3.4. The additional distributable income which results from the Transaction is assumed to be earned evenly throughout the year ended 31 December 2012.
    • 3.5. Estimated transaction costs of EUR0.2 million were expensed in accordance with IFRS 3 Revised, (Business Combinations).
    • 3.6. The net asset value of BVB Real Estate as at 31 December 2012 was EUR8.2 million.
    • 3.7. The acquisition of BVB Real Estate has been accounted for under IFRS 3 (Revised), (Business Combinations) whereby trade and other receivables, trade and other payables, deferred taxation and goodwill have been recognised.
    • 3.8. An amount of EUR4.1 million was recognised in goodwill and as a deferred taxation liability.

Categorisation of the Transaction

The Transaction is classified as a category 2 transaction in terms of section 9.5(a) of the Listings Requirements of the JSE Limited is not subject to approval by NEPI’s shareholders.