Stenprop: Disposal of Bleichenhof
Shareholders are advised that earlier today, Kommanditgesellschaft Bleichenhof Grundstücksverwaltung GmbH & Co KG, a German partnership in which Stenprop holds a 94.9% interest (the “Seller”), entered into a transaction agreement (the “transaction agreement”) for the disposal of the leasehold of the property known as Bleichenhof in Hamburg (the “Bleichenhof property”) for a consideration of €160.15 million (the “disposal” or the “transaction”), as more fully described in paragraph 3 below and subject to the satisfaction or waiver of the conditions precedent set out in paragraph 4 below.
The disposal is classified as a Category 1 transaction for Stenprop pursuant to the JSE Listings Requirements and requires the approval of Stenprop’s shareholders. A circular (the “circular”) incorporating the notice of general meeting will be posted to shareholders in due course.
The disposal is in line with Stenprop’s strategy to become a 100% UK MLI business via the sale of all non-MLI properties in its portfolio and the reinvestment of the proceeds into UK MLI properties. As at 30 September 2019, approximately 44.6% of the Stenprop portfolio was made up of UK MLI estates. On completion of the disposal, assuming no further purchases of MLI estates, the MLI percentage of the portfolio will rise to 56% calculated based on Stenprop’s total property asset value.
The Bleichenhof property is the largest single asset in the Stenprop property portfolio, making up approximately 21% of the gross portfolio by value. It is a mixed-use property situated in the centre of Hamburg with a total lettable area of approximately 19,500 sq m of which currently 94% is let, generating a contractual rent of approximately €7.0 million per annum.
As at 30 September 2019, the property was valued at €151.7 million. Under the terms of the disposal for €160.15 million, Stenprop is required to complete the refurbishment works at the property which have been on-going since 2016. As at 30 September 2019, the additional capital expenditure required to complete these works was estimated at €8.0 million. The transaction therefore reflects a sales price €0.45 million above valuation. After deduction of transaction costs, loan breakage costs and taxes, Stenprop’s IFRS NAV is expected to decrease by approximately €2.3 million against the IFRS NAV reported at 30 September 2019. Following completion of the refurbishment works, the disposal will release net cash proceeds of approximately €62.8 million after transaction costs, the repayment of external debt and taxes. Stenprop has a beneficial ownership interest in the Bleichenhof property of 94.9%, which means its share of net cash proceeds is expected to be approximately €59.6 million.
Stenprop intends to use the net cash proceeds from the disposal to acquire additional UK MLI estates which meet the purchasing and return criteria of Stenprop and to repay debt.
Today the Seller entered into the transaction agreement for the sale of the leasehold on the Bleichenhof property to Projekt Palais Verwaltungs GmbH (the “Purchaser”), a vehicle beneficially owned by three German pension funds specialising in the provision of pensions to members of the medical sector in Germany, for a total purchase price of €160,150,000 (the “Purchase Price”). A maximum amount of €500,000 may be retained by the Purchaser and deducted from the Purchase Price to the extent that one of the tenants due to take possession of its lease in the next few weeks does not do so by 30 June 2019.
Completion of the transaction will occur within 10 business days of satisfaction of the last condition precedent described in paragraph 4 below when the Purchase Price (less the maximum retention amount of €500,000) will be paid. The transaction is expected to complete by 31 March 2020. The parties have agreed that if completion does not take place by 31 July 2020 (the “Deadline”), they shall each be entitled to withdraw from the transaction.
The Seller has also agreed that, if the transaction fails to complete by the Deadline due to the shareholders’ resolutions required to approve the transaction not being passed, then the Seller shall pay to the Purchaser the amount of €600,000 as fixed compensation for the Purchaser’s transaction costs.
The transaction agreement contains warranties standard for a transaction of this nature.
The implementation of the transaction is subject to the fulfilment and/or waiver of the following conditions precedent.
- The ordinary resolutions required to approve the transaction having been passed by the requisite majority of shareholders;
- The current lender (LandesBank Berlin, Berlin Hyp AG) having deposited a cancellation notice for the existing land charge on the Bleichenhof property with an escrow agent pending completion of the transaction and repayment in full of all amounts due under the facility; and
- The City of Hamburg having consented to the transaction and waived its pre-emption right in respect of the sale. The City of Hamburg holds the freehold of the Bleichenhof property and benefits from a right of pre-emption on a sale. If it were to exercise such right, it would acquire the Leasehold instead of the Purchaser under the transaction agreement on the terms of the transaction agreement. The board believes that the City of Hamburg is unlikely to seek to exercise its right of pre-emption and that the necessary consents to the transaction will be obtained.