Shoprite forms JV with Equities Property fund
CAPE TOWN - Shoprite Holdings and Equites Property Fund have established a joint venture property company (JVCo) to house a R2 billion portfolio of distribution cents and associated undeveloped land in Brackenfell in the Cape and Centurion in Gauteng.
Equites will inject cash of c.R2.1bn into the JVCo, in exchange for a 50.1 percent equity stake in the JVCo.
The JVCo will then acquire the Cilmor distribution centre and the associated undeveloped land for.R1.2bn cash.
The JVCo and Shoprite Checkers will conclude "triple net" 20 year lease agreements for the Brackenfell, Cilmor and Centurion distribution centres. The JVCo 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 JVCo. 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 JVCo will fund the development.