Rosebank, South Africa, 06 October 2020: JSE listed diversified real estate investment trust Redefine Properties is pleased to announce that it has reached a mutually beneficial and alternative arrangement relating to the conclusion of the sale of the Mall of the South (MOTS). As part of the agreement, the 73 111sqm regional shopping centre in Aspen Hills, south of Johannesburg will be acquired by a limited liability special purpose vehicle (SPV) for R1.76 billion in cash. RMB Investments and Advisory Proprietary Limited will hold an 80% equity interest in the SPV and Redefine 20%.
The deal will be funded through a loan agreement with RMB.
The transaction is expected to close before 1 November 2020 once all conditions are met, including approval by the Competition Commission and other usual approvals.
Construction of MOTS began during 2013, and at that time the property was considered to be an attractive asset to complement Redefine’s retail property portfolio. In order to secure participation in the development, Redefine entered into a structured financing transaction with Zenprop and RMB, which would allow or require Redefine to purchase MOTS upon the occurrence of certain events.
“Given that circumstances had changed dramatically, clearly unforeseen at the time of entering the put agreements, all the parties agreed to engage constructively to restructure the put arrangements,” says Andrew Konig, CEO, Redefine Properties.
“The restructure allows additional time for MOTS to recalibrate to the post COVID-19 retail real estate environment and provides Redefine with the opportunity to either acquire or dispose MOTS over a three-year period. We do not anticipate the restructured arrangement to have a significant adverse impact on our loan-to-value ratio.”
Konig reiterated his views expressed at the pre-close briefing for the year ending 31 August 2020 that “property fundamentals are going to be challenged for the rest of 2020 and beyond” due to unprecedented and evolving market conditions.
The coronavirus pandemic has dealt a blow to retail tenants and landlords already struggling with declining disposable incomes and a sluggish economy. The public health crisis temporarily closed malls nationwide at the end of March, when the Government enforced a strict lockdown, the hardest the world has seen.
The transaction constitutes a category 2 transaction in terms of the JSE Listings Requirements and is not subject to approval by Redefine shareholders.