Wednesday, October 21, 2020

LLR Property closes multi-million investment deal

The industrial property focused Letlole La Rona (LLR) has paid a premium price to acquire plots from  its main shareholder, a week after the Botswana Stock Exchange (BSE) listed property investment company notified the Competition and Consumer Authority (CCA) that it intends to acquire six industrial plots from Western Industrial Estate (WIE), a subsidiary of Botswana Development Corporation (BDC), which happens to be LLR’s main shareholder. 

As markets closed on Friday, LLR revealed to its shareholders that it has entered into an acquisition agreement with WIE to pay P174.4 million for the industrial plots, five in Gaborone and one in Lobatse. The price consideration is 6 percent higher than the P164.4 million valuation of the six properties by real estate giant Knight Frank Botswana. The P174.4 million price tag will be  funded through LLR’s cash reserves ,fattened by proceeds of sale from the hospitality assets last year.

“The above properties will grow LLR’s portfolio and consolidate its presence in Botswana’s industrial rental sector while offering an attractive initial net yield of 9 percent, thus enhancing shareholder value in a real estate market where securing investment grade properties is challenging,” the company’s board of directors said in a statement announcing the acquisition. 

Late last year, BDC, the wholly owned government investment arm, reduced its stake in LLR from 65.8 percent to 42 percent after disposing 66.5 million shares to property investor Grit Real Estate Income, with the London Stock Exchange (LSE) listed firm upping its stake in LLR from 6.25 percent to 30 percent, making it now the second main shareholder. 

The acquisition of BDC’s stake in LLR by Grit was settled through share consideration, in which Grit paid for LLR shares by issuing 9.8 million shares to BDC, which is equivalent to P150 million, resulting in BDC holding a 3.1 percent shareholding in Grit.

According to LLR’s 2019 annual report, the company owned 20 properties worth P774 million, majority of which are in the greater Gaborone area.  LLR’s property portfolio is spread 56.2 percent in the industrial sector, 30.3 percent in retail, 6.3 percent in commercial and 6.2 percent residential. 

LLR’s latest move to expand its industrial portfolio follows last year’s strategic exit when it disposed all of its hospitality assets for P235 million to Cresta, another company listed on the BSE in which BDC also holds a 27 percent stake in. The proceeds of sale where earmarked to be deployed into LLR’s pipeline of yield-enhancing investment opportunities.

“The company is well on its way to honouring the commitment made to shareholders last year that proceeds from the disposal of the hospitality portfolio would be re-invested within 24 months.

Substantial progress has been made in acquiring value-accretive assets to add to LLR’s portfolio,” Chikuni Shenjere-Mutiswa, chief executive of LLR, said during the company’s unveiling of the interim results in early February.

In the coming months, the company will be seeking stakeholders’ approval for a number of attractive, yield-enhancing acquisitions in Botswana and within the region which shall significantly re-position LLR’s portfolio, added Shenjere-Mutiswa. 

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