- Mall expected to give Lobatse face lift
- Over 73 percent of the area already let
Botswana Stock Exchange (BSE) listed property firm, PrimeTime intends to enter into an agreement to acquire the leasehold interest from Time Projects in Lot 14076 Lobatse and appoint Time Projects to develop the shopping centre which would be valued at around P116 million.
According to a circular published on the BSE, the company has been granted the development rights to the Property by Lobatse Town Council.
Prime Time’s major shareholders are the Botswana Public Officers Pension Fund (BPOPF), which, through its fund managers is the largest shareholder at 31.72 percent. Linwood Services Limited, owned by Prime Time Managing Director (MD), Sandy Kelly own 16.36 percent, Tati Company Limited owns 9.35 percent while Debswana Pension Fund (DPF), through all its fund managers control 7.99 percent.
Prime Time has entered into a Development Agreement with Time Projects, which is subject to conditions, in terms of which Time Projects will develop a retail shopping centre on the Property at a price ultimately to be based on a net initial rental return of 8 percent inclusive of ground rental.
According to Prime Time, the Development is currently being marketed and negotiations are at an advanced stage with a number of prospective tenants. The Property measures 4.42 hectares and is held on a 30-year lease from Lobatse Town Council with an option to renew for a further 30 years.
The company announced that a ground rental of 3.5 percent of gross rentals will be payable for the duration of the lease over the Property. Further, the proposed Development on the Property amounts to circa 8,768 square meters (sqm) of lettable area and currently leases have been signed or offer letters received for 73 percent of the lettable area.
Prime Time said the estimated Contract Price for the Development is P106 169 963 with a guaranteed Net Return of 8 percent in the first year of operation, underwritten by Time Projects.
“The return on the Acquisition will step up year on year in line with the rental escalations built into the leases,” Prime Time announced.
The company believes the project is a worthy investment because Lobatse has a population of close to 30,000 and a steady stream of traffic passing through it as a border town and its position on the A1.
“No new shopping centres have been built in Lobatse for over 15 years. Current retail provision is concentrated in a few small malls, standalone units and traditional high street retail. Existing offerings are therefore generally dated with tenants holding onto premises due to a lack of other options in the market. New entrants to the Lobatse market are also frustrated by a lack of available premises,” said Prime Time.
Moreover, the Acquisition is subject to a profit guarantee by Time Projects of a Net Return of 8 percent. In terms of the Profit Guarantee, Time Projects irrevocably and unconditionally guarantees as captured within the Development Agreement a Net Return of 8 percent on PrimeTime’s cost of investment for a period of one year from the date that tenants in the property first pay rental.
The amount to be paid will be determined by calculating any shortfall between rentals received during the first year of operation and the guaranteed 8 percent Net Return. PrimeTime shall retain an amount equal to an 8 percent Net Return which shall be dispersed to Time Projects over the course of the centre’s first year of operation.
“The Board considers the Profit Guarantee to be attractive as it minimises PrimeTime’s risk during the first year of operation, a period during which new retail malls often deliver lower than expected returns,” the company said.
The Prime Time board is of the opinion that the Acquisition will achieve the Company’s stated objective to expand and diversify its investment portfolio though the development of high-quality properties and acquisition of standing assets. The intention is to fund the Acquisition though the raising of debt.
Prime further said this Development is the subject of exceptionally strong tenant demand with 73 percent of the Development subject to leases or offers to lease, predominately to national and regional retailers. Amongst those who have signed leases and made offers to lease are high quality tenants such as; Spar, Botswana Life, BBS, Ackermans, PEP, Jet, Clicks and Bradlows.
The Development is located at Lobatse’s main bus terminal, which shall be incorporated into the Property while a footbridge will offer a pedestrian crossing to the train station further increasing footfall at the centre. Although the Company currently has exposure to the Lobatse retail market through the Hillside Mall property, that asset is subject to a shortening ground lease and will diminish in value as the lease runs down. This Acquisition, according to Prime Time will protect the Company’s position as a major player in the retail market in Lobatse. The Development has been valued at P116 million by the Independent Valuers upon completion.
The Contract Price for the Development is P106.2 million which may be adjusted in line with the terms set out in the Development Agreement. The existing portfolio of the PrimeTime Group comprises assets in Botswana, South Afrcia and Zambia and was independently valued at P1.5 billion as at the 31 August 2019, prior to acquisition of assets in South Africa