| Acquisition of rights in a property in England |
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Date:
7/8/2007
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Source:
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Notice is hereby given that a wholly owned foreign subsidiary of Electra Real Estate Ltd. (hereinafter: the “Company”) has purchased 60% of the rights in a Income Producing Property in the city of London, England. The principal details of the transaction are as follows:
• The property purchase price (100%) before expenses is £ 134.7 M (approx. NIS 1.18 B) plus related expenses in the sum of approx. £ 9.1 M (approx. NIS 79.4 M).
• The property consists of a luxury office building situated in the business center of the city of London, England. The net area of the property for lease totals approx. 17,500 m2 plus existing building rights for the construction of approx. 2,000 m2 net area for lease.
• The building is leased in its entirety to RBC (Royal Bank of Canada), which is the largest bank in Canada, under a lease agreement up to March 2012, without an option to exit. The building serves RBC as its principal offices in London.
• The gross annual rent (100%) amounts to approx. £ 7.85 M (approx. NIS 68.5 M), less the cost of ground lease, the annual net rent (100%) totals approx. £ 7.53 M (approx. NIS 65.7 M). All ongoing management and maintenance expenses pertaining to the property are paid by the lessee.
• A financial institution abroad has provided a loan to finance the transaction (100%) in the sum of approx. £ 120 M (approx. NIS 1.05 B), bearing fixed interest for a period of 7 years. Of this sum, £ 7.0 M (approx. NIS 61.1 M) is placed in an interest bearing deposit to be released upon the satisfaction of certain conditions. The loan is secured by a first fixed charge on the property and receipts from the property which are non-recourse to the Company.
• Another financial institution abroad has provided an additional loan to finance the transaction (100%) in the sum of approx. £ 14.9 M (approx. NIS 130.0 M), bearing fixed interest for a period of 3 years, plus an exit commission the sum of which depends on the profit generated in the project upon the sale thereof in the future. The loan is secured by a second fixed charge on the property and receipts from the property which are non-recourse to the Company.
• The foreign subsidiary is conducting an initial negotiation with RBC to extend the lease agreement for a period beyond the present term of the agreement. The Company estimates that should the lease term indeed be extended for a further long term, it is likely that the value of the property will be fundamentally enhanced. It should be clarified that the Company’s estimate with respect to the enhancement in the value of the property, if such lease term is indeed extended as aforesaid, falls within forward-looking information. The Company’s estimate with respect to the anticipated enhancement in the value of the property is based on similar properties (inter alia, in terms of the location and the quality of the tenant) leased for long terms. The Company estimates that similar properties as aforesaid are being sold at present for a greater value than the value determined under the agreement for the acquisition of the property – subject to a long term lease agreement being entered into, beyond the present lease term. At the same time, it may be that the Company’s estimate with respect to the enhancement in the value of the property does not materialize, inter alia, due to a future increase in the capitalization rate required by investors in the income producing real estate market in England, a decrease of RBC’s financial robustness and a decrease in the rent prices of income producing real estate in London.
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| 71 Queen Victoria Street |
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| 77 Queen Victoria Street |
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