Brazil Travel & Tourism
SQUARESTONE BRASIL LIMITED INTENTION TO FLOAT ON THE AIM MARKET OF THE LONDON STOCK EXCHANGE
Squarestone Brasil Limited ("Squarestone Brasil or "the Company") today announces its intention to proceed with an institutional placing of Ordinary Shares ("the Placing") and application for the admission of its Ordinary Shares to trading on the AIM market of the London Stock Exchange.
Squarestone Brasil is seeking to raise funds via the Placing. The Company's strategic aim is to become a leading Anglo-Brazilian real estate development company with an exclusive focus on the acquisition, development and delivery of high quality shopping mall destinations in the strong and growing retail market of Brazil, with an initial concentration on Greater Sao Paulo.
Conditionally upon Admission, the Company will acquire two existing shopping mall assets, Bonsucesso Mall and Golden Square Mall (the "Mall Acquisitions") located in Sao Paulo, and currently managed by Squarestone Brasil II Administraçaoe Participaçâo S.A. ("SB ManCo"), which itself will also be acquired on Admission (the "SB ManCo Acquisition") (together the "Conditional Acquisitions"), combined with a pipeline of identified mall development opportunities.
Key Highlights
· The AIM listing and Placing will provide the Company with the platform and funds to enable the development of the existing two mall assets and to potentially pursue its identified pipeline investments, with the objective of achieving superior shareholder returns through the delivery of 'next generation' shopping malls.
· The Directors believe that the consumer-orientated strategy being pursued by the Company is well underpinned by current highly favourable macro-economic, demographic, consumer and real estate factors in Brazil:
o the country's relatively high GDP growth forecasts (circa 5% per annum) allied to its economic stability in terms of having relatively low consumer debt and historically low levels of unemployment, inflation and interest rates;
o a highly urbanised, growing population (in particular an expanding consumer-entry middle class) which has access to increasing credit and which, in any event, has historically demonstrated a spending culture (as evidenced by the relatively low savings ratio of the country);
o Brazil's mall sector is currently fragmented, generally lacking in Western European standards of design and operation and has a low current retail provision per capita relative to other countries.
· The Company is committed to addressing what it perceives to be a gap in the market, by combining an international approach to shopping mall design, development and management whilst appealing to the local culture, tastes and fashions of Brazil in order to deliver a higher quality, tailored retailing experience for Brazilian consumers.
· Highly experienced Board, comprising the three co-founders of SB ManCo (together the "Executive Directors"), who have a track record of anticipating and exploiting opportunities in the real estate sector (further detailed below), and four Non-executive Directors who together provide extensive retail industry, real estate, finance and public company experience. The Company's Chairman is Tony Campbell, a leading UK retailer and former Deputy CEO of Asda who has held, and continues to hold, senior board positions in a number of high profile companies.
· Established, wholly-owned operational management team in Sao Paulo, led by James Morse who has a total of 15 years experience in the shopping mall sector in the UK and latterly Brazil. This team has been active on the ground in Brazil for the last three years, in the process building up a local contact base, an established management operation and a pipeline of identified shopping mall development opportunities, combined with additional support services provided by London-based affiliate Squarestone Property Investment Management ("SPIM"), ensuring Western European levels of reporting, corporate governance and Shareholder communication.
· The Company will also benefit from the considerable retail industry and retail real estate experience provided by three retail and shopping mall experts, Claudio Politi (25 years in Brazilian mall leasing and development), Michael Poynor (40 years in the international retail sector) and Neil Varnham (33 years in retail real estate fund management and current President of the British Council of Shopping Centres).
· The Conditional Acquisitions will result in existing Squarestone investors rolling over/reinvesting circa £20 million of equity, including Directors and management rolling over/reinvesting circa £10 million of equity, thus providing a significant alignment of interests between management and its shareholders.
· The objective of delivering 'next generation' shopping malls will predominantly be achieved via new build development to provide malls with a minimum 20,000 m2 NLA, which are intended to dominate their respective catchment areas and which are intended, through the introduction of international retail and development expertise, provide a considerably improved retail experience for the Brazilian consumer.
· On Admission the Company will own two malls, one operating (Bonsucesso Mall) and one (Golden Square Mall) undergoing development, providing an aggregate total NLA of 63,000m2 on completion of current and forecast development works, with an identified pipeline of a further three development opportunities and which, on completion, would provide a further total approximate 100,000 m2 NLA of high quality mall space.
· The Mall Acquisitions will result in the Company being seeded with around £63m Gross Asset Value (GAV) (around £56m Net Asset Value (NAV)) of existing shopping mall assets to be acquired by the Company for a mix of Ordinary Shares and cash at current valuation - an attractive Offer pricing relative to Brazilian peer group mall operators, which are trading at premiums to NAV.
· On Admission and completion of the Mall Acquisitions the Company will be very conservatively geared, with total borrowings of less than £7 million, although the Company intends to increase its level of borrowings in due course as development of the current and future portfolio proceeds.
· The Company has a signed letter of intent and has entered into negotiations with BTG Pactual, a leading independent Brazilian investment bank, wealth manager and asset manager to potentially partner the Company in the funding of its current and future development projects at the asset level. The proceeds of the AIM listing would be used by the Company to fund its share of such projects.
The Company's Nominated Adviser and Broker is Liberum Capital Limited.
Commenting on today's announcement, Tony Campbell, Chairman of Squarestone Brasil said:
"We are delighted to be announcing this next step in the Squarestone story, which will provide a fantastic platform to exploit the compelling economic, demographic, consumer and real estate dynamics in Brazil. A listing will allow us to continue to capitalise on the attractive opportunities already presented by the Brazilian shopping mall sector by enabling access to a broader capital base.
In our view AIM represents the most appropriate venue for the Company's flotation given the Board's familiarity with the international investment community and the international nature of Squarestone's operations, allied to our growth ambitions. Furthermore we believe our strategy of bringing international mall retailing standards to Brazil will resonate more fully with an international investment audience outside of Brazil.
I am also personally delighted to be working with such a strong team of Directors, each contributing their own expertise, coming together to demonstrate a solid track record spanning emerging markets, real estate, retail, finance and public company experience."
Commenting on the announcement, James Morse, Chief Executive of Squarestone Brasil, said:
"We are especially excited about raising new capital via the AIM listing because not only will this enable us to further develop the existing Bonsucesso and Golden Square assets originated and currently managed by our established Sao-Paulo based business, where there is still significant latent potential to exploit, but we will also be in a position to pursue the additional three pipeline projects also identified by our team.
These opportunities, coupled with the considerable international retailing know-how provided by our colleagues Claudio Politi, Neil Varnham and Michael Poyner, and the expertise provided by our affiliated operations in London, will enable us to clearly demonstrate our objective of introducing international retailing standards to the Brazilian mall sector to complement local culture, tastes and fashions, in order to deliver a tailored retailing experience for Brazilian consumers."
Source:investegate.co.uk