NAPSA agreed to buy Society Business Park for K230m (about $9m) which had a book value of only K32m (about $1.2m) in ZNBS books

ZNBS SOCIETY SAYS

●We sold Society House Business Park to NAPSA

●We bought former MTN head office situated at Corner of Chikwa lane and Beit Road from AFlife Properties who were selling it on behalf of Sartunia Regna.

SALE OF THE SOCIETY BUSINESS PARK AND PURCHASE OF THE MANNU BUILDING

…. An opportunity arose after the Board and the Procurement Committee had already approved the purchase of Stand no. 4647 Lusaka. The former MTN head office situated at Corner of Chikwa lane and Beit Road, opposite the newly constructed Standard Charted Bank head office was advertised by AFlife Properties on behalf of Sartunia Regna with a closing date of 30th December 2021, for receiving of bids….

… This is a four (4) storey building with estimated net lettable area of 5610 square meters constructed on a 6000 square meter plot with 134 parking slots…..

1.0 SALE OF SOCIETY BUSINESS PARK

1.1 Zambia National Building Society (ZNBS) was established by the Building Societies Act, with the mandate to increase the housing stock within Zambia.

1.2 The property in question was sold to NAPSA on 30 December 2020.

1.3 At the time of sale of SBP, the Society was receiving annual concession fees of K69,000 per month. Given the need to unlock capital, the Board made a decision to sale SBP to support the issuance of mortgages and to purchase a new head office outside the Central Business district.

Even after considering a 100% occupancy rate of SBP, the resulting concession fees were too low to make a significant impact on ZNBS’ capital position.

1.4 Negotiations for the sale of SBP to NAPSA started in June 2019 and were concluded in February 2020 and a purchase consideration of K230million was agreed.

1.5 The carrying amount on ZNBS financial statements was K32.41million as at year ended March 2020 and the Society made a profit of K197.6million kwacha from the disposal of SBP which significantly improved the capital position.

1.6 ZNBS was the owner of the Society Business Park and entered into a concession agreement with NAPSA for the refurbishment of the building following an infernal which had gutted the building.

1.7 In a letter dated 5th November 2014, National Pension Scheme Authority (NAPSA) requested to purchase the Society Business Park citing the fact that the current Concession Agreement was not viable as it was not able to recover the investment amount in the 20 year concession period.

1.8 At a meeting held on 5th July 2018, the Board of Directors of Zambia National Building Society resolved to seek approval from the Ministry of Finance for the sale of the Society Business Park.

1.9 Following the approval granted by the Ministry of Finance, ZNBS Management commenced exploratory meetings with NAPSA Management and a road map was proposed commencing with the preliminary valuation of the Society Business Park. These exploratory meetings commenced in 2019.

1.10 The justification for the sale of the Society Business Park was as follows:
(i) According to the concession agreement with NAPSA, ZNBS is only entitled to 3.5% of gross rentals per month for a period of 20 years translating to a yield of 2.9% per annum which is below inflation and therefore not economically profitable for the Society.

(ii) The concession agreement further requires that NAPSA be paid 50% of market value at the end of the concession period of 20years for NAPSA to exit the agreement.

Zambia National Building will not have the means to make such a payment.

(iii) NAPSA, in its letter to the Society dated 5th November 2014, indicated that the project is not viable for them within the 20year period as they would be unable to recover the sum invested to redevelop the building. A sale would therefore be beneficial to both parties.

(iv) The Society had been raising funds on the capital markets through a Medium Term Note Programme (MTNP), and by obtaining corporate loans which are linked to the yield on Government securities. The sale of the Society Business Park not only offered an opportunity to unlock funding into the Society’s core business but also an opportunity to lower the cost of funds for the Society.
1.11 The Board of Directors wrote to the Ministry of Finance and National Planning to seek approval to for the sale of the building to NAPSA. The Ministry of Finance engaged Cabinet and obtained approval for the transaction.

1.12 Following the receipt of approval from Cabinet and the Ministry of Finance, the Society entered into a contract of sale for the sale of the building to NAPSA on in December 2020 and the sale was concluded in April 2021.

2.0 PURCHASE OF STAND 4647 LUSAKA

2.1 The Board approved the proposal for the Society construct a new head office outside the CBD, in line with the Corporate Strategic Plan. A budget line was approved for the year 2021/2022 to acquire land and design a new head office budget of K10 million.

2.2 The Society initially wanted to purchase a plot and build the head office. However, the estimated cost of constructing a 2500 square metre Head Office at this Land is at USD $4,700,000.00, this is in line with the property and construction cost guide 2021 done by AECOM SA (Pty) Limited for Southern Africa countries. The tendering and construction processes will take approximately 2½ years.

2.3 An opportunity arose after the Board and the Procurement Committee had already approved the purchase of Stand no. 4647 Lusaka.

The former MTN head office situated at Corner of Chikwa lane and Beit Road, opposite the newly constructed Standard Charted Bank head office was advertised in the Zambia Daily Mail on 28th December 2021, by AFlife Properties on behalf of Sartunia Regna with a closing date of 30th December 2021, for receiving of bids.

This is a four (4) storey building with estimated net lettable area of 5610 square meters constructed on a 6000 square meter plot with 134 parking slots.

2.4 The property is strategically located at the famous Elunda Park next to Standard Chartered, CITI Bank, Barclays Bank, and Liquid Telecom Head Offices at the Addis abba round about.

Other Banks Head Office in close proximity Stanbic and Indo Banks (under construction). The Property was considered due to the excellent accessibility and visibility from the two high traffic roads. This location has become the Banking Square with most of the leading Banks having their Head Offices around this location.

2.5 Management had put in a bid of $5.4m, however the seller advised Management that they had received a bid of $8m and the sellers book value of the property stood at $8.2m. Hence, the bid was unsuccessful.

However in March 2022, Aflife reached out to the Society after the highest bidder pulled out of the transaction. AFLIFE indicated that being the second highest bidder they were willing to accept $5.4 million for the building. The selling price was renovated to a Kwacha amount of K 89 million before VAT, which is the equivalent of $ 3.2 million at the current exchange rate, against a reserve price of USD 8 million and a valuation of USD 7 million.

2.7 All relevant approved within the requirements of the Public Finance Management Act were obtained for the purchase of the building.