| Mon 18 Jul 2011, 16:24 | | VPF - Vunani Property Investment Fund Limited - Abridged Pre-Listing Statement |
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VPF
VPF - Vunani Property Investment Fund Limited - Abridged Pre-Listing Statement
Vunani Property Investment Fund Limited
(Registration number: 2005/019302/06)
(formerly Vunani Property Investment Fund (Proprietary) Limited)
ISIN: ZAE000157459
JSE code: VPF
("VPIF" or "the Company" or "the fund")
ABRIDGED PRE-LISTING STATEMENT
Abridged Pre-Listing Statement relating to the private placing of units by the
Company to eligible investors and the listing of VPIF on the securities
exchange operated by the JSE Limited ("JSE") with effect from the commencement
of business on Thursday, 11 August 2011.
This Abridged Pre-Listing Statement is not an invitation to the general public
to subscribe for VPIF units but is issued in compliance with the JSE Listings
Requirements for the purpose of providing information about VPIF.
The information in this Abridged Pre-Listing Statement has been extracted from
the Pre-Listing Statement, dated 5 July 2011. For a full appreciation of VPIF
and the private placing, the Pre-Listing Statement should be read in its
entirety.
1. INTRODUCTION
VPIF intends to list via a private placing ("the private placing") on the
Main Board of the exchange operated by the JSE in the "Real Estate - Real
Estate Holdings and Development" sector of the JSE List, in terms of the
FTSE classification.
The private placing, which is open for acceptance only by eligible
investors (as described in the "Private Placing and Applications"
paragraph below), will be by way of an:
* offer to subscribe for a maximum of 66 334 357 new VPIF units with
an approximate value of R497.5 million (at an assumed private
placing price of R7.50 per unit)("the offer to subscribe"); and
* offer for sale of 22 232 113 VPIF units with an approximate value of
R166.7 million (at an assumed private placing price of R7.50 per
unit)("the offer for sale").
2. ABOUT VPIF
VPIF was incorporated on 6 June 2005. It was formed by Vunani Properties
(Proprietary) Limited ("Vunani Properties"), a subsidiary of Vunani
Limited, the JSE (AltX) listed entity, through the merger of its existing
commercial portfolio with a commercial portfolio owned by Hyprop
Investments Limited. In addition, Standard Bank Properties (Proprietary)
Limited at the time agreed to dispose of a portfolio of its own
commercial property assets (largely incorporating bank branches in large
and mid-sized towns across South Africa) to VPIF.
VPIF offers investors an opportunity to participate in the only office-
dominated JSE property fund, which sector the directors believe is well-
poised for recovery. The portfolio comprises 21 strategically located,
high quality buildings and offers a competitive distribution yield
together with a consistent growth profile.
Since its formation, VPIF has been managed by the same team at Vunani
Properties. This will continue from listing date onwards through the
asset managers of VPIF, Vunani Property Asset Management (Proprietary)
Limited ("VPAM"), a wholly owned subsidiary of Vunani Properties.
The fund has historically performed well with annual compounded growth of
34.3% to December 2010. This has been achieved with limited acquisitions
but primarily through tight management and yield-enhancing
refurbishments.
3. PURPOSE OF THE LISTING
The main purpose of the listing is to provide the fund with a platform
for acquisitive growth. This will initially be facilitated through the
private placing and will provide it with debt capacity to acquire yield-
enhancing properties. The fund will utilise the expertise of its
management team to add value to its portfolio through yield-enhancing
upgrades and refurbishments. Appropriate corporate governance structures
are in place to ensure that the best interests of VPIF are maintained at
all times as well as to ensure no conflicts of interest arise between any
related parties.
The listing will also provide Vunani Properties with an opportunity to
reduce a portion of equity-related debt that was associated with the
establishment of VPIF as well as debt linked to the Athol Ridge property,
one of the properties to be included in the VPIF portfolio on listing.
4. PROPERTY INFORMATION
VPIF offers investors a sectorally focused high quality portfolio
comprising 21 quality properties, with commercial offices comprising just
over 92% and with a wide geographical spread. Tenants` activities are
spread over a wide range of industries with a predominantly national or
listed bias. The properties are graded from B to A+, with the majority
being B+/A. The 21 properties include 3 A grade properties recently
developed for tenants by Vunani Properties, which will be acquired by the
fund just prior to or on the listing date.
The fund intends to double its portfolio size over the next 18 months
through the acquisition of well located B+ and A grade office buildings
with a stable tenant profile. The A/B+ segment of the office market is
characterised by greater volumes, more arbitrage opportunities and a
rental base that will be pushed higher as vacancies decline and new
developments demand premium rentals. VPIF intends to source buildings in
which yield-enhancing refurbishments can be carried out. In the short
term, the fund will avoid premium AAA grade "trophy" buildings, which the
directors believe do not represent good value at this time.
Historically, the portfolio has performed well with low vacancies, well
managed arrears and continued tenant retention. Compound distribution
growth of 18.6% per annum has been achieved since 2007. Capital value
growth over the same period has been 15.7% (defined as the growth from
the acquisition price at December 2006 to the independent valuation at 1
January 2011) giving a total annual compounded return of 34.3% since
inception.
The weighted average rental per m2 (excluding vacancies) for the VPIF
Portfolio by sector is as follows:
- Commercial: R91 m2.
- Retail: R89 m2.
The weighted average rental escalation (by gross lettable area) for the
VPIF Portfolio* is:
- Office: 8.9%.
- Retail: 8.1%.
*Excludes leases expiring before June 2012
The listing of VPIF offers a well-organised and smoothly functioning
property investment vehicle to investors. On listing, the VPIF portfolio
will have a total gross lettable area of 99 684m2 and has been valued by
the independent valuer at R943.2 million.
5. INVESTMENT STRATEGY
VPIF`s investment strategy is focused on:
* providing unitholders with a competitive distribution yield together
with a stable and consistent growth profile, which will increase the
economic value attributable to unitholders;
* providing investors with the only office-dominated JSE property
fund. The directors believe that the office sector is poised for
recovery and the fund is well positioned to deliver enhanced
returns;
* continued grooming of the existing portfolio with a focus on tenant
retention, tight management, targeted upgrades and extracting value
out of unutilised bulk in the portfolio;
* acquiring well located B+ and A grade office buildings with a stable
tenant profile. In particular, VPIF will source buildings in which
yield-enhancing refurbishments can be carried out. In the short
term, the fund will avoid A Grade "trophy" buildings, which the
directors believe are overpriced in the current market and have
little opportunity for yield enhancement;
* acquisitions, which will take cognizance of the need for geographic
and industry diversification but not, however, at the expense of
yield and quality;
* acquisitions that will take advantage of the current office market
in which recent lease negotiations have depressed property values;
and
* utilising the Company`s BEE status to retain and attract both
Government and national tenants. Historically the fund has been
able to secure leases for up to six years with National Government.
6. PROSPECTS
The directors believe the fund will continue to deliver solid returns and
that it is well-placed to take advantage of current market conditions.
The board is of the opinion that:
* the office market is at its lowest ebb, thereby creating embedded
value for investors;
* office property rentals will rise disproportionally in the next four
years as the current oversupply is absorbed and the lack of new
developments impacts on rentals;
* the fund will acquire properties that enhance its stable base of
well-managed, well-located buildings;
* the high proportion of single tenant and National/Government/listed
tenants will give an underlying strength to the cash flows;
* the current portfolio contains approximately 19 000 m2 of unutilised
bulk in prime locations which value will be extracted; and
* the fund will continue to utilise its BEE rating to retain
Government tenants and selectively acquire new Government tenanted
buildings, provided those assets represent sound investments.
The fund has a right of first refusal on any Vunani Properties completed
developments, which currently amount to R150 million of assets. In
addition, the fund has a pipeline of R450 million of assets from third
party vendors.
7. FORECASTS
The table below sets out summaries of the unaudited profit forecasts of
VPIF for the year ending 30 June 2012:
Based on a subscription Based on a maximum
(from the offer to subscription (from
subscribe) of R306.5 the offer to
million, which results subscribe) of R497.5
in a loan to value of million, which
approximately 20% at a results in a loan to
mid range price of 750 value of
cents per unit approximately 0% at a
mid range price of
750 cents per unit
Units in issue 97 891 691 123 358 357
Distribution per unit 70.55 70.84
(cents)
Earnings per unit 108.15 94.52
(cents)
Headline earnings per 40.51 40.85
unit (cents)
Forward yield (based on
distribution) per unit 9.4% 9.5%
at a price of 750 cents
per unit
8. PRIVATE PLACING AND APPLICATIONS
The purpose of the private placing is to raise a minimum of R366.7
million, R306.5 million from the offer for subscription and R60.2 million
from the offer for sale by Vunani Properties of linked units to that
value. The private placing has not been underwritten. The private placing
will be implemented via a book-build process. The Bookrunners will
obtain indications of interest from eligible investors to acquire VPIF
units and following this book-build process, the private placing will be
determined. It is estimated that the private placing price will fall
within a range of between R7.00 and R8.00 per unit. The private placing
is only open to eligible investors (as defined below):
* institutional investors and other entities and persons who fall
within the ambit of section 96(1) of the Companies Act and includes
but is not limited to persons whose ordinary business, or part of
whose ordinary business, is to deal in securities, whether as
principals or agents;
* preferential placees invited by the directors and who may
participate in the private placing, by virtue of section 96(1)(b) of
the Companies Act, where the total acquisition cost of VPIF units
for any single addressee acting as principal, is not less than R1
million.
Eligible investors interested in participating in the private placing
should contact the Bookrunners prior to the closing date of the private
placing to provide indications of their interest.
The basis of allocation of the VPIF units will be determined by VPIF in
its sole discretion but will be done on an equitable basis, after
consultation with the Bookrunners, however in determining the basis of
allocation, the date that eligible investors apply for units will be
taken into account. Based on the level of demand and the final private
placing price, applicants may not receive any VPIF units or a lesser
number of units than applied for. Subject to the aforegoing, no
preference of allotment will be given to any particular eligible
investor. Any dealing in VPIF units prior to actual delivery thereof is
entirely at the risk of the applicant. No late applications will be
accepted. Once submitted, applications are irrevocable and may not be
withdrawn.
9. SALIENT DATES AND TIMES
2011
Opening date of the private placing (09h00) Monday,18 July
Closing date of the private placing (12h00) by Friday, 29 July
which date eligible investors must have submitted
their applications to the Bookrunners in order to
qualify to participate in the private placing
Date when eligible investors will be notified of Tuesday, 2 August
their participation in the private placing and the
number of units allocated to them and the pricing
thereof
Market to be advised of fulfilment of the Friday, 5 August
conditions precedent set out in paragraph 12 below
Listing of VPIF units on the JSE Thursday, 11 August
The dates and times set out above are subject to change and any changes
will be communicated via the Securities Exchange News Service of the JSE
and the press.
10. MANAGEMENT OF THE FUND
The fund will be managed by VPAM in accordance with the terms of the
Asset Management agreement. The VPAM management team has remained
unchanged since inception and each of the executives has substantial
technical and financial skills to enable VPAM to maximise the long-term
success of the fund.
11. DIRECTORS
The directors of VPIF, all of whom are South African citizens with the
exception of Chipo Evelyn Chimombe-Munyoro who is German, at listing
date, will be:
Name and age: Robert Fletcher Kane (51)
Position: Chief Executive Officer
Qualifications: BSc (Civ) Eng., MBA
Business address: 2nd Floor, 33 Church Street, Cape Town, 8001
Name and age: Marelise de Lange (38)
Position: Financial Director
Qualifications: B.Com (Law) and B.Com (Hon)(Acc)
Business address: Vunani House 151 Katherine Street, Sandown,
Sandton, 2196
Namge and age: Pieter Willem Mackenzie (47)
Position: Executive director
Qualifications: BSc Building Management, MBA
Business address: Vunani House 151 Katherine Street, Sandown,
Sandton, 2196
Name and age: Pragalathan Dhanapalan Naidoo(53)
Position: Independent non-executive Chairman
Qualifications: B.Sc (Hons) Civil Engineering, Pr.Eng
Business address: 25 Scott Street, Waverley, Johannesburg, 2090
Name and age: Robert Reinhardt Emslie (53)
Position: Independent non-executive and Chairman of the
Audit Committee
Qualifications: B.Com (Hons), CA(SA)
Business address: 283 Pinto Place, Beaulieu, Kyalami, 1684
Name and age: John Russell Macey (49)
Position: Independent non-executive director
Qualifications: CA(SA), BCom(Hons)(FinAcc)
Business address: Cardiff Castle, Main Street, Kenilworth, 7800
Name and age: Chipo Evelyn Chimombe-Munyoro(37)
Position: Non-executive director
Qualifications: BA LLB. LLM (Commercial law / Maritime law)
Business address: Vunani House Block C, 151 Katherine Street,
Sandown, Sandton, 2196
Name and age: Ethan Gilbert Dube (50)
Position: Non-executive director
Qualifications: MSc (Statistics) Executive MBA (Sweden)
Business address: Vunani House Block C, 151 Katherine Street,
Sandown, Sandton, 2196
12. JSE APPROVAL AND CONDITIONS PRECEDENT TO THE LISTING
The JSE has granted approval for the listing of all the VPIF units in
issue after the private placing with effect from the commencement of
trade on the JSE on Thursday, 11 August 2011, subject to the following
conditions:
* VPIF obtaining a spread of unitholders acceptable to the JSE;
* the approval by Vunani shareholders of the listing of VPIF, for
which irrevocable commitments representing in excess of 50% of the
shares in issue have been received;
* the minimum subscription being received; and
* the registration of transfer of the Athol Ridge property to VPIF.
13. COPIES OF THE PRE-LISTING STATEMENT
Copies of the full Pre-Listing Statement may be obtained, during normal
business hours between Tuesday, 19 July 2011 and Thursday, 11 August
2011, from the following parties:
* the Company and Vunani Corporate Finance at Vunani House, Block C,
Athol Ridge Office Park, 151 Katherine Street, Sandown, Sandton;
* the Independent Lead Sponsor, Grindrod Bank Limited, at Building
Three, 1st Floor, North Wing, Commerce Square, 39 Rivonia Road (cnr.
Helling Road), Sandton; and
* the Transfer Secretaries, Computershare Investor Services
(Proprietary) Limited, Ground Floor, 70 Marshall Street,
Johannesburg.
The Pre-Listing Statement will also be available in electronic form on
the Company`s website (www.vpif.co.za).
Sandton
18 July 2011
Corporate Adviser, Joint Sponsor and Joint Bookrunner
Vunani Corporate Finance (trading as a division of Vunani Capital
(Proprietary) Limited)
Independent Lead Sponsor
Grindrod Bank Limited
Independent reporting accountants and auditors
KPMG Incorporated
Legal adviser
Edward Nathan Sonnenbergs Incorporated
Independent valuer
Mills Fitchet Magnus Pennny (Proprietary) Limited
Investment Bank and Joint Bookrunner
Investec Corporate Finance (trading as a division of Investec Bank Limited)
Date: 18/07/2011 16:24:00 Produced by the JSE SENS Department.
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