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VKE
VKE
VKE - Vukile Property Fund Limited - Detailed cautionary announcement regarding
the strategic acquisition of a portfolio of 20 properties and introduction of
the PIC as a large unitholder
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
Registration number 2002/027194/06
JSE Share code: VKE
ISIN: ZAE000056370
NSX Share code: VKN
("Vukile" or "the company")
DETAILED CAUTIONARY ANNOUNCEMENT REGARDING THE STRATEGIC ACQUISITION OF A
PORTFOLIO OF 20 PROPERTIES AND INTRODUCTION OF THE PIC AS A LARGE UNITHOLDER
1. Introduction
Further to the cautionary announcement dated 3 November 2011, Vukile linked
unitholders ("unitholders") are advised that the company has made an offer to
Sanlam Life Insurance Limited ("Sanlam") dated 3 November 2011 in terms of which
Vukile will acquire the property letting enterprises (the "Enterprises") in
respect of a portfolio of properties (the "Property Portfolio") (the
"Transaction") which offer has been accepted by Sanlam.
The Transaction will become effective upon the date of fulfilment or waiver of
the conditions precedent set out in paragraph 4 below (the "Effective Date"),
which is expected to be on or about 1 June 2012, and accordingly the Property
Portfolio has been valued at that date.
Coterminously with the Transaction, the Public Investment Corporation ("PIC")
has reached agreement with Sanlam in terms of which it will acquire 70 200 000
Vukile units from the Sanlam Group (the "Acquisition"). The PIC will acquire
the stake of c.20% and thereby become a large unitholder in Vukile. The last
condition precedent to the Acquisition is the announcement of the Transaction.
Accordingly, the Sanlam Group`s beneficial unitholding in Vukile will reduce to
13.6%, of which 7.6% will be held by Sanlam Policy holder funds and will be
considered as an institutional holding.
2. Rationale
Transaction
The Transaction fulfils Vukile`s objective of growing a quality portfolio of
properties with strong cash flows in order to achieve meaningful capital
appreciation and sustainable growth in distributions. Vukile already manages
the properties in the Property Portfolio on behalf of Sanlam and has deep
insight into the properties making this a low risk acquisition which will be
integrated seamlessly into the Vukile portfolio. Within the property portfolio
being acquired the offices are well located with good quality building
specifications, hence the Transaction will enhance the quality of Vukile`s
current office portfolio. The total acquisition cost of R8 154/m2 is 29.2%
higher than the current valuation of Vukile`s total portfolio on a R/m2 basis.
The Transaction increases the group`s exposure in the Western Cape.
The Transaction will also assist in achieving Vukile`s strategy of broadening
its unitholder base and seeking to achieve a JSE free float rating of 100%
(currently 50%) in respect of the FTSE/JSE Africa Index series.
Acquisition
The Acquisition has been concluded to realign Sanlam`s property exposure with
its investment requirements.
The Acquisition also introduces the PIC as a large unitholder in the company.
The PIC is one of the largest property investors in South Africa and the
introduction of such a seasoned property investor is an affirmation of the new
Vukile strategy.
3. Purchase Consideration
The Enterprises will be acquired for a purchase consideration of R1 490 303 000
(One billion four hundred and ninety million three hundred and three thousand
Rand), payable in cash (the "Purchase Consideration") on the Effective Date.
The Purchase Consideration has been determined on the basis that the Property
Portfolio will be transferred on 1 June 2012. To the extent that the Effective
Date is prior to or post 1 June 2012, the Purchase Consideration will be
adjusted upwards or downwards by 0.017255% compounded daily (6.5% per annum).
The first and second year forecast yields in respect of the Enterprises are 8.8%
and 9.5% respectively. The Property Portfolio being acquired has been
externally valued as described more fully in paragraph 6 below. The external
value equates to 98% of the Purchase Consideration. Details per property are
listed in paragraph 5 below.
The Purchase Consideration will be funded through a combination of debt and the
issue of new linked units (the "Consideration Units").
4. Conditions precedent
The Transaction is subject to the fulfilment of the following conditions
precedent on or before the Effective Date:
4.1. Approval by the Listings Division of the stock exchange operated by the JSE
Limited and all other regulatory authorities;
4.2. Approval by the South African Competition Authorities;
4.3. Raising the required capital through the issue of the Consideration Units
and raising of the requisite bank debt;
4.4. Unitholders passing the required resolutions to approve the Transaction and
placing of the Consideration Units under the control of the Vukile board and
authorising the Vukile board to allot and issue the Considerations Units;
4.5. Consent from the eThekwini Metropolitan Municipality to cede and assign the
land lease for the Durban Workshop centre from Sanlam to Vukile;
4.6. Sanlam providing Certificates of Identification in respect of the Property
Portfolio;
4.7. Sanlam providing Electrical Compliance Certificates in respect of the
Property Portfolio; and
4.8. Conclusion of a formal agreement of sale containing all the normal terms,
conditions and warranties associated with a transaction of this nature.
5.Salient details of the Property Portfolio
Specific information relating to the Property Portfolio:
Bassonia Bellville
Office Bellville Bellville Tijger
Details Park Barons Santyger Park 1
Location Bassonia Bellville Bellville Bellville
Johannes- Western Western Western
Burg Cape Cape Cape
Gauteng
Sector Offices Retail Offices Offices
GLA (mSquared) 1 597 6 778 6 374 3 198
Single or
multi tenanted Multi Multi Multi Multi
Weighted
average rental
per mSquared (Rand) -
contractual
September 2011 89.68 86.21 100.58 87.74
Vacancy by
rentable
area (mSquared) - - 1 018 -
Vacancy %
of total
GLA (mSquared) 0.0% 0.0% 16.0% 0.0%
Annualised
property
yield on
purchase price 8.2% 8.5% 9.2% 9.1%
External valuer Jones Quadrant Quadrant Quadrant
Lang Properties Properties Properties
LaSalle
Valuation
(Rand million) 9.660 64.400 66.450 32.700
Price
(Rand million) 10.214 70.033 67.183 32.067
Bellville Bellville Bellville
Tijger Tijger Tijger
Details Park 2 Park 3 Park 4
Location Bellville Bellville Bellville
Western Western Western
Cape Cape Cape
Sector Offices Offices Offices
GLA (mSquared) 3 904 4 345 4 297
Single or
multi tenanted Multi Multi Single
Weighted
average
rental
per mSquared (Rand) -
contractual
September 2011 75.63 83.58 81.55
Vacancy by
rentable
area (mSquared) 2 099 1 115 -
Vacancy %
of total
GLA (mSquared) 53.8% 25.7% 0.0%
Annualised
property
yield on
purchase price 7.7% 8.4% 8.8%
External
Valuer Quadrant Quadrant Quadrant
Properties Properties Properties
Valuation
(Rand million) 30.300 36.300 47.500
Price
(Rand million) 32.546 37.003 50.344
Bloem-
Fontein Durban
Bellville Trador Westville
Tijger Cash Surrey Durban
Details Park 5 & Carry Park Workshop
Location Bellville Bloem- Westville Durban
Western fontein Durban KwaZulu-
Cape Free State KwaZulu- Natal
Natal
Sector Offices Retail Offices Retail
GLA (mSquared) 4 480 6 563 3 176 20 138
Single or
multi
tenanted Multi Multi Multi Multi
Weighted
average
rental
per mSquared
(Rand) -
contractual
September
2011 85.00 0.00* 75.01 110.40
Vacancy by
rentable
area (mSquared) 600 6 563 710 141
Vacancy %
of total
GLA (mSquared) 13.4% 100.0% 22.4% 0.7%
Annualised
property
yield on
purchase
price 8.8% 9.8%* 11.5% 10.5%
External
Valuer Quadrant Jones Lang Jones Lang Jones Lang
Properties LaSalle LaSalle LaSalle
Valuation
(Rand
million) 40.950 18.400 19.880 139.100
Price
(Rand
million) 42.206 18.119 22.582 133.442
* Currently vacant - effective yield assumes the building is fully let within
the first year.
Johannes-
Burg
Empire Johannes-
Road burg Pretoria
Details Offices Houghton Sanlynn**
Location Parktown Houghton Lynnwood
Johannes- Johannes- Manor
Burg burg Pretoria
Gauteng Gauteng Gauteng
Sector Offices Offices Offices
GLA (mSquared) 5 959 28 068 8 619
Single or
multi tenanted Multi Multi Multi
Weighted
average
rental per
mSquared (Rand) -
contractual
September 2011 78.44 69.89 98.83
Vacancy by
rentable
area (mSquared) 1 403 1 913 -
Vacancy %
of total
GLA (mSquared) 23.5% 6.8% 0.0%
Annualised
property
yield on
purchase price 10.2% 8.4% 8.9%
External
Valuer Jones Lang Jones Lang Quadrant
LaSalle LaSalle Properties
Valuation
(Rand million) 38.100 223.900 104.600
Price
(Rand million) 43.378 230.133 108.000
** The acquisition of this property is subject to the satisfactory renewal of a
Sanlam lease (74% of the building) which is currently in process.
Pretoria
Rosslyn
Joshua Sandton
Midrand Doore Pretoria Ascot
Details IBG Warehouse Sancardia Offices
Location Midrand Rosslyn Arcadia Bryanston
Gauteng Pretoria Pretoria Sandton
Gauteng Gauteng Gauteng
Sector Offices Industrial Offices Offices
GLA (mSquared) 8 515 7 541 28 723 5 539
Single or
multi
tenanted Multi Single Multi Multi
Weighted
average
rental per
mSquared (Rand) -
contractual
September
2011 80.04 82.07 63.19 63.69
Vacancy by
rentable
area (mSquared) 1 497 - 8 027 -
Vacancy %
of total
GLA (mSquared) 17.6% 0.0% 27.9% 0.0%
Annualised
property
yield on
purchase
price 8.2% 8.5% 8.2% 8.4%
External
Valuer Quadrant Quadrant Jones Lang Quadrant
Properties Properties LaSalle Properties
Valuation
(Rand
million) 80.600 24.700 173.000 49.400
Price
(Rand
million) 80.715 25.529 179.550 49.136
Sandton Sandton
Rivonia Sunninghill
Details Tuscany Park Total
Location Rivonia Sunninghill
Sandton Sandton
Gauteng Gauteng
Sector Offices Offices
GLA (mSquared) 11 088 14 790 183 692
Single or
multi tenanted Multi Multi
Weighted
average
rental per
mSquared (Rand) -
contractual
September 2011 80.75 81.79 78.96
Vacancy by
rentable
area (mSquared) 1 354 - 26 441
Vacancy %
of total
GLA (mSquared) 12.2% 0.0% 14.5%
Annualised
property
yield on
purchase price 8.4% 8.7% 8.8%
External valuer Jones Lang Jones Lang
LaSalle LaSalle
Valuation
(Rand million) 114.850 142.800 1 457.590
Price (Rand
million) 114.708 143.415 1 490.303
6. Related Party Transaction and independent valuation report
As Sanlam was a holder of more than 10% of the units in Vukile during the last
12 months, the Transaction is classified as a related party transaction in terms
of the JSE Listings Requirements. The company has therefore appointed two
independent registered valuation experts, Jones Lang LaSalle (Proprietary)
Limited and Quadrant Properties (Proprietary) Limited ("the Valuers"), to value
the Property Portfolio. The details of the valuation of the Property Portfolio
will be disclosed in the circular to be sent to unitholders to approve the
Transaction (the "Circular"). Based on these valuations, the Vukile directors
will state whether the terms and conditions of the Transaction are fair to
unitholders.
7. Circular and general meeting
The Circular to unitholders containing details of the Transaction and all
resolutions and the notice of general meeting will be posted to all unitholders
in due course.
8. Financial effects of the Transaction and continued cautionary announcement
The interim results for the company are due to be released on 21 November 2011.
Financial effects of the Transaction will be provided on or about 30 November
2011. Accordingly, unitholders are advised to continue exercising caution when
dealing in the company`s linked units until the financial effects of the
Transaction have been disclosed
Johannesburg
14 November 2011
Merchant Bank and Transaction Sponsor:
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Reporting Accountants: Grant Thornton
Independent Valuation Experts: Quandrant Properties (Pty) Ltd and Jones Lang
LaSalle
Date: 14/11/2011 07:30:02 Produced by the JSE SENS Department.
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