| Fri 18 Nov 2011, 9:38 | | IPF - Investec Property Fund Limited - Acquisition of General Electric |
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IPF
IPF
IPF - Investec Property Fund Limited - Acquisition of General Electric
Property
INVESTEC PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 2008/011366/06)
Share code: IPF ISIN: ZAE000155099
("Investec Property Fund" or "the Fund")
ACQUISITION OF GENERAL ELECTRIC PROPERTY
1. Introduction
Linked unit holders are hereby advised that the Investec Property Fund,
a company primarily involved in property investment, has entered into an
agreement ("Sale and Purchase Agreement") to acquire the General
Electric Property in Midrand, Johannesburg, ("the Property") from North
Mid Corporate Park (Proprietary) Limited (the "Vendor"), for R76.8
million ("the Purchase Consideration") ("the Proposed Transaction"). In
terms of the agreement the Fund has undertaken the obligation of the
Vendor to refurbish the Property as set out in 4 below for a total fixed
cost R42.3 million ("Refurbishment") such that the total cost of
acquiring and refurbishing the Property will amount to R119.1 million.
The Purchase Consideration will be paid in cash to the Vendor upon
registration of transfer of the Property into the name of the Fund. The
cost of the Refurbishment will paid at completion, which is anticipated
to be on or around December 2012. The Purchase Consideration and the
cost of Refurbishment will be will be funded by debt.
2. Rationale for the Proposed Transaction
Given the prime location of the property, the quality tenant and the
terms of the lease the Property including the Refurbishment is being
acquired at an attractive yield of 9%, which the directors believe
offers good value and will enhance the earnings and growth prospects of
the Fund. The independent valuation set out in 5 below supports this
view.
3. Description of the Property
The Property is located at 130 Gazelle Street, Northmid Corporate Park,
Midrand comprising the remaining extent of Erf 210 Randjespark Extension
72 Township, Registration Division J.R, Province of Gauteng, measuring 2
2285 hectares together with all buildings and improvements thereon. The
Property offers exceptional visibility from and exposure onto the N1
between Johannesburg and Pretoria.
The Property is an industrial warehouse facility providing Gross
Lettable Area ("GLA") of 11 180 mSquared. The GLA comrpises 58%
warehouse space and 42% of offices. .
The Property is let entirely to General Electric South Africa
(Proprietary) Limited ("GESA") who have occupied the Property since it
was built in August 1999.
GESA is a wholly owned subsidiary of the General Electric Company
("GE"), the global, diversified infrastructure, finance and media
company. GE operates in more than 100 countries and employs about
300,000 people worldwide.
The current lease with GESA expires in December 2011 and has been
renewed for 8 years, which new lease commences on 1 January 2012
escalating annually at 8.5%. The lease is a triple net lease with all
operating costs, including exterior maintenance being for the tenant`s
account.
Notwithstanding the anticipated completion date of the Refurbishment the
commencing weighted average gross rental rate per square meter for the
Property at 1 January 2012 is R68.24.
4. Refurbishment
In terms of the new lease agreement with the tenant, the Vendor is
obliged to refurbish the Property to the tenant`s specifications, at its
own cost. In terms of the Sale and Purchase Agreement the Fund has
undertaken the Vendor`s obligation to effect the Refurbishment.
The Fund has entered into an agreement ("Development Agreement") with
Investec Property Limited ("Investec Property") to effect the
Refurbishment in accordance with the tenant`s requirements. The
Development Agreement provides that Investec Property will deliver the
Refurbishment at a fixed cost of R42.3 million (exclusive of VAT). The
anticipated date of completion of the refurbishment is December 2012.
5. Valuation of the Property
An independent valuation of the Property, has been performed by Mills
Fitchet Magnus Penny (Proprietary) Limited ("Independent Valuer"), which
at R123.0 million exceeds the Purchase Consideration and the cost of
Refurbishment. The Independent Valuer is an independent registered
valuer as defined in section 13 of the Listings Requirements.
6. Conditions precedent
In terms of the Sale and Purchase Agreement the Proposed transaction
remains subject to the fulfillment of the condition that the Fund notify
the Vendor in writing that it is satisfied with the results of its due
diligence investigation.
7. Financial effects
As the Purchase Consideration and cost of Refurbishment will be funded
by debt the Proposed Transaction will not have a material effect in the
first year as it does not contribute more than 3% to the pro forma
distribution per linked unit, pro forma earnings per linked unit, pro
forma headline earnings per linked unit, pro forma net asset value per
linked unit or pro forma tangible net asset value per linked unit of the
Fund.
8. Small related party transaction
The Proposed Transaction and the Refurbishment constitutes a small
related party transaction in terms of the Listings Requirements of the
JSE Limited as Investec Limited holds 50% plus 100 linked units of the
Fund`s issued linked units and through its wholly owned subsidiary,
Investec Property, holds 50% of the Vendor`s issued share capital and is
the manager of the Fund .
The JSE Limited has been provided with a summary of the sworn valuation
of the Property by the Independent Valuer. The full report is available
for inspection at the registered office of the Fund during normal
business hours until 31 January 2012.
Johannesburg
18 November 2011
Investment Bank and Sponsor Attorneys
Investec Specialist Bank Fluxmans Inc.
Date: 18/11/2011 09:38:02 Produced by the JSE SENS Department.
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