| Tue 28 Feb 2012, 16:43 | | SGA/SGB - Synergy - Proposed Acquisition of Property Portfolio and Renewal Of |
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SGA SGB
SIFL
SGA/SGB - Synergy - Proposed Acquisition of Property Portfolio and Renewal Of
Cautionary and Update in regard to Acquisitions Detailed in the Pre-Listing
Statement and Related Capital Raising
SYNERGY INCOME FUND LIMITED
(formerly Capital Land Retail Fund Limited)
(Incorporated in the Republic of South Africa on 13 November 2007)
(Registration number 2007/032604/06)
JSE share code for A linked units: SGA ISIN Code: ZAE000161550
JSE share code for B linked units: SGB ISIN Code: ZAE000162293
("Synergy" or "the company")
PROPOSED ACQUISITION OF PROPERTY PORTFOLIO AND RENEWAL OF CAUTIONARY AND UPDATE
IN REGARD TO ACQUISITIONS DETAILED IN THE PRE-LISTING STATEMENT AND RELATED
CAPITAL RAISING
INTRODUCTION
Linked unitholders are advised that Synergy has concluded agreements with
Rainbow Beach Trading 180 (Proprietary) Limited ("Rainbow Beach Trading") and
Westside Trading 600 (Proprietary) Limited ("Westside Trading") for the
acquisition of the letting enterprises conducted in respect of the Setsing
Crescent Shopping Centre ("Setsing Crescent") and the Gugulethu Square Shopping
Centre ("Gugulethu Square"), including the properties on which these shopping
centres are situated (collectively "the acquisitions" and "acquisition" shall
mean either one of them). The Old Mutual Life Assurance Company (South Africa)
Limited holds a portfolio of assets known as The Ideas Managed Fund ("Ideas
Fund"). Ideas Fund is the sole shareholder in Rainbow Beach Trading and has a
majority economic interest in Westside Trading.
PROPOSED TERMS OF THE ACQUISITIONS
The letting enterprises in respect of Setsing Crescent and Gugulethu Square are
being acquired with effect from the date of transfer of ownership of the
respective properties into Synergy`s name.
The aggregate purchase price for the acquisitions is in the sum of R530 000 000,
subject to various transfer date adjustments, which is apportioned as follows:
- R240 000 000 is payable in respect of the property and the letting
enterprise conducted in respect of Setsing Crescent; and
- R290 000 000 is payable in respect of the property and the letting
enterprise conducted in respect of Gugulethu Square.
It is the intention of the company to fund the aggregate purchase price of the
acquisitions by way of an issue of A and B linked units, in terms of the
placement of A and B linked units with third party placees, or otherwise ("the
placement") and debt funding.
RATIONALE FOR THE ACQUISITIONS
As stated at the time of Synergy`s listing in December 2011, the objectives of
Synergy are to grow a specialised retail property investment fund and invest in
a well-diversified portfolio of properties located in strong demographic nodes,
which nodes demonstrate good growth opportunities with a focus on midsized
community and regional shopping centres. In addition, it was the stated
intention of Synergy to increase the size of the property portfolio through the
acquisition of quality retail assets. The acquisitions meet the aforementioned
objectives and intentions.
Setsing Crescent is a 21 500m2 gross lettable area shopping centre located in
the town of Phuthaditjhaba, 60 kms outside Harrismith, in the Free State
province. Setsing Crescent is dual anchored by a Superspar and Game.
Situated in the heart of Gugulethu outside Cape Town, Gugulethu Square is a
newly built 25 300m2 gross lettable area shopping centre developed by the Ideas
Fund in 2009. Gugulethu Square is the only formal shopping centre within the
greater Gugulethu catchment area and is dual anchored by both a Superspar and
Shoprite supermarket. It is tenanted by all the major national retail groups and
has enjoyed strong growth in trading densities since opening.
With the acquisition of Setsing Crescent and Gugulethu Square, the size of
Synergy`s property portfolio will increase by approximately 35.8% in gross
lettable area (m2) and 49.6% in value. The acquisition of the Setsing Crescent
and Gugulethu Square brings the Synergy portfolio of shopping centres to 14,
with a total gross lettable area of more than 176 800m2 valued in excess of R1.7
billion, steadily strengthening its specialist retail offering within the listed
property sector.
Details of the properties being acquired from the vendors, including property
name and address, geographical location, rentable area, sector, weighted average
rental per square meter, effective date of acquisition, purchase price and the
valuations attributed to the properties as at 1 April 2012 by Mills Fitchet
Magnus Penny (Pty) Ltd, an independent professional associated valuer, are as
follows:
Property name Geographical Rentable area Sector:
and address: location: (m2)
The Setsing Phuthaditjhaba 21 500 Retail
Crescent
Shopping Centre,
Corner Setai &
Motland Road,
Phuthaditjhaba,
Free State
Gugulethu Square Cape Town 25 300 Retail
Shopping Centre
Corner NY1, NY3
and NY4
Gugulethu,
Western Cape
Total 46 800
Weighted Effective Purchase price Valuation as
average date of (R`000) at 1 April
Property name rental per m2 acquisition 2012
and address (R) (R`000)
The Setsing 92.85 Date of 240 000 257 000
Crescent transfer
Shopping
Centre
Gugulethu 105.24 Date of 290 000 308 000
Square transfer
Shopping
Centre
Total 198.09 530 000 565 000
CONDITIONS PRECEDENT
Each acquisition is subject to various conditions precedent including:
- obtaining the requisite resolutions by the vendor`s/vendors` directors and
shareholders, approving each acquisition by Synergy;
- the securing of the appropriate regulatory approvals including that of the
JSE Limited ("JSE") and the Competition Authorities for the implementation
of the acquisitions;
- the linked unitholders of the company approving each acquisition in a
general meeting;
- the company successfully placing sufficient Synergy linked units for cash
with third party placees in terms of the placement in order to fund up to a
maximum of 70% of the purchase price payable to the vendor/s in respect of
each acquisition; and
- Synergy securing debt funding of not less than 30% of each acquisition or
such greater amount as makes up the shortfall between the money raised
pursuant to the placement and the purchase price payable to the vendor/s.
The acquisitions are not inter-conditional.
FINANCIAL EFFECTS AND RENEWAL OF CAUTIONARY ANNOUNCEMENT
The financial effects of the acquisitions, as required in terms of the JSE
Listings Requirements, are subject to review by the reporting accountants and
will be published shortly thereafter.
Linked unitholders are advised to continue exercising caution when dealing in
the company`s linked units until a further announcement is made.
FURTHER DOCUMENTATION
The acquisitions constitute a category 1 transaction in terms of the JSE
Listings Requirements and as such require the approval of Synergy linked
unitholders. Accordingly, a circular to Synergy linked unitholders will be
prepared and issued in due course.
ANCILLARY MATTERS
Linked unitholders are referred to the announcement on 5 December 2011,
regarding the listing of Synergy on the JSE and the ancillary matters referred
to in such announcement. As detailed in such announcement, at the combined
meeting of linked unitholders convened for purposes of approving the
acquisitions, linked unitholders will be asked to approve amendments to the
company`s Memorandum of Incorporation and debenture trust deed.
UPDATE REGARDING ACQUISITIONS DETAILED IN PRE-LISTING STATEMENT AND RELATED
CAPITAL RAISING
The properties described as "acquisition portfolio one" in the pre-listing
statement, comprising Ruimsig Boulevard Shopping Centre, Taxi City Shopping
Centre and King Senzangakhona Shopping Centre have now all transferred to
Synergy.
Transfer of the properties comprising the "SA Corporate Real Estate Fund
portfolio one" and the "SA Corporate Real Estate Fund portfolio two", as
described in the pre-listing statement, remain subject to receipt of approval
from the Competition Authorities.
At the time of listing it was envisaged that the SA Corporate Real Estate Fund
portfolio two acquisition would be funded through the combination of a vendor
consideration placement and debt funding, and that prior to and in order to
facilitate such placement an interim distribution would be made to linked
unitholders in respect of the three month period ending 31 March 2012. In light
of the conclusion of agreements in respect of the acquisition of Setsing
Crescent and Gugulethu Square, Synergy has re-assessed this strategy and
determined that the SA Corporate Real Estate Fund portfolio two acquisition
would be better funded by way of debt only in order to ensure an efficient
capital structure for Synergy post implementation of all acquisitions.
In the circumstances, the proposed interim distribution will now be made for the
period ending 31 May 2012, prior to and in order to facilitate the placement
that will be undertaken to fund the acquisition of Setsing Crescent and
Gugulethu Square.
28 February 2012
Corporate advisor and sponsor
Java Capital
Attorneys
DLA Cliffe Dekker Hofmeyr Inc.
Date: 28/02/2012 16:43:22 Produced by the JSE SENS Department.
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