| Tue 3 Apr 2001, 0:00 | | The Acquisition By Octodec Of An 80% Interest In K |
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OCTODEC INVESTMENTS LIMITED
(Registration number 1956/002868/06)
(Incorporated in the Republic of South Africa)
("Octodec")
The acquisition by Octodec of an 80% interest in killarney Mall
1. INTRODUCTION
Further to the cautionary announcement that was published in the press on
Friday, 23 March 2001, Benefique Capital is authorised to announce that Octodec
has acquired Killarney Mall jointly with Gold Edge Holdings Limited ("Gold
Edge"), a company listed on the JSE Securities Exchange South Africa ("the
JSE"), subject to the fulfilment of certain conditions precedent set out in
paragraph 4 below.
An agreement has been concluded between Octodec and Gold Edge ("the
Consortium") in terms of which a company in which Octodec will hold an 80%
interest and Gold Edge the balance, will acquire Killarney Mall ("the
acquisition").
Killarney Mall is a shopping centre with approximately 20 800 square metres of
retail space and 10 900 square metres of office space.
2. RATIONALE FOR THE ACQUISITION
Octodec's strategy is to build a substantial a-grade portfolio of quality, well
positioned, income producing properties. The acquisition of Killarney Mall will
increase the overall quality of Octodec's property portfolio. Killarney Mall
represents a blue chip tenant mix with 75% national tenants, sustainable
rentals and good escalations. The acquisition of Killarney Mall will help
Octodec to achieve appropriate critical mass.
Furthermore the recent decline in South African interest rates has made it more
attractive for property loan stock companies like Octodec to use gearing to
acquire new properties.
3. THE ACQUISITION
3.1 Terms of the acquisition
The Consortium has acquired Killarney Mall for a total purchase consideration
of R235 million which is to be paid in cash to the vendor, Chartaprops 16
(Proprietary) Limited. Payment will be made on registration of transfer of
Killarney Mall to the Consortium.
The Consortium will fund the acquisition as follows:
Mortgage finance R185 000 000
Loan finance - Octodec R40 000 000
Loan finance - Gold Edge R5 000 000
Cash - Gold Edge R5 000 000
R235 000 000
3.2 Effective date
The effective date will be on registration of transfer of Killarney Mall to the
Consortium.
3.3 Warranties
The usual warranties in a transaction of this nature have been provided by the
vendor.
4. CONDITIONS PRECEDENT
The acquisition of Killarney Mall is subject to the following material
conditions precedent:
* approval of the acquisition by Octodec linked unit holders in general meeting
* approval of the acquisition by Gold Edge shareholders in general meeting; and
* approval of the acquisition by the Competition Commission, the JSE and any
other applicable regulatory bodies.
5. FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the acquisition
based on Octodec's published audited results for the year ended 31 August 2000,
on the assumption that the acquisition had been in effect from 1 September 1999
for the purpose of the headline earnings and earnings per linked unit
calculation, and that there were 61 492 890 linked units in issue. It has been
assumed that the net rental income for the 12 months from the effective date
will be R30 million before any finance costs. An interest rate of 13,51% has
been used in determining the finance costs. In addition, it has been assumed
that costs of R3,5 million will be incurred, which costs are associated with
the registration of the mortgage bond over the property, the transfer of the
property, commissions and advisors' fees.
Pro forma
Before the after the
acquisition acquisition Change
(cents) (cents) (%)
Headline earnings per linked unit (cents) 46,79 43,83 (6,33)
Earnings per linked unit (cents) 46,59 43,63 (6,35)
Although this acquisition will dilute the earnings of Octodec in the current
financial period, due to the attractive escalation of rental income, the
dilution in earnings should be eliminated in the financial year ending 31
August 2003 and this acquisition will yield positive returns in subsequent
periods. The short-term dilution in earnings is therefore justified due to the
benefits that will flow from this acquisition.
This acquisition will not have a material effect on the net asset value per
linked unit.
6. CIRCULAR TO UNIT HOLDERS
A circular giving full details of the acquisition and giving notice of the
general meeting to approve this acquisition will be sent to unit holders within
28 days of this announcement or such later time as may be agreed to by the JSE.
7. CAUTIONARY ANNOUNCEMENT
Unit holders of Octodec are advised that Octodec is currently in negotiations
unrelated to this acquisition which if successfully concluded may have a
material effect on the price of the linked units of Octodec.
Unit holders are therefore advised to continue exercising caution when dealing
in their linked units until a further announcement is made.
Johannesburg
3 April 2001
Corporate adviser and sponsor
Benefique Capital
Attorneys
Moss-Morris Inc.
(Registration number 94/08751/21)
