| Mon 9 Jul 2012, 9:37 | | Investec Property Fund Ltd - Acquisition Disposal |
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IPF
Acquisition, Disposal and Cautionary Announcement
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 NEW PROPERTIES, DISPOSAL OF 373 PRETORIUS STREET PROPERTY AND CAUTIONARY ANNOUNCEMENT
A. ACQUISITION OF NEW PROPERTIES
1. THE GIURICICH PORTFOLIO
1.1 THE GIURICICH ACQUISITION
Linked unitholders of Investec Property Fund are hereby advised that the Fund has entered into an agreement with S Giuricich Holdings Proprietary Limited (Giuricich) to acquire a portfolio of properties known as the Giuricich Portfolio (the Giuricich Acquisition).
The effective date of the acquisition shall be the date of transfer of the Giuricich Portfolio into the name of the Fund, which, subject to fulfillment of the conditions precedent set out in 1.5 below (Conditions Precedent), is expected about mid-October 2012.
1.2 RATIONALE FOR THE GIURICICH ACQUISITION
The Giuricich Acquisition is consistent with Investec Property Funds growth and investment strategy of building a quality portfolio by investing in well-priced income producing properties that optimise capital and income returns over the medium- and long-term for linked unit holders. The acquisition will enable the Fund to achieve critical mass to be competitive and achieve portfolio effect.
The properties within the Giuricich Portfolio are quality assets, situated in prime locations around Gauteng and are 95% tenanted by listed national tenants. The portfolio is being acquired at a through yield of 8.3%.
1.3 PURCHASE CONSIDERATION
The purchase consideration for the Giuricich Acquisition is R742,800,000, to be settled as follows:
* R208,930,000 will be settled through the issue of 17,000,000 new Investec Property Fund linked units to Giuricich at a price of R12.29 per linked unit (the Consideration Linked Units) calculated with reference to the 30 day volume weighted average traded price of an IPF linked unit as at 3 July 2012;
* The remaining R533,870,000 payable in cash to be funded through a combination of equity and existing debt facilities.
1.4 GIURICICH PORTFOLIO
The Giuricich Portfolio consists of 12 retail properties, the details of which are set out below.
No.
Owner / Seller
Tenant
Erf Description
GLA (m2)
Rental/m2 (R/m2)
Purchase price (R)
1
Gaal Investments (Pty) Ltd
Plastic Land
Portion 4 of Erf 1180 Lone Hill Extension 56 Township, The Province of Gauteng
1250
97.06
13000000
2
Lussin Piccolo 1 Investments (Pty) Ltd
Dial a bed, Tile World, Super Quick
Portion 3 of Erf 1180 Lone Hill Extension 56 Township, The Province of Gauteng
2412
95.67
23500000
3
Lussin Piccolo Africa Properties (Pty) Ltd
Unitrans Auto Motive
Portion 3 of Erf 6471 Pietersburg Extension 27 Township, Limpopo Province
4780
40.47
20000000
4
Summero (Pty) Ltd
Chateaux D'Ax, Wetherlys, other
Portion 73 of Erf 5597 Bryanston, The Province of Gauteng
6190
93.45
61000000
5
Summero (Pty) Ltd
VW McCarthy
Portion 1 of Erf 681 Allen's Nek Ext. 19, The Province of Gauteng
2595
87.7
26000000
6
AAIR Property Investments (Pty) Ltd
Nissan (Super Group)
Erf 2324 Helderkruin Extension 30 Township, Registration Division I.Q., Province of Gauteng
4893
66.25
34800000
7
AAIR Property Investments (Pty) Ltd
Honda & Nissan (Super Group)
Remaining Extent of Erf 1845 Greenstone Hill Extension 24 Township, The Province of Gauteng
5538
82.44
50000000
8
Summero (Pty) Ltd
Builders Warehouse
Portion 1 of Erf 16, President Park, Emalahleni Extension 5
11492
44.27
80000000
9
Lussin Piccolo Polokwane Properties (Pty) Ltd
Builders Warehouse
Remaining Extent of Erf 6471 Pietersburg Extension 27 Township
8500
69.9
93000000
10
Lusslin Investments (Pty) Ltd
Builders Warehouse
Erf 2173 Montana Park Extension 3 Township, Province of Gauteng
8907
74.29
104500000
11
Lussin Piccolo Polokwane Properties (Pty) Ltd
Builders Warehouse, CTM
Remainder of portion 349 of the farm Bloemfontein no. 654 Province of the Free State
9378
66.44
98000000
12
Lusslin Investments (Pty) Ltd
Builders Warehouse, Tiger Wheel, PG Glass, Sparkling Auto Care
Erf 40 & 41 Glen Eagles Extension 9 Township, Gauteng Province
11114
79.69
139000000
A
Total
A
A
77049
70.16
742800000
1.5 CONDITIONS PRECEDENT
The Giuricich Acquisition is subject to the following Conditions Precedent:
a) The satisfactory completion of a due diligence investigation, to be performed by the Fund on each property within the Giuricich Portfolio;
b) Confirmation that the transaction has been unconditionally approved by the competition authorities in terms of the Competition Act 89 of 1998;
c) The requisite majority of Investec Property Fund unit holders approving in a general meeting the necessary resolutions required for the implementation of the Giuricich Acquisition;
d) The repayment by Giuricich of certain financing arrangements over various properties, to the extent necessary;
e) Obtaining any other regulatory approvals that may be required including, but not limited to, the approval of the JSE Limited (the JSE); and
f) The JSE granting a listing of the Consideration Linked Units.
1.6 WARRANTIES
Giuricich have provided warranties and indemnities to the Fund that are standard to a transaction of this nature.
1.7 FORECAST FINANCIAL INFORMATION AND PRO FORMA FINANCIAL EFFECTS OF THE GIURICICH PORTFOLIO
The forecast financial information and pro forma financial effects in relation to the Giuricich Portfolio are still in the process of being finalised and will be published in due course.
1.8 CATEGORISATION
The Giuricich Acquisition is a Category 1 acquisition in terms of the Listings Requirements of the JSE (JSE Listings Requirements) requiring unit holder approval.
2. THE MEGAMARK MALL PROPERTY
2.1 THE MEGAMARK MALL ACQUISITION
The Fund has entered into an agreement (Sale of Enterprise Agreement) with Ivory Pewter Trading 18 Proprietary Limited (the Vendor) for the acquisition of the MegaMark Mall property located in Kriel, Mpumalanga (MegaMark Mall or the MegaMark Mall Acquisition).
The effective date of the acquisition shall be the date of transfer of MegaMark Mall into the name of the Fund which, subject to fulfillment of the conditions precedent, is expected on or about 1 December 2012.
2.2 PURCHASE CONSIDERATION
The purchase consideration for MegaMark Mall amounts to R217,973,543, payable as follows:
- R183,825,513 payable upon transfer, in respect of the capitalised contractual rental income from the main centre of the development (Core Centre). A further amount of R12,782,609 may also be paid in respect of leases still to be entered into between the Vendor and new tenants in the Core Centre (Reconfigurated Portion), provided these tenants are in occupation and paying rent at transfer date. This payment in respect of the Reconfigured Portion shall be made by no later than March 2013; and
- The balance will be payable on achievement of certain tenancy and net income targets
The purchase consideration will be settled utilising existing debt facilities. The Fund may wish to refinance a portion of the funding with a combination of corporate bond issuance and the issue of new equity if deemed appropriate at the time.
2.3 RATIONALE FOR THE ACQUISITION
The MegaMark Mall property is the dominant retail facility in Kriel, a city with coal mines and power stations, whose economy is driven by Eskoms ongoing coal-based infrastructure expansion plans. MegaMark Mall is well-located off the main road running through Kriel and is dominant against other competitive retail amenities in the area. The centre is 96% let and anchored by Shoprite and Superspar. The property offers a forward yield of 9.02%, which the management of the Fund believe offers good value and enhances the Funds retail offering.
The MegaMark Mall Acquisition is consistent with Investec Property Funds growth and investment strategy of building a quality portfolio by investing in well-priced income producing properties that optimise capital and income returns over time for linked unit holders. Importantly, it further enhances the Funds retail portfolio, adding to the two shopping centre acquisitions announced earlier this year.
2.4 INFORMATION RELATING TO THE MEGAMARK MALL PROPERTY
Description of the property:
Remaining Extent of Erf 3 Kriel Township, Registration Division J.S.,
Location:
Kriel, Mpumalanga
Single or multi-tenanted:
Multi-tenanted
GLA (m2):
20,078m2
Weighted average gross rental per square metre:
R87.07
The purchase consideration of the MegaMark Mall Property as at the effective date is considered to be its fair market value, as determined by the directors of the Fund. The directors of the Fund are not independent and are not registered as professional valuers or as professional associate valuers in terms of the Property Valuers Profession Act, No 47 of 2000.
2.5 WARRANTIES
The Sale of Enterprise Agreement provides for warranties that are standard for transactions of this nature.
2.6 CONDITIONS PRECEDENT
The MegaMark Mall Acquisition remains subject to the fulfillment of the following conditions:
a) The satisfactory completion of a due diligence investigation, to be performed by the Fund on the MegaMark Mall Property;
b) Confirmation that the transaction has been unconditionally approved by the competition authorities in terms of the Competition Act 89 of 1998;
c) If for any reason, the occupancy rate at effective date should fall below 92.5% of the gross lettable area of the main centre of the development, the fund shall be entitled to cancel the MegaMark Mall Acquisition.
2.7 PRO FORMA FINANCIAL EFFECTS OF THE MEGAMARK MALL ACQUISITION
As the purchase consideration will be funded by debt, the MegaMark Mall Acquisition 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.
2.8 FORECAST FINANCIAL INFORMATION OF THE MEGAMARK MALL ACQUISITION
Forecast for the 12 months ending November 20134
R'000
Gross income1,2
29,636
Property expenditure
(9,977)
Net property income
19,659
Property income after interest and tax3
1,088
Annualised yield on property
9.02%
Notes:
1. Gross income includes rental and parking income and all tenant recoveries, while property expenditure includes all operating and consumption expenses.
2. Contractual income as at the effective date will constitute 100% of gross income for the 12 month period 30 November 2013.
3. Investec Property Fund will utilise existing debt to fund the MegaMark Mall Acquisition at an assumed effective rate of 8.52%
4. The forecast information has been calculated from the anticipated effective date of the MegaMark Mall Acquisition, being 1 December 2012
2.9 CATEGORISATION
The MegaMark Mall Acquisition is classified as a Category 2 transaction in terms of the JSE Listings Requirements. Accordingly it is not subject to approval by Investec Property Funds linked unitholders.
3. THE FIRS PROPERTY
3.1 THE FIRS ACQUISITION
The Fund has agreed the terms with Investec Property Proprietary Limited (Investec Property) for the acquisition of the Firs property located in Rosebank, Johannesburg (the Firs or the Firs Acquisition).
The effective date of the acquisition shall be the date of transfer of the Firs into the name of the Fund, which subject to fulfillment of the conditions precedent, is expected on or about 1 October 2012.
3.2 PURCHASE CONSIDERATION
The purchase consideration for the Firs amounts to R272,313,371, payable in cash against transfer of the property into the name of the Fund. The purchase consideration will be settled utilising a combination of equity and existing debt facilities.
3.3 RATIONALE FOR THE ACQUISITION
The Firs Acquisition is consistent with the Funds objective to build a quality portfolio of properties with strong contractual cash flows in order to achieve value enhancement and sustainable growth in distributions to unitholders.
Situated in a sought after node of Rosebank, the Firs is a mixed use property with A+ grade offices and a specialized boutique retail level. It is conveniently located in close proximity to the Gautrain Rosebank Station and adjacent to the Hyatt Regency. The upmarket and niche retail level with a restaurant piazza allows for seamless flow for hotel patrons and other Rosebank shoppers. The occupancy level of the Firs is 100%. Thus, the Directors of the Fund believe the investment offers good value and will enhance the earnings and growth prospects of the Fund. The Firs is being acquired at a yield of 8.75%.
3.4 INFORMATION RELATING TO THE FIRS PROPERTY
Description of the property:
Section 2 of Erf 246 Rosebank
Location:
193 Oxford Road, Rosebank (Corners Oxford Road and Biermann and Cradock Avenues, Rosebank)
Single or multi-tenanted:
Multi-tenanted
GLA (m2):
13,796m2
Weighted average gross rental per square metre (R/m2):
Retail: R270.96
Office: R183.34
The lease with Standard Bank over 4,691.3m2 of the office space (the Standard Bank Lease) is due to expire on 30 September 2013. Investec Property has undertaken to provide a rental guarantee at market related rentals for 36 months after expiry of the Standard Bank lease if for any reason the premises are not re-let during that period.
A lease agreement is being concluded with a tenant on 989.2m2 of office space that is currently vacant with rental flowing from March 2013. Investec Property will provide a rental guarantee at a market related rent in respect of this space from effective date until commencement of the rental payment on 1 March 2013.
3.5 FORECAST FINANCIAL INFORMATION OF THE FIRS ACQUISITION
Forecast for the 12 months ending 31 March 20134
R'000
Gross income1,2
35,724
Property expenditure
(11,897)
Net property income
23,827
Property income after interest and tax3
638
Annualised yield on property
8.75%
Notes:
1. Gross income includes rental and parking income and all tenant recoveries, while property expenditure includes all operating and consumption expenses
2. Contractual income currently constitutes 96.5% of gross income for the 12 month period ending 31 March 2013
3. Investec Property Fund will utilise existing debt to fund the Firs Acquisition at an assumed effective rate of 8.52%
4. The forecast information has been calculated from the beginning of Investec Property Funds next financial year being 1 April 2012
3.6 CONDITIONS PRECEDENT TO THE FIRS ACQUISITION
The Firs Acquisition remains subject to the fulfillment of the following conditions:
a) The satisfactory completion of a due diligence investigation, to be performed by the Fund on the Firs;
b) Obtaining any other regulatory approvals that may be required including, but not limited to, the approval of the JSE; and
c) The requisite majority of Investec Property Fund unit holders approving in a general meeting the necessary resolutions required for the implementation of the Firs Acquisition.
3.7 CATEGORISATION
The Firs Acquisition is classified as a related party transaction in terms of the JSE Listings Requirements as Investec Property is the manager of the Fund.
3.8 PRO FORMA FINANCIAL EFFECTS AND INDEPENDENT VALUATION
The pro forma financial effects of the Firs Acquisition and independent valuation of the Firs are still in the process of being finalised and will be published in due course.
B. DISPOSAL OF THE 373 PRETORIUS STREET PROPERTY
1.1 THE DISPOSAL
Linked unitholders are hereby advised that the Fund has entered into an agreement with Ascension Properties Limited (the Buyer) in relation to the disposal of an office property ("the Disposal Property") as detailed in paragraph 4 below ("the Disposal").
The effective date of the Disposal shall be the date of transfer of the Disposal Property into the name of the Buyer.
1.2 RATIONALE FOR THE DISPOSAL
The Fund considers the Disposal Property to be a non-core asset, which is an older CBD office building with local Government tenants and will therefore be disposed of.
1.3 DISPOSAL CONSIDERATION
The disposal consideration for the Disposal Property is R155,000,000, payable in cash against transfer of the Disposal Property into the name of the Buyer. The sale proceeds will be used to invest in high quality investment properties.
1.4 DETAILS OF THE DISPOSAL PROPERTY
The details of the Disposal Property is as follows:
Name of property:
373 Pretorius Street
Description of the property:
Erf 3255 City of Pretoria, Registration Division J.R., Gauteng
Location:
Pretoria, Gauteng
Single or multi-tenanted:
Single-tenanted
GLA (m2):
13,340m2
Weighted average gross rental per square metre (R/m2):
R105.10
The selling price of the Disposal Property is above its fair market valuation as at 31 March 2012.
1.5 CONDITIONS PRECEDENT AND WARRANTIES
The Disposal is subject to a due diligence, the buyer procuring financing and approval from the Competition Commission
The agreement provides for warranties and indemnities that are standard for transactions of this nature.
1.6 PRO FORMA FINANCIAL EFFECTS OF THE DISPOSAL
The Disposal 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.
1.7 CATEGORISATION
The Disposal constitutes a Category 2 transaction in terms of the JSE Listings Requirements.
C. CAUTIONARY ANNOUNCEMENT
Unit holders are advised to exercise caution when dealing in the Funds securities until a full announcement regarding the forecast financial information of the Giuricich Portfolio and the pro forma financial effects of the Giuricich Acquisition and the Firs Acquisition is made. A combined circular detailing the terms of the Giuricich Acquisition (Category 1 transaction) and the related party transaction, and convening a general meeting will be posted to unit holders in due course.
Johannesburg
9 July 2012
Investment Bank and Sponsor to IPF
Investec Corporate Finance
Attorneys to IPF
Fluxmans Inc
Attorneys to Giuricich
Bowman Gilfillan Inc
Date: 09/07/2012 08:36:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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