| Wed 15 May 2013, 17:48 | | Proposed Acquisition Of Atlantis Shopping Centre Renewal Of Cautionary Announcement And A Further Cautionary Announcement |
|
SGA
Proposed Acquisition of a Atlantis City Shopping Centre and Renewal of Cautionary
SYNERGY INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)
(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 ATLANTIS SHOPPING CENTRE, RENEWAL OF CAUTIONARY
ANNOUNCEMENT AND A FURTHER CAUTIONARY ANNOUNCEMENT
INTRODUCTION
Linked unitholders are advised that Synergy has concluded an agreement for the acquisition ("the acquisition") of the rental
enterprise in respect of Atlantis City Shopping Centre, Western Cape ("the Property") from The Property Incubator Proprietary
Limited (Registration number 2004/023119/07) ("the seller").
RATIONALE FOR THE ACQUISITION
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
acquisition meets the aforementioned objectives and intentions.
TERMS OF THE ACQUISITION
The purchase price payable by Synergy for the Property will not be greater than R340 000 000 and, subject to what follows, will
not be less than R330 000 000 ("the floor price"). The purchase price is determined formulaically by applying a capitalisation
rate of 8% to the estimated net income for the first year ending 31 August 2014 ("the forecast net income"). Rates and taxes in
an amount of R1 980 000, which are not recoverable from tenants, have been included in the calculation of net income. The floor
price will be decreased by a value equal to the amount by which the rates and taxes expense (net of recoveries) actually incurred
during the first year ending 31 August 2014 exceeds R1 980 000 capitalised at 8%. The purchase price is payable in cash against
registration of transfer of the Property into Synergy~s name. The parties have agreed an effective date of transfer of
1 September 2013, on which date possession of the rental enterprise and all risk in and to the Property will pass to Synergy.
Synergy will be liable for and will pay the seller occupational interest calculated at the rate of 8% per annum on the purchase
price. The occupational interest is to be calculated from 1 September 2013 to the actual date of transfer and will be paid by
Synergy to the seller against registration of transfer of the Property in the Cape Town Deeds Registry. If transfer takes more than
one month from 1 September 2013, the occupational interest will be payable on the last day of each and every completed month
following 1 September 2013.
The purchase price is currently expected to be R334 000 000 ("the preliminary purchase price") based on the forecast net
income. The purchase price will be increased or decreased within the limits referred to above, as the case may be, by an amount
equal to the difference between the forecast net income and the actual net income for the first year ending 31 August 2014 ("the
actual net income"), taking into account any amounts paid in terms of the rental and income guarantee detailed below, capitalised
at 8% ("the adjustment amount"). Synergy will as soon as practicable after 31 August 2014, procure the preparation and
delivery to the seller of a detailed statement of the actual net income and a calculation of the adjustment amount which will
include a written certification by the auditors of the actual net income ("first year adjustment accounts"). The adjustment
amount will be payable by the seller if positive or payable by Synergy if negative within 10 business days after the date on which
the first year adjustment accounts are delivered to the seller. The adjustment amount will include interest from 1 September 2013
to the date of payment, which interest will be calculated at a nominal annual rate of 8% capitalised monthly.
The seller has provided a rental guarantee in terms of which the seller will pay Synergy an amount equal to the shortfall between
the actual rentals and tenant operating cost contributions and the guaranteed rentals and tenant operating cost contributions ("the
shortfall payment"), in respect of premises forming part of the Property as at 1 September 2013 which are either vacant or in
terms of which the seller has entered into identified sub-optimised leases, during each month for the period commencing on
1 September 2013 and ending on the date when the relevant premises is let in terms of a lease which complies with the following
criteria:
- the lease must extend for a period of at least 36 months;
- the rental and/or tenant operating cost contributions payable by the relevant tenant per square metre must not be less than
the amount guaranteed;
- the rental and/or tenant operating cost contributions payable by the relevant tenant must be paid monthly in advance on the
8th day of each and every month or such other date as is acceptable to both parties; and
2
- the lease must be on terms no less favourable to the landlord than the terms of the seller~s existing standard conditions of
lease.
The shortfall payment will be made together with interest on such amount calculated at the prime rate from the last day of the
relevant month to the date of payment by the seller.
The agreement provides for warranties and indemnities that are standard for an acquisition of this nature.
CONDITIONS PRECEDENT
The acquisition is subject to the following conditions:
- the seller notifying Synergy in writing by not later than 21 May 2013 of any pre-emptive rights granted to any current
lessees to purchase the Property and the seller having procured that any such pre-emptive rights have been waived by
4 June 2013;
- Synergy completing a due diligence investigation and advising the seller in writing that the board of directors of Synergy
("the Board") is satisfied with the outcome thereof by 11 June 2013;
- Approval and ratification by the Board of the entering into of the sale agreement an all other agreements relating to the
acquisition of the Property by 11 June 2013;
- Synergy securing loan facilities to fund the payment of not less than 60% of the purchase price by 11 June 2013;
- Synergy furnishing the seller with guarantees for the payment of the balance of the purchase price in respect of Property by
11 June 2013 which payment will be due against registration of transfer of the Property into Synergy~s name;
- the parties agreeing the various relevant inputs to be used in the formula to determine the purchase price by 11 June 2013;
and
- the parties obtaining approval from the Competition Authorities to the extent it may be required by 13 August 2013.
DETAILS OF THE PROPERTY
Details of the Property, including the Property name and address, geographical location, sector, rentable area, weighted average
rental per square meter, effective date of acquisition, preliminary purchase price and the valuation attributed to the Property as at
1 September 2013 by the executive directors, are as follows -
Purchase price
and valuation
Weighted as at 1
average rental Rentable September
Property name and Geographical per square metre Effective date of area 2013
address location Sector (R/m2) acquisition (m2) (R)
Atlantis City Shopping
Centre (Westfleur,
Atlantis, Cape Town) Western Cape Retail 123.25 1 September 2013 22 077 334 000 000
The executive directors are satisfied that the value of the Property is in line with the preliminary purchase price being paid by the
company. The directors of the company 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.
FINANCIAL EFFECTS, RENEWAL CAUTIONARY ANNOUNCEMENT AND A FURTHER CAUTIONARY
ANNOUNCEMENT
The financial effects of the acquisition on Synergy are in the process of being finalised and will be published in due course.
Synergy linked unitholders are advised to continue to exercise caution when dealing in the company~s linked units until a further
announcement is made.
Synergy linked unitholders are advised that the company is currently in negotiations for the acquisition of a further portfolio of
properties and accordingly are advised to exercise caution when dealing in the company~s linked units until a further
announcement is made.
3
CATEGORISATION OF THE ACQUISITION
The acquisition constitutes a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not require
approval by linked unitholders.
15 May 2013
Sponsor and corporate advisor
Java Capital
Legal advisor
