| Tue 17 Dec 2002, 15:22 | | Capital - ACQUISITION OF 2 LONG STREET AND SOUTHWA |
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CAPITAL PROPERTY FUND ("Capital")
A unit trust scheme in property shares registered
in terms of the Unit Trusts Control Act, 54 of 1981(the "Act")
managed by Property Fund Managers Limited
(Registration No. 1980/009531/06)
("PFM")
Sharecode : CPL
ISIN : ZAE000001731
ACQUISITION OF 2 LONG STREET AND SOUTHWAY MALL
1. Introduction
On 9 August 2002 and 27 September 2002, Capital announced that it had, through
Bands Properties (Pty) Limited, subject to the fulfilment (or waiver, where
appropriate) of the conditions precedent set out below, concluded agreements
(the "acquisition agreements") for the acquisition (the "acquisitions") of the
property letting businesses conducted in respect of 2 Long Street and Southway
Mall, from Garforres Investments (Pty) Limited and Titren Road Properties (Pty)
Limited respectively, subsidiaries of Centrecity Property Fund ("Cenprop").
The opportunity to make the acquisitions arose from Cenprop resolving to
implement a process to dispose of its entire property portfolio and be wound up
in terms of section 25(2) of the Act (or appropriate replacing or succeeding
legislation) (the "winding-up").
2. Rationale
The acquisitions will improve the quality of Capital`s portfolio and the
distribution of the Capital units (which are to be issued in consideration for
the acquisitions, as further set out below) to Cenprop unitholders will increase
the liquidity of Capital units. This is part of a strategy in terms of which
Capital`s portfolio will be expanded with the objective of creating a fund
focused on office, retail and industrial properties located in high demand
areas.
3. The terms and conditions of the acquisitions
3.1 The acquisitions
In terms of the acquisition agreements, Bands Properties (Pty) Limited, a
subsidiary of Capital, will acquire 2 Long Street and Southway Mall, with effect
from 1 January 2003, for R59 million and R9 million, respectively, to be settled
on the transfer date of the properties by the issue of 37,777,778 Capital units
at R1,80 per unit.
3.2 Conditions precedent
The acquisition agreements are subject to the fulfilment (or waiver) of the
following conditions precedent by not later than 28 February 2003 (or such later
date as agreed between the parties to the acquisition agreements):
* the approval of the Cenprop unitholders to the winding-up of Cenprop and,
to the extent necessary, to the disposal of the Cenprop property portfolio,
including the acquisitions;
* the agreements for the disposals of all the properties in the Cenprop
property portfolio other than 2 Long Street and Southway Mall becoming
unconditional in accordance with their terms (save for the conditions relating
to the unconditionality of the acquisition agreements);
* the granting by the High Court of an order for the winding-up; and
* the securing of all necessary approvals by:
the Capital unitholders in a meeting to be convened pursuant to the circular
referred to in paragraph 6 below (the "meeting");
the Registrar of Unit Trust Companies;
the Trustee of Capital, being ABSA Bank Limited; and
the JSE Securities Exchange South Africa ("JSE").
The unconditional approval of the Competition Commission to the acquisitions has
been obtained.
3.3 Warranties
The acquisition agreements contain standard warranties for acquisitions of this
nature.
3.4 Related Party Transaction
As PFM is the management company of both Capital and Cenprop, the JSE, in terms
of the discretion available to it, has ruled that the acquisitions are related
party transactions as defined in the Listings Requirements of the JSE.
The acquisitions are therefore subject to the approval of Capital unitholders
(save for PFM, who will not be entitled to vote its units at the meeting).
3.5 Pro forma financial effects of the acquisitions on Capital
The pro forma financial effects of the acquisitions on the historical earnings,
headline earnings, net asset value and revalued net asset value per Capital unit
are illustrated in the table below:
Before After
acquisitions acquisitions Change
Per unit Per unit %
(Cents) (Cents)
Historical 14,01(1) 13,43(3) (4.14)
earnings
Historical 14,01(1) 13,43(3) (4.14)
headline
earnings
Historical net 253,46(1) 237,50(4) (6.30)
asset value
Revalued net 222,53(2) 212,90(5) (4.34)
asset value
The acquisition of 2 Long Street and Southway Mall will be dilutionary in the
short term but will improve future earnings. The dilution of the historical
earnings and headline earnings per share relates predominantly to the historical
income applied to the purchase prices determined by forward yields. The
directors of PFM believe that the acquisition of 2 Long Street is strategically
important as it is located in a highly desirable precinct of Cape Town. An
investigation as to the viability of increasing the number of parking bays in 2
Long Street so as to improve its letting potential is underway. Southway Mall is
to be upgraded so as to reposition it in the Durban metropolitan retail market.
Improved tenancies are expected to result from the upgrade.
The adverse impact of interest rates on property valuations has resulted in a
decrease in the revalued net asset value of Capital as further explained in
paragraph 7 below.
(1) The historical earnings and headline earnings per Capital unit as set out
in the "Before acquisitions" column of the table, are based on Capital`s
unaudited interim results for the six months ended 30 June 2002. The historical
net asset value per Capital unit as set out in the "Before acquisitions" column
of the table, is based on Capital`s unaudited balance sheet at 30 June 2002, in
which the existing property portfolio is stated at fair value.
(2) The revalued net asset value per Capital unit as set out in the "Before
acquisitions" column of the table, is based on Capital`s unaudited balance sheet
at 30 June 2002, in which the existing property portfolio has been restated to
reflect the values as provided by registered valuers at September 2002.
(3) The historical earnings and headline earnings per Capital unit as set out
in the "After acquisitions" column of the table, are based on the assumption
that the properties were acquired on 1 January 2002 and the acquisitions were
settled by the requisite issue of Capital units on that date. It was further
assumed that interest on the costs of the acquisitions was incurred at the
various prime rates over the period.
(4) The historical net asset value per Capital unit as set out in the "After
acquisitions" column of the table, is based on the assumption that the
properties were acquired on 1 January 2002 and the acquisitions were settled by
the requisite issue of Capital units on that date. It was further assumed that
the costs of the acquisitions, which were written off to trust capital, were
incurred on that date and the concomitant interest liability for the period was
raised.
(5) The revalued net asset value per Capital unit as set out in the "After
acquisitions" column of the table, is based on the assumption that the
properties were acquired on 1 January 2002 and the acquisitions were settled by
the requisite issue of Capital units on that date as well as the restatement of
the property portfolio to reflect the values as provided by the registered
valuers (see paragraph 7). It was further assumed that the costs of the
acquisitions, which were written off to trust capital, were incurred on that
date and the concomitant interest liability for the period was raised.
4. Opinions and recommendations
Sasfin Bank Limited, which has been appointed by PFM as the independent expert,
has considered the terms and conditions of the acquisitions insofar as they
pertain to the Capital unitholders. Sasfin Bank Limited is of the opinion that
the terms and conditions of the acquisitions are fair and reasonable to the
Capital unitholders.
The board of directors of PFM, in its capacity as management company of Capital,
is of the opinion that the terms and conditions of the acquisitions are fair and
reasonable to Capital unitholders. Accordingly the directors of PFM recommend
that Capital unitholders vote in favour of the resolutions to approve the
acquisitions to be proposed at the meeting.
5. Salient Dates and Times
The salient dates and times of the acquisitions for Capital unitholders are set
out in the table below:
2003
Last day to lodge form of proxy for Monday, 17
unitholders by 13:30 February
Meeting of Capital unitholders at 13:30 Tuesday, 18
February
Results of meeting published on SENS Tuesday, 18
February
Results of meeting published in the Wednesday, 19
press February
Notes:
1. The date of listing of the Capital units will be announced on the Stock
Exchange News Service ("SENS") and in the press.
2. The dates and times may be changed at the instance of Capital. Any changes
will be published on SENS and in the press.
6. Issue of circular and withdrawal of cautionary announcement
A circular incorporating a notice of the meeting will be sent to Capital
unitholders in due course. Accordingly, Capital unitholders are no longer
advised to exercise caution when dealing in their units.
7. Revaluation of Capital property portfolio
Capital obtained valuations of its property portfolio from independent valuers
at September 2002. These valuations reflected a decrease in the value of the
property portfolio from R370 994 927 at 30 June 2002 to R325 578 000.
Johannesburg
17 December 2002
Corporate Advisor Sponsor
Corpcapital Corporate Finance Sasfin Bank Limited
Legal Advisor Reporting Accountants
Corpcapital Corporate Finance KPMG Inc.
Trustee Independent Company Advisor to
ABSA Bank Limited PFM (in its capacity as
management company of Capital)
Sasfin Bank Limited
Date: 17/12/2002 01:50:18 PM Produced by the JSE SENS Department
