| Tue 17 Dec 2002, 15:57 | | Cenprop - Announcement |
|
CENTRECITY PROPERTY FUND
("Cenprop")
A unit trust scheme in property shares registered
in terms of the Unit Trusts Control Act, 54 of 1981(the "Act")
Sharecode : CEN
ISIN : ZAE000001335
managed by Property Fund Managers Limited
(Registration No. 1980/009531/06)
("PFM")
WINDING-UP OF CENPROP IN TERMS OF SECTION 25(2) OF THE ACT AND
DISPOSAL OF ITS ENTIRE PROPERTY PORTFOLIO
1. Introduction
As set out in previous announcements, Cenprop has, subject to the fulfilment (or
waiver, where appropriate) of the conditions precedent set out below, resolved
to implement a process pursuant to which the unit portfolio of Cenprop is to be
wound up in terms of s25(2) of the Act (or appropriate succeeding or replacing
legislation) (the "winding up") and has concluded agreements to dispose of its
entire property portfolio (the "disposals") (collectively the "transaction").
2. Rationale for the transaction
Over time the Cenprop portfolio has become unbalanced with The Rosebank Mall and
JHI House comprising 75% of the value of the portfolio with medium to high
yielding properties making up the balance. In addition, in relation to other
listed property funds, Cenprop has a low market capitalisation which has
adversely affected its liquidity.
Consequently, the PFM Board has determined that the interests of holders of
Cenprop units ("Cenprop unitholders") would be best served by disposing of the
properties in the Cenprop property portfolio to other preferably larger listed
property funds in exchange for units in such funds, where possible, and with a
cash alternative for some or all of the purchase considerations, thereby giving
the Cenprop unitholders the opportunity to remain invested in such properties
and disposing of the balance for cash. Accordingly, PFM has concluded the
various agreements referred to below to give effect to this.
The transaction will result in Cenprop unitholders having the opportunity to
remain indirectly invested in The Rosebank Mall and JHI House, 2 Long Street and
Southway Mall through the distribution to Cenprop unitholders of combined units
in Hyprop Investments Limited ("Hyprop") (to be issued by Hyprop in partial
settlement of the acquisition of The Rosebank Mall and JHI House (the "Hyprop
agreement")) and Capital Property Fund ("Capital") units (to be issued by
Capital in full settlement of the acquisition of 2 Long Street and Southway
Mall). To the extent that Cenprop unitholders receive a cash distribution
arising out of their election in respect of the Hyprop agreement or the balance
of the proceeds from the disposals of the property portfolio, they will be able
to retain or reinvest this money. Further details of the distribution to Cenprop
unitholders of the bulk of the proceeds of the disposals are set out in
paragraph 0 below (the "distributions").
3.The de-listing of Cenprop
As soon as practicable after implementation of the transaction and the
distributions, Cenprop will be de-listed.
4. The disposals
4.1 The disposal of The Rosebank Mall and JHI House to Hyprop
4.1.1. Terms and conditions
The Rosebank Mall (Pty) Limited, a wholly-owned subsidiary of Cenprop, has
entered into the Hyprop agreement (as subsequently revised) in terms of which it
has agreed to dispose of The Rosebank Mall and JHI House to Hyprop with effect
from 1 January 2003 (the "effective date") for a purchase price of R320 million,
payable by the issue of Hyprop combined units at R10,25 each, provided that
Cenprop unitholders shall be entitled to elect to receive cash in respect of
their proportionate share of the distributions or a combination of cash and
Hyprop combined units as set out below. The final proportion of Hyprop combined
units to cash will depend upon such election.
Hyprop may in its discretion increase the purchase price payable by it at any
time prior to the meeting of Cenprop unitholders.
The purchase price will be discharged on the date on which the properties
comprising The Rosebank Mall and JHI House are transferred to Hyprop as follows:
* an amount in cash sufficient to:
* discharge The Rosebank Mall (Pty) Limited`s liability in terms of its
overdraft facility with The Standard Bank of South Africa Limited, up to a
maximum of R50 million;
* distribute cash to Cenprop unitholders to meet their election to take cash
rather than Hyprop combined units on the distributions (plus interest thereon at
an effective rate of 11% per annum, calculated from the effective date to the
transfer date (including the effective date)) after set-off of:
- an amount payable by The Rosebank Mall (Pty) Limited to Hyprop in respect of
the Cradock Heights litigation (details of which are set out below);
- any amount owing by The Rosebank Mall (Pty) Limited in terms of the initial
adjustment account to be prepared in terms of the Hyprop agreement;
an amount of R10 million to be retained by PFM to enable it to fulfil its
obligations in terms of the Hyprop agreement; and
- the agent`s commission to JHI Real Estate Limited; and
* the balance of the purchase price shall be paid by the issue of Hyprop
combined units.
The purchase price payable by Hyprop in terms of the Hyprop agreement includes
an amount in respect of the refurbishment of The Rosebank Mall, which is
substantially complete. To the extent that any of such refurbishment expenditure
has not, by the business day following the date on which the last of the
conditions precedent are fulfilled (or waived), been expended by The Rosebank
Mall (Pty) Limited, this amount will be paid to Hyprop by The Rosebank Mall
(Pty) Limited.
The properties will be transferred into the name of Hyprop as soon as possible
after fulfilment (or waiver) of the last of the conditions precedent (set out
below).
4.1.2 The election
Cenprop unitholders are entitled to elect (in their sole and absolute
discretion) if they wish to receive cash instead of the Hyprop combined units in
respect of any portion of their proportionate share of the purchase price
relating to the Hyprop agreement. Such election must have been made by Cenprop
unitholders by no later than the election date, which date will be announced in
due course.
4.1.3. Cradock Heights Litigation
During October 2002, Cradock Heights (Pty) Limited obtained an order from the
High Court against Cenprop and The Rosebank Mall (Pty) Limited for the removal
of the new glass structure at the Cradock Road entrance of The Rosebank Mall.
PFM and The Rosebank Mall (Pty) Limited have recently obtained leave to appeal
the judgement.
In terms of the Hyprop agreement, Hyprop will provide an undertaking to Cradock
Heights (Pty) Limited that it will abide by and execute the court order, if the
appeal is not upheld or is abandoned, in return for which The Rosebank Mall
(Pty) Limited has agreed to pay Hyprop on the transfer date an amount of R4,5
million (plus VAT), to be paid by way of set-off from the cash portion of the
purchase price.
4.2 The disposal of 2 Long Street and Southway Mall
Garforres Investments (Pty) Limited ("Garforres Investments") and Titren Road
Properties (Pty) Limited, wholly-owned subsidiaries of Cenprop, have entered
into agreements in terms of which they dispose of 2 Long Street and Southway
Mall ("Capital agreements"), with effect from the effective date, to Bands
Properties (Pty) Limited, a wholly owned subsidiary of Capital. The purchase
considerations are R59 million for 2 Long Street and R9 million for Southway
Mall, to be settled on the transfer date by the issue of 37,777,778 Capital
units at R1,80 per Capital unit.
4.3 The disposal of NBS Building and Innes Chambers
Temple Inn Investments (Pty) Limited and Belmark Properties (Pty) Limited have
agreed to dispose of Innes Chambers and the NBS Building, respectively, to
ApexHi Properties Limited ("ApexHi"), with effect from the transfer date, for an
effective cash purchase consideration of R16,841,701. This disposal has become
unconditional and the properties are in the process of being transferred to
ApexHi.
4.4 The disposal of Summit Road Properties (Pty) Limited
Cenprop has entered into an agreement in terms of which it has disposed of the
entire issued share capital of and shareholders` claims on loan account against
Summit Road Properties (Pty) Limited (which owns the property known as Andersen
Park ("Andersen Park")) to The Trustees of the Ahern Family Trust and The
Trustees of the Carcor Family Trust for a purchase consideration of
R12,5 million payable in cash. The effective date of this disposal was
1 December 2002. The agreement was implemented in accordance with its terms on
2 December 2002.
5. Conditions precedent to the Hyprop and Capital agreements ("conditions
precedent")
The Hyprop and Capital agreements are subject to the fulfilment (or waiver) of,
inter alia, the following conditions precedent by no later than 30 April 2003
(in respect of the Hyprop agreement) and 28 February 2003 (in respect of the
Capital agreements) (or such later date as agreed between the parties):
* the conditions to which the agreements for the disposal of the balance of the
Cenprop portfolio are subject having been fulfilled (or waived) as the case may
be (save for the conditions relating to the unconditionality of the Hyprop and
Capital agreements);
* the granting by the High Court of an order for the winding up;
* the securing of all the necessary approvals from:
- the Capital unitholders (in respect of the Capital agreements);
- the holders of Hyprop combined units (in respect of the Hyprop agreement);
- Cenprop unitholders to the winding-up and the Hyprop and Capital agreements;
- the Registrar of Unit Trust Companies (the "Registrar"), inter alia, to the
circular referred to in paragraph 0 below (the "circular") and the winding-up;
- the Cenprop Trustee (the "Trustee") to the transaction; and
- the JSE Securities Exchange South Africa ("JSE") to the circular and the
listing of the Hyprop combined units and Capital units to be issued in
settlement of the respective purchase considerations.
The unconditional approval of the Competition Commission to both the Hyprop and
the Capital agreements has been obtained.
6. The distributions
Subject to the fulfilment (or where appropriate, waiver) of the conditions
precedent to the Hyprop and the Capital agreements and the transfer of The
Rosebank Mall and JHI House to Hyprop and 2 Long Street and Southway Mall to
Capital, Cenprop will distribute to Cenprop unitholders, registered on the
record date for the distribution, the bulk of the proceeds from the disposals,
including the Capital units and, depending on the election by Cenprop
unitholders, Hyprop combined units and/or cash. A small portion of the proceeds
from the disposals will be retained by PFM to cover the costs of the winding-up
and the settlement of any claims and adjustment accounts and any balance
remaining will be distributed to Cenprop unitholders. The record dates for these
distributions will be announced in the press in due course.
7. Purchase of shares in Hyprop Management Company
An agreement has been concluded between the current shareholders of the Hyprop
Management Company (Pty) Limited ("Hyprop Management Company") for the sale of
10% of the total issued share capital of Hyprop Management Company, in the
proportions in which the shares are currently held by them, to JH Isaacs Group
Holdings (Pty) Limited for a purchase consideration of R1 million payable in
cash on the 5th business day after the fulfilment (or waiver) of the last of the
conditions precedent to the Hyprop agreement.
8. Compensation for relinquishment of management rights
The transaction will result in the termination of the existing management
arrangement between PFM and Cenprop and the consequent loss of a substantial
income-generating asset for PFM.
Hyprop Management Company has accordingly agreed to compensate PFM for the loss
of its management arrangement, by paying an amount of R2,8 million to PFM in
cash on the 5th business day following the fulfilment (or waiver) of the last of
the conditions precedent to the Hyprop agreement.
9. Management agreement
Hyprop, Hyprop Management Company and JHI Real Estate Limited ("JHI") have
entered into a management agreement in terms of which JHI is appointed to manage
The Rosebank Mall and JHI House with effect from 1 January 2003 for a period of
5 years.
The management agreement is subject to the fulfilment of the following
conditions precedent, namely:
* the Hyprop agreement becoming unconditional; and
* the lease agreement in terms of which JHI occupies a portion of The Rosebank
Mall and JHI House being amended to provide, inter alia, for the extension of
the lease period until 31 December 2007.
Alternative offers
Introduction
Offers have been received in respect of The Rosebank Mall and JHI House from
Acucap Investments (Pty) Limited ("Acucap Investments") and Momentum Property
Investments (Pty) Limited ("Momentum"), and in respect of 2 Long Street from
Kovacs Investments 286 (Pty) Limited ("Kovacs" and the "Kovacs offer"). These
offers are irrevocable, save for the proviso (the "proviso") that Momentum may
withdraw its offer if Cenprop unitholders holding more than 50% of Cenprop units
irrevocably support an alternative offer or an alternative offer is recommended
to Cenprop unitholders for acceptance prior to the meeting of Cenprop
unitholders. These offers expire on 28 February 2003, and are conditional upon,
inter alia, the approval of Cenprop unitholders in general meeting, the
Registrar, the Trustee and the Competition Commission. Acucap Investments has
also submitted irrevocable offers for the remaining properties in the Cenprop
property portfolio (other than Andersen Park) should any sale in respect of
those properties fail for any reason. The salient details of the offers are set
out below.
Only in the event that the Hyprop agreement and/or the Capital agreement in
respect of 2 Long Street cease to be effective, inter alia, due to Cenprop
unitholders rejecting either one or both of such agreements in general meeting,
will The Rosebank Mall (Pty) Limited and PFM be in a position to accept any of
the alternative offers in respect of The Rosebank Mall and JHI House and will
Garforres Investments and PFM be in a position to accept the Kovacs offer.
10.2 Offers by Acucap Investments
Acucap Investments, a wholly-owned subsidiary of Acucap Properties Limited
("Acucap Properties"), has made conditional offers to acquire, with effect from
the effective date, The Rosebank Mall and JHI House and the entire Cenprop
property portfolio, excluding Andersen Park.
The offer price for The Rosebank Mall and JHI House is R350 million, 50% to be
discharged in cash and the remainder in Acucap Properties linked units to be
issued at R10 per linked unit ("Acucap units"). The offer price for the Cenprop
property portfolio excluding Andersen Park, is R402 million, R188 million to be
discharged in cash and R214 million in Acucap units.
10.3 The Momentum offer
Cenprop unitholders have been notified of Momentum`s interest in The Rosebank
Mall and JHI House. Momentum has now submitted a cash offer of R340 million for
such properties payable on transfer. Risk and benefit is to pass on the
effective date. As noted in paragraph 10.1 above, the offer is irrevocable until
28 February 2003, subject to the proviso and various conditions precedent.
Further details of the offer will be disclosed in the circular.
10.4. The Kovacs offer
As noted in paragraph 10.1 above, Kovacs has submitted an irrevocable
conditional offer for 2 Long Street. The offer price is R61 million payable in
cash on transfer and risk and benefit is to pass on the effective date.
11. Irrevocable undertakings
51% of Cenprop unitholders have given written support to vote their units at the
Cenprop general meeting of unitholders to be convened pursuant to the circular
in favour of all resolutions necessary or incidental to approve and implement
the transaction.
55% of Hyprop combined unitholders have given irrevocable undertakings to vote
their shares and debentures at the Hyprop general meetings of shareholders and
debenture holders to be convened to approve the Hyprop agreement in favour of
all resolutions necessary or incidental to approve and implement the Hyprop
agreement.
12. Pro forma financial effects of the transaction on Cenprop unitholders
The pro forma financial effects of the transaction on the historical
distribution and net asset value received by a Cenprop unitholder, should
Cenprop unitholders elect to receive the entire purchase price in respect of the
Hyprop agreement in Hyprop combined units, are illustrated below:
Pro forma Pro forma
before after
transaction transaction Change
Per unit Per unit %
(Cents) (Cents)
Historical 14,51(1) 14,35 (2) (1.10)
distribution
Historical net asset 242,62 (1) 235,25 (3) (3.04)
value
The dilution to both the historical distribution and net asset value is
immaterial and relates predominantly to the historical income applied to the
purchase prices determined by forward yields.
(1) The historical distribution received by a Cenprop unitholder as set out in
the "before transaction" column of the table, is based on Cenprop`s unaudited
interim results for the six months ended 30 June 2002.
The historical net asset value per Cenprop unit as set out in the "before
transaction" column of the table is based on Cenprop`s unaudited balance sheet
at 30 June 2002, in which the existing property portfolio is stated at fair
value.
(2) The historical distribution received by a Cenprop unitholder as set out in
the "after transaction" column of the table, is based on the assumption that the
transaction occurred on 1 January 2002 and the disposals were settled by the
requisite issue of Capital units and Hyprop combined units as well as the
receipt of the cash in respect of the Summit Road, NBS and Innes Chambers
disposals on that date. The distributions received by Cenprop unitholders from
the Capital units and Hyprop combined units were based on their results for the
six months ended 30 June 2002 after adjusting for the acquisition of 2 Long
Street and Southway Mall and The Rosebank Mall and JHI House respectively and
the costs associated therewith. The cash remaining after settling all applicable
outstanding liabilities (including the litigation liability) and costs was
assumed to have earned interest at an average rate of 11% per annum.
(3) The historical net asset value per Cenprop unit as set out in the "after
transaction" column of the table, is based on the assumption that the
transaction occurred on 1 January 2002 and the disposals were settled by the
requisite issue of Capital units and Hyprop combined units as well as the
receipt of the cash in respect of the Summit Road, NBS and Innes Chambers
disposals on that date. It was further assumed that the costs of the
transaction, which were written-off trust capital, were incurred on 1 January
2002 and all applicable assets collected in cash and all applicable outstanding
liabilities (including the litigation liability) paid on that date. Thereafter,
the remaining cash, Capital units and Hyprop combined units will be distributed
to Cenprop unitholders.
No income taxation or capital gains taxation consequences on a Cenprop
unitholder have been provided for in the abovementioned calculations as each
Cenprop unitholders` taxation circumstances will be unique to such unitholder.
Cenprop unitholders are accordingly advised to consult their professional
advisors in respect of their personal tax position regarding the treatment of
the distribution.
The pro forma financial effects of the transaction on the historical
distribution and net asset value received by a Cenprop unitholder, should
Cenprop unitholders elect to receive the entire purchase consideration in
respect of the Hyprop agreement in cash, are illustrated below:
Pro forma Pro forma
before after
transaction transaction Change
Per unit Per unit %
(Cents) (Cents)
Historical 14,51(1) 13,75 (2) (5.24)
distribution
Historical net asset 242,62 (1) 235,25 (3) (3.04)
value
The dilution to both the historical distribution and net asset value is
immaterial and relates predominantly to the historical income applied to the
purchase prices determined by forward yields.
(1) The historical distribution received by a Cenprop unitholder as set out in
the "before transaction" column of the table, is based on Cenprop`s unaudited
interim results for the six months ended 30 June 2002. The historical net asset
value per Cenprop unit as set out in the "before transaction" column of the
table is based on Cenprop`s unaudited balance sheet at 30 June 2002, in which
the existing property portfolio is stated at fair value.
(2) The historical distribution received by a Cenprop unitholder as set out in
the "after transaction" column of the table, is based on the assumption that the
transaction occurred on 1 January 2002 and the disposals were settled by the
requisite receipt of the cash and Capital units (in respect of the disposal of 2
Long Street and Southway Mall) on that date. The cash remaining after settling
all applicable outstanding liabilities (including the litigation liability) and
costs was assumed to have earned interest at an average rate of 11% per annum.
The income distribution from the Capital units was based on the results for the
six months ended 30 June 2002 after adjusting for the acquisition of 2 Long
Street and Southway Mall and the costs associated therewith.
(3) The historical net asset value per Cenprop unit as set out in the "after
transaction" column of the table, is based on the assumption that the
transaction occurred on 1 January 2002 and the disposals were settled by the
requisite receipt of the cash and Capital units (in respect of the disposal of 2
Long Street and Southway Mall) on that date. It was further assumed that the
costs of the transaction, which were written-off trust capital, were incurred
and all applicable assets collected in cash and all applicable outstanding
liabilities (including the litigation liability) paid on that date. Thereafter,
the remaining cash and Capital units will be distributed to Cenprop unitholders.
No income taxation or capital gains taxation consequences on a Cenprop
unitholder have been provided for in the abovementioned calculations as each
Cenprop unitholders` taxation circumstances will be unique to such unitholder.
Cenprop unitholders are accordingly advised to consult their professional
advisors in respect of their personal tax position regarding the treatment of
the distributions.
13. Opinions and recommendations
As PFM is the management company of both Cenprop and Capital, the JSE has ruled
that, in respect of the Capital disposal, PFM is a related party and can
therefore not vote its units at either the meeting of Capital unitholders or the
meeting of Cenprop unitholders.
Deloitte & Touche Corporate Finance ("Deloittes") has been appointed by PFM as
an independent advisor to Cenprop in order to consider the terms and conditions
of the transactions insofar as they pertain to the Cenprop unitholders.
Deloittes is of the opinion that the terms and conditions of such transactions
are fair and reasonable to the Cenprop unitholders and supports the
recommendation of PFM to vote in favour of the resolutions necessary and
incidental to implement the transaction.
The board of directors of PFM, in its capacity as management company of Cenprop,
is of the opinion that the terms and conditions of the transaction are fair and
reasonable to Cenprop unitholders. Accordingly the directors of PFM recommend
that Cenprop unitholders vote in favour of the resolutions to be proposed at the
meeting of Cenprop unitholders to approve the transaction. The directors of PFM
undertake, in respect of the units that they hold or control (excluding units
held by PFM), to vote in favour of the transaction.
14. Salient Dates and Times
The salient dates and times of the transaction for Cenprop unitholders are set
out in the table below:
2003
Last date to lodge forms of proxy for Monday, 17
unitholders by 15:00 February
Meeting of Cenprop unitholders at Tuesday, 18
15:00 February
Results of meeting published on the
Johannesburg Securities Exchange News Tuesday, 18
Service ("SENS") February
Results of the meeting published on Tuesday, 18
the Johannesburg Stock Exchange News February 2002
Service ("SENS")
Results of meeting published in the Wednesday, 19
press February
These dates and times may change at the instance of PFM. Any changes will be
published on SENS and in the press.
The dates of the winding-up application, the election, the distribution, and the
suspension and termination of the listing of Cenprop units will be announced on
SENS and in the press in due course.
15. Issue of circular and withdrawal of cautionary announcement
A circular incorporating a notice of a meeting of Cenprop unitholders will be
sent to Cenprop unitholders in due course. Accordingly Cenprop unitholders are
no longer advised to exercise caution when dealing in their units.
Johannesburg
17 December 2002
Corporate Law Advisors and Sponsor
Consultants Sasfin Bank Limited
Edward Nathan & Friedland
(Pty) Limited
Trustee Independent Advisor to PFM (in
ABSA Bank Limited its capacity as management
company of Cenprop)
Deloitte & Touche Corporate
Finance
Independent reporting
accountants
KPMG Inc.
Date: 17/12/2002 01:51:43 PM Produced by the JSE SENS Department
