| Thu 22 May 2003, 17:45 | | Shops For Africa - The Acquisition Of Sammy Marks |
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Shops for Africa - The Acquisition of Sammy Marks" Square portions 2 and 3
SHOPS FOR AFRICA LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2000/018084/06)
Share code: SFA ISIN: ZAE000031241
("Shops for Africa" or "the Company")
THE ACQUISITION OF SAMMY MARKS" SQUARE PORTIONS 2 AND 3
1. INTRODUCTION
Further to the cautionary announcement published on SENS on 7 May 2003 and in
the press on 8 May 2003, Sasfin Bank Limited and Catalyst Property Asset
Managers (Proprietary) Limited are authorised to announce that Shops for Africa
has entered into two separate agreements for the acquisition of Portions 2 and 3
of Sammy Marks" Square.
2. THE ACQUISITION OF SAMMY MARKS" SQUARE PORTION 3
Subject to the fulfilment of the conditions precedent set out in par. 2.4 below,
Shops for Africa has entered into an agreement to acquire Sammy Marks" Square
Portion 3 from Spearhead Property Holdings Limited ("Spearhead") for R37 000 000
("the acquisition").
2.1 Acquisition strategy and rationale
Shops for Africa is actively pursuing its stated strategic objective of
increasing its portfolio value and market capitalisation on the JSE Securities
Exchange South Africa ("JSE") through the acquisition of additional focused
retail properties servicing predominantly the C and D income groups of Southern
Africa.
The acquisition represents an exciting opportunity for Shops for Africa to grow
its portfolio value and improve the tradability and liquidity of its linked
units in issue. In addition, the acquisition will:
* enhance distributions per linked unit as illustrated in par. 2.5 below;
* maintain a favourable lease expiry profile with no more than 25% of leases
expiring in any one year;
* increase the national tenant representation to 58%.
2.2 Details of the property
Sammy Marks" Square is an existing, established shopping centre with a total
lettable area of 32 657 m2 and is divided into three contiguous portions. The
acquisition entails the purchase of Portion 3, measuring 7 353 m2 and equating
to 22.5% of the entire centre. As set out in par. 3 below, Shops for Africa
recently acquired a 50% indirect interest in Portion 2 of the same centre
measuring 17 744 m2 and representing 54.3% of the entire centre.
Sammy Marks" Square Portion 3:
* Consists of portion 3 of Erf 3357, Pretoria, measuring 5 663 m2 and located in
the Pretoria CBD with a total lettable area of 7 353 m2;
* Has a headlease with M & R Properties Limited over the entire lettable area
until 30 April 2005 at a rental of R66.53 per m2, escalating at 10% per annum
and generating an initial forward net income yield of 16.9%;
* Has 21 sub-tenants of which 86% are national, the largest of these being
Joshua Doore, Nu Metro, Russels, Bradlows and Mr Price, and has a vacancy factor
of 1%; and
* Has a staggered sub-lease expiry profile with the majority of the major sub-
leases expiring after the date of expiry of the headlease, which extended expiry
dates have been consented to by the landlord.
2.3 Terms of the acquisition
Shops for Africa will acquire Sammy Marks" Square Portion 3 from Spearhead for
R37 000 000 which is to be settled as follows:
* R13 000 000 by the issue of 6 046 512 new Shops for Africa linked units at an
issue price of 215 cents per linked unit; and
* the balance of R24 000 000 in cash which will be funded by a loan from a third
party financial institution, details of which will be provided in the circular
referred to in par. 2.6 below.
The number of issued linked units in the Company will increase from 65 896 115
to 71 942 627 post the settlement of the purchase consideration.
2.4 Conditions precedent
The acquisition is subject to the fulfilment of, inter alia, the following
conditions precedent:
* The owners of the remaining two portions of the centre, each of whom have a
pre-emptive right to purchase the property, waiving such right;
* Obtaining the necessary regulatory approvals, including but not limited to
that of the Competition Commission if required;
* Approval by the JSE for the listing of the 6 046 512 new Shops for Africa
linked units; and
* The successful raising of a loan to finance the cash component of the purchase
consideration as set out in par. 2.3 above.
As the acquisition constitutes a category 2 transaction in terms of the Listings
Requirements of the JSE, the necessary disclosure thereof will be made in the
circular to shareholders referred to in par. 2.6 below.
2.5 Financial effects
Based on the published interim financial information of the Company for the six
months ended 31 October 2002, the pro forma financial effects of the acquisition
on net asset value per linked unit, distribution per linked unit, earnings per
linked unit and headline earnings per linked unit are set out below.
Before the After the
Acquisition acquisition Change
(cents)(1) (cents)(2)(3) (%)
Net asset value per linked unit 236.69 233.98 (1.1)
Distribution to linked unit-holders 15.19 15.32 0.9
Earnings per linked unit (0.10) (0.98) (856.2)
Headline earnings per linked unit (0.39) (1.24) (216.3)
Linked units in issue ("000) 65 896 72 115 9.4
Weighted average linked units in
issue ("000) 58 661 64 880 10.6
1 The "Before" financial information is based on the published unaudited interim
results of the Company for the six months ended 31 October 2002.
2 The pro forma "After" column assumes that:
* In relation to the pro forma "After" net asset value calculation, the
acquisition had been implemented on 31 October 2002;
* In relation to the pro forma "After" earnings and headline earnings
calculation, the acquisition had been implemented and the property had been
transferred into the name of Shops for Africa with effect from 1 May 2002;
* The reviewed net property income attributable to the property for the six
months ended 31 December 2002, was earned by Shops for Africa;
* An interest rate of 13% per annum was paid on debt funding;
* The linked units pertaining to the acquisition had been issued for the full
six-month period ended 31 October 2002, resulting in a weighted average number
of linked units for the period of 64 879 605 and the total number of linked
units at the end of the period of 72 114 605.
3 The pro forma financial effects include estimated expenses associated with the
acquisition of R1 127 552, of which R553 000 have been capitalised and R574 552
have been expensed. 172 903 linked units will be issued in partial settlement of
the expenses.
4 The pro forma financial effects have been prepared for illustrative purposes
only and because of its nature, may not give a true picture of the Company"s
financial position or results of operations.
2.6 Documentation
A circular containing full details of the acquisition is being prepared and will
be posted to Shops for Africa linked unit-holders in due course.
3. ACQUISITION OF A 50% INDIRECT INTEREST IN SAMMY MARKS" SQUARE PORTION 2
Sammy Marks" Square Portion 2 was purchased for R57 million from Sycom Property
Fund by Rowmoor Investments 373 (Proprietary) Limited ("Rowmoor 373"), a joint
venture in which Shops for Africa owns 50%. The purchase price represents a
15.3% initial forward net income yield and the property is 92% let on a gross
rental value basis. Portion 2 has a national tenant representation of 62%. A
third of the leases expire in 2006, with the major tenant, Woolworths, due for
renewal in 2012.
Cape of Good Hope Bank Limited provided Rowmoor 373 with equity funding of R0,75
million and initial loan funding of R40,6m as well as funding for the balance of
the purchase price, which is payable in three equal annual instalments from the
end of the first year following the date of transfer, being 29 November 2002. In
return for its stakeholding, Shops for Africa"s only obligation in terms of the
acquisition is to provide a surety of R7,5 million to Cape of Good Hope Bank
Limited.
As the acquisition of Portion 2 will be accounted for as an investment in
associate under the equity method, it will not have a material effect on the
earnings, distribution or net asset value per Shops for Africa linked unit in
the short term.
4. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Shareholders are referred to the cautionary announcement published on SENS on 7
May 2003 and in the press on 8 May 2003 and are advised that caution is no
longer required in this regard when dealing in their Shops for Africa linked
units.
Cape Town
22 May 2003
Date: 22/05/2003 05:30:47 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
