| Thu 11 Sep 2003, 15:29 | | STATUS OF THE ACQUISITION OF CANAL WALK SHOPPING |
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HYPROP INVESTMENTS LIMITED - STATUS OF THE ACQUISITION OF CANAL WALK SHOPPING
CENTRE, PROFIT FORECAST, FINANCIAL EFFECTS OF THE ACQUISITION AND SALIENT DATES
Hyprop Investments Limited
(Registration number 1987/005284/06)
Share code: HYP ISIN: ZAE00003430
("Hyprop")
STATUS OF THE ACQUISITION OF CANAL WALK SHOPPING CENTRE, PROFIT FORECAST,
FINANCIAL EFFECTS OF THE ACQUISITION AND SALIENT DATES
1. Introduction
Hyprop combined unitholders are referred to the joint Hyprop, Nedcor Limited
and Ellerine Bros (Pty) Ltd announcement dated 4 July 2003 detailing the terms
of the acquisition ("the acquisition") by Hyprop and Ellerine Bros (Pty) Ltd of
Canal Walk Shopping Centre.
2. Status of the acquisition
The acquisition has been unconditionally approved by the Competition
Commission.
The only conditions to which the acquisition are still subject are:
* the approvals required in terms of the Listings Requirements of the JSE
Securities Exchange South Africa from Hyprop combined unitholders. In this
regard irrevocable undertakings to vote in favour of the acquisition have been
obtained from combined unitholders holding in excess of 35% of the total number
of combined units; and
* the passing of the requisite resolution in terms of section 228 of the
Companies Act by the shareholders of Canal Walk Limited. In this regard an
irrevocable undertaking to vote in favour of the resolution has been obtained
from Nedbank Limited, the controlling shareholder of Canal Walk Limited.
3. Forecast
The historical financial effects set out in paragraph 5 do not provide a
meaningful reflection of the effect of the acquisition on Hyprop"s future
earnings.
In order to provide combined unitholders with more meaningful financial
effects, a forecast income statement for Hyprop for the 12 months ending
31 December 2004 is set out below.
The forecast has been reviewed by Grant Thornton Kessel Feinstein whose
report is available at the registered offices of Hyprop.
Forecast
year ending
31 December
2004
R"000
Turnover 468 811
Operating income 309 705
Interest paid (142 236)
Net operating income 167 469
Debenture interest paid to linked unit holders (120 000)
Income before taxation 47 469
Taxation (116)
Net income after taxation 47 353
Minority interest (47 083)
Net profit 270
Combined units in issue ("000) 89 009
Earnings and headline earnings per combined unit (cents) 135,12
Earnings and headline earnings per share (cents) 0,30
Notes:
The forecast income statement for the year ending 31 December 2004 is based
on the following assumptions:
* Canal Walk Shopping Centre will have been transferred to Hyprop by
1 January 2004.
* Revenue is based on existing lease agreements.
* There will be no unforeseen economic factors that will affect the lessees"
abilities to meet their commitments in terms of the existing lease agreements.
* Leases expiring during the period have been forecast on a lease by lease
basis and, in circumstances where the tenant has indicated that it is satisfied
with the premises, it is assumed that these leases will continue at the current
rentals and escalations for the majority of tenants.
* Future vacant space has been forecast on a property by property basis and has
been assumed to remain vacant unless it is deemed probable that such space will
be let in the future.
* There will be no change in the fair value of the properties between
31 December 2002 and 2004.
* Operating expenditure has been determined based on discussions with the
property managers and the vendor and on historical costs.
* Hyprop will have borrowings, excluding borrowings to finance the acquisition,
of R276,3 million at 1 January 2004. Of this amount
R184 million will be at fixed rates of interest between 10,7% and 13,98% and
R92,3 million will be at a floating rate of 13% linked to the overnight call
rate.
* Hyprop"s share of the acquisition price of Canal Walk Shopping Centre, being
R928 million, will be financed by a loan secured by a mortgage bond over the
property bearing interest at a fixed rate of 11% per annum.
4. Proposed capital raising
The purchase consideration payable for Canal Walk Shopping Centre is R1,16
billion, of which Hyprop, which will be acquiring an undivided 80% share in the
property, is obliged to pay R928 million.
Hyprop has sufficient funding available to discharge its obligations.
However, as a result of the acquisition Hyprop"s debt to open market value ratio
("debt ratio") will exceed 50%. Hyprop considers a debt ratio of 45% as optimal
and accordingly it intends to reduce its gearing to this level at the
appropriate time by the most effective measures including a possible rights
offer to Hyprop combined unitholders.
A resolution increasing the debt ratio limit in Hyprop"s Articles of
Association to 55% of the value of its property portfolio will be included in
the circular to combined unitholders referred to in paragraph 7 below in order
to accommodate the temporary increase in the debt ratio resulting from the
implementation of the acquisition.
5. Financial effects
The pro forma financial effects of the acquisition set out in the table below
have been prepared for illustrative purposes only to provide information on how
the acquisition may have impacted on Hyprop. Because of their nature, the pro
forma financial effects may not give a fair reflection of Hyprop"s financial
position after the acquisition or the effect on future earnings.
Before the After the
acquisition acquisition Percentage
Note (cents)1 (cents) change
Earnings per combined unit 2 66,69 40,98 (38,55)
Headline earnings per combined unit 3 66,73 42,39 (36,48)
Net asset value per combined unit 4 1 095,52 1 090,83 (0,43)
Net tangible asset value per
combined unit 4 1 095,52 1 090,83 (0,43)
The decrease in the earnings and headline earnings per Hyprop linked unit
results from:
* the use of historical income where the purchase price was based on projected
future income; and
* applying an interest rate on the borrowings of 14,15% being the fixed rate
for the historical period which is significantly higher than the actual fixed
rate of 11,00%.
The board of directors is of the view that the forecast income statement
provides a more meaningful reflection of the financial effects of the
acquisition.
Notes:
1. The figures in the "before" column were extracted from the unaudited results
of Hyprop for the six months ended 30 June 2003.
2. Earnings per combined unit is based on, inter alia, the following
assumptions:
* the acquisition was implemented on 1 January 2003 and the applicable gearing
(bearing interest at a rate of 14,15% for the six-month period) was advanced on
that date;
* the net property income of Canal Walk Shopping Centre for the six months
ended 31 March 2003 was R60 326 000;
* property management fees have been charged at 1% of gross revenue and an
adjustment reducing net income of R913 000 was effected to bring the treatment
of tenant installations into line with Hyprop"s policy; and
* a fair value adjustment of R1 217 000 (net of deferred taxation) relating to
the costs of the acquisition capitalised to the investment property and being
written-off in the income statement has been applied (the "fair value
adjustment").
3. Headline earnings per combined unit are based on the same assumptions as the
earnings per combined unit calculation but exclude the fair value adjustment.
4. Net asset and tangible asset value per combined unit are based on the
assumption that the acquisition was implemented on 30 June 2003 and the
applicable gearing advanced on that date. In addition, the gearing associated
with the costs of the transaction has been taken into account and the costs have
been capitalised to the investment property (and subsequently written-off in the
fair value adjustment), written-off to the income statement and set off share
premium as appropriate.
6. Salient dates and times
The salient dates and times relating to the acquisition are as follows:
2003
Last day to lodge forms of proxy for Hyprop shareholders -
09:00 on Friday, 24 October
Last day to lodge forms of proxy for Hyprop debenture
holders - 09:30 on Friday, 24 October
General meeting of Hyprop shareholders - 09:00 on Tuesday, 28 October
General meeting of Hyprop debenture holders - 09:30 on Tuesday, 28 October
Result of general meeting published on SENS Tuesday, 28 October
Result of general meeting published in the press Wednesday, 29 October
Anticipated date of transfer of 80% of Canal Walk
Property to Hyprop Friday, 31 October
These dates and times may be changed at the instance of Hyprop. Any changes will
be published in the press and on SENS.
7. Circular and withdrawal of cautionary
A circular providing full details of the acquisition will be sent to Hyprop
combined unitholders in due course. Combined unitholders are no longer required
to exercise caution in their dealings in Hyprop combined units.
Rosebank
11 September 2003
Corporate advisor and sponsor to Hyprop
JAVACAPITAL
Legal advisor to Hyprop
JAVACAPITAL
Reporting Accountant
Grant Thornton Kessel Feinstein
Chartered Accountants (SA)
Accountants, Auditors & Business Advisers
Date: 11/09/2003 02:33:32 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
