| Thu 6 Nov 2003, 8:29 | | GROWTHPOINT PROPERTIES LIMITED - COMPANY ANNOUNCEM |
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GROWTHPOINT PROPERTIES LIMITED - COMPANY ANNOUNCEMENT
GROWTHPOINT PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT
ISIN: ZAE000037669
("Growthpoint" or "the company")
TRANSACTION WHEREBY GROWTHPOINT WILL ACQUIRE INVESTEC BANK LIMITED"S
("INVESTEC"S") HEAD OFFICE BUILDINGS IN SANDTON AND CAPE TOWN
1. INTRODUCTION
Growthpoint has entered into various acquisition agreements ("the
acquisition agreements") in terms of which it has acquired Investec"s head
office building in Sandton ("the Investec Sandton building"), the right to
the exclusive use of 580 parking bays for tenants of the Investec Sandton
building, and Investec"s offices in Cape Town ("the Investec Cape Town
building") (collectively, "the acquisitions") for an aggregate
consideration of R975 million ("the purchase consideration").
The acquisition agreements are subject, inter alia, to the conditions
precedent as set out in paragraph 7 below.
2. STRATEGY AND RATIONALE
Growthpoint management wishes to enhance the Growthpoint physical property
portfolio as well as the quality, long term sustainability and growth of
the income stream available to Growthpoint linked unitholders.
In terms of the acquisition agreements Growthpoint will be acquiring the
Investec Sandton building and the Investec Cape Town building ("the
Investec buildings"), including cession of the lease agreements which are
20 year triple net, fully repairing and maintaining leases ("the leases")
as a going concern. Simultaneously, Growthpoint will be entering into
various loan agreements ("the loan agreements") and interest rate SWAP
agreements ("the SWAP agreements") which will have the effect of fixing
Growthpoint"s maximum interest rate exposure for the full duration of the
leases, which is expected to improve the growth in distributions as the
rental payable by Investec escalates over the period of the leases.
It is the intention of Growthpoint to offer investors exposure to a
sectorally well balanced, geographically diversified, high quality physical
property portfolio and a portfolio of listed property loan stock companies
and property unit trusts. In growing its market capitalisation, Growthpoint
moves closer to its previously stated goal of being included in the
FTSE/JSE Top 40 index of the JSE Securities Exchange South Africa ("the
JSE").
The acquisitions will increase Growthpoint"s total asset base to
approximately R6,6 billion, comprising R5,8 billion of physical property
assets and R0,8 billion of listed property assets. In addition, the overall
quality of Growthpoint"s income stream and commercial portfolio will be
enhanced whilst the total gross lettable area of the commercial portfolio
will increase to 527 022m2 or 35,6% of the total gross lettable area of
Growthpoint"s physical property portfolio. By value, the commercial
portfolio will comprise 40,5% of the total property portfolio of
Growthpoint, while the retail portfolio will comprise 54,1% of the value of
Growthpoint"s property portfolio, with the balance of 5,4% of the portfolio
being made up of warehousing, industrial and hotel properties.
3. TERMS OF THE ACQUISITION AGREEMENTS
3.1 The Transaction Agreements
In terms of the acquisition agreements, loan agreements and SWAP
agreements (collectively "the transaction agreements") Growthpoint
will, subject, inter alia, to the conditions precedent as set out in
paragraph 7 below, acquire:
* the Investec Sandton building comprising the remaining extent of
Portion 18 of Erf 4, Sandown Township from 100 Grayston Drive
Property (Proprietary) Limited ("Grayston");
* 5 800 ordinary shares in Merchant Place Parkade Share Block
(Proprietary) Limited ("Merchant"), which in terms of a use
agreement entitles Growthpoint to the exclusive use of 580
parking bays for tenants of the Investec Sandton building ("the
Investec Sandton parkade"), from Grayston; and
* the Investec Cape Town building comprising Erf 155345, which
forms a portion of Erf 148343, Cape Town from Block E Power
Station Properties (Proprietary) Limited ("Block E").
The purchase consideration is to be settled by Growthpoint as follows:
- R292,5 million through the issue, in aggregate, to Grayston and
Block E ("the sellers") of 50 869 565 new Growthpoint linked
units ("the Growthpoint consideration units") at an issue price
of 575 cents per Growthpoint linked unit ("the equity
consideration"); and
- the balance of the purchase consideration of R682,5 million in
cash ("the cash consideration") to be funded by Growthpoint from
new loan facilities provided by Investec in terms of the loan
agreements.
3.2 Payment Of The Purchase Consideration
The purchase consideration will be paid by Growthpoint to the sellers
as follows:
* an amount of R482,5 million in cash on the date of registration
of transfer of the Investec buildings into the name of
Growthpoint ("the transfer date");
* R292,5 million shall be paid through the allotment and issue by
Growthpoint of renounceable letters of allocation in respect of
the Growthpoint consideration units within 5 days of the
fulfilment of the last of the conditions precedent referred to in
paragraph 7 below;
* an amount of R100,0 million in cash on the first anniversary of
the transfer date without any interest being payable by
Growthpoint on this amount; and
* an amount of R100,0 million in cash on the second anniversary of
the transfer date without any interest being payable by
Growthpoint on this amount.
The present value of the purchase consideration at a discount rate of
12,0%, taking into account the deferred payments referred to above,
amounts to R944,0 million whilst the present value of the net rental
income streams over the 20 year period of the leases amounts to R1 077
million using the same discount rate.
4. TERMS OF THE LOAN AGREEMENTS
In terms of the loan agreements, Investec will provide Growthpoint with an
interest only loan facility of R702,5 million ("the debt funding") which
will be utilised to settle the cash consideration and transaction costs of
R20 million. As security for the debt funding, mortgage bonds will be
registered over the Investec buildings in favour of Investec to the value
of R702,5 million.
The initial period of the loan is 7 years and Growthpoint has the right to
re-finance the loan with third party financial institutions at the expiry
of the loan or alternatively, renew the loan, on an interest only basis, at
a variable rate for a further 13 years.
5. TERMS OF THE SWAP AGREEMENTS
In terms of the SWAP agreements, Growthpoint has entered into two separate
interest rate SWAP agreements with Investec over periods commencing on the
first day of the month following the fifth anniversary of the transfer date
and expiring on the last day of the month of the seventh and twentieth
anniversary of the transfer date, respectively.
The net effect of the loan agreements and the SWAP agreements is that
Growthpoint will have effectively hedged out any interest rate risk during
the period of the leases and will have fixed its maximum interest rate
exposure.
The effective fixed interest rate over the entire period of the lease
amounts to 12,96%.
6. LOAN TO VALUE RATIO
Post-implementation of the acquisitions and taking into account the total
amount of the loans in terms of the loan agreements, the overall loan to
value ratio of Growthpoint will amount to 46,6%.
7. CONDITIONS PRECEDENT
The transaction agreements are subject, inter alia, to the following
conditions precedent being fulfilled:
* to the extent required, the approval for the transaction agreements by
all regulatory authorities, including the Competition Authorities,
being obtained by no later than 28 February 2004;
* the registration of the security bond over the Investec buildings in
favour of Investec by no later than 28 February 2004; and
* the JSE granting a listing in respect of the Growthpoint consideration
units within 5 days after the transfer date.
The effective date of the acquisitions will be the transfer date.
8. FINANCIAL EFFECTS OF THE ACQUISITIONS
The pro forma financial effects of the acquisitions as set out in the table
below have been prepared for illustrative purposes only and to provide
information on how the acquisitions may have impacted the historic
financial results of Growthpoint. Because of their nature, the pro forma
financial effects may not give a fair reflection of Growthpoint"s
financial position after the acquisitions or the effect on future earnings.
The table below sets out the pro forma financial effects of the
acquisitions on the headline earnings, distribution, net asset value and
tangible net asset value per Growthpoint linked unit on the basis that:
8.1 The figures reflected in the "Published before" column are the figures
as reflected in the reviewed results of Growthpoint for the twelve
months ended 30 June 2003, published in the press on 10 September
2003;
8.2 The "Pro forma after" column assumes that:
8.2.1 the transaction had been implemented with effect from 1 July
2002;
8.2.2 the net property income attributable to the Investec
buildings for the twelve months ended 30 June 2003 was
earned by Growthpoint for the twelve month period commencing
1 July 2002;
8.2.3 an average interest rate of 12,96% per annum before tax for
the twelve months ending 30 June 2003 on R502,5 million of
the debt funding; and
8.2.4 the acquisitions had been implemented on 30 June 2003 for
the pro forma net asset value and tangible net asset value
calculations;
Pro
Published forma Increase/
Before After (Decrease)
Per Growthpoint linked unit (cents) (cents) (%)
Distribution for the financial year ended
30 June 2003 66,6 67,0 0,6
Net asset value and tangible net
asset value at 30 June 2003 524 531 1,3
Headline earnings for the financial
year ended 30 June 2003* 56,3 52,5 (6,6)
* Reported headline earnings per linked unit are considered to be
relatively meaningless in the context of a property loan stock company as
it includes profit on the sale of listed property investments, fair value
adjustments for listed property investments, fair value adjustments for
debentures as well as notional interest on non-interest bearing long term
loans, which do not effect distributable earnings.
9. GROWTHPOINT CONSIDERATION UNITS
The Growthpoint consideration units to be issued to the sellers pursuant to
the conclusion of the transaction agreements will be allotted and issued at
a price of 575 cents per linked unit. In relation to the Growthpoint
consideration units, the sellers will only qualify for the pro rata portion
of the Growthpoint distributions relating to the distribution period in
which the transfer date occurs. Therefore, the sellers will only qualify
for the pro rata Growthpoint distribution for the period from the transfer
date to the end of that particular distribution period. The Growthpoint
consideration units will therefore be issued at an effective "clean" price
of 575 cents per linked unit.
10. CIRCULAR TO GROWTHPOINT LINKED UNITHOLDERS
In terms of the Listings Requirements of the JSE, a circular will be posted
to the Growthpoint linked unitholders within 28 days of the date of this
announcement for information purposes.
