| Thu 13 Nov 2003, 14:43 | | Announcement Regarding The Acquisition |
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Paramount Property Fund Limited - Announcement Regarding The Acquisition And
Disposal Of Properties
PARAMOUNT PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1945/019928/06)
Share code: PRA
ISIN: ZAE000028577
("Paraprop")
ANNOUNCEMENT REGARDING THE ACQUISITION AND DISPOSAL OF PROPERTIES
1. Introduction
Linked unit holders are advised that Paraprop has entered into an agreement with
Swiss Re Life and Health Africa Limited ("Swiss Re") to acquire:
- 100% of the shares in Mercantile & General Investments South Africa
(Proprietary) Limited ("Mercantile"); and
- 100% of the claims against Mercantile
(together, "the Swiss Re acquisition") with effect from 1 November 2003.
Mercantile is a property owing company, with its sole property holding being the
office block situated at the corner of Protea and Main Road Claremont, Cape Town
known as the Swiss Re building ("the Swiss Re property"). The Swiss Re property
comprises 11 920 m2 of lettable space. The Swiss Re property is fully let and no
vacancies are foreseen for the year ahead.
Further to the above, Paraprop has entered into an agreement with Wasteman Prop
(Proprietary) Limited ("Wasteman") to acquire the Wasteman property situated at
Mobile Road, Airport Industria, Cape Town ("the Wasteman acquisition") with
effect from 1 October 2003. The Wasteman property comprises 4 775 m2 of
lettable space. This property is fully let to the Wasteman group on a 7 year
lease.
Paraprop has also disposed of the Lawley Street property, an industrial property
situated in Durban ("the disposal") to ApexHi Properties Limited ("ApexHi"), a
company listed on the "Financial - Real Estate" sector of the JSE Securities
Exchange South Africa ("JSE") list, with effect from 1 July 2003.
2. Rationale for the Swiss Re and Wasteman acquisitions and the disposal ("the
transactions")
The Swiss Re and Wasteman acquisitions have been effected in line with
Paraprop"s strategy of continuing to grow its property portfolio in order to
increase market capitalisation and benefit from increased diversification. The
Swiss Re property is acknowledged to be one of Cape Town"s landmark properties
and should show good growth into the future.
The disposal of Lawley Street was undertaken in line with Paraprop"s strategy to
hold quality properties with solid income growth and the property was considered
to be off-prime and non-strategic.
3. Consideration for the transactions
The Swiss Re acquisition consideration is R52 500 000, based on a forward yield
of 11,55%, to be settled in cash. Of the cash consideration, R32 000 000 will be
funded through debt and the balance of R20 500 000 will be funded from existing
cash resources.
The Wasteman acquisition consideration is R12 400 000, based on a forward yield
of 13,14% and is to be settled in cash. The cash consideration will be funded
through debt of R7 440 000 and the balance of R4 960 000 funded from existing
cash resources.
The disposal consideration is R11 000 002, settled by the receipt of 846 154
ApexHi A linked units and 846 154 ApexHi B linked units ("ApexHi linked units")
at a combined price of R13.00 for the ApexHi linked units. The ApexHi Linked
units have subsequently been sold for a combined price of R13.80.
4. Financial effects of the transactions
Based on the unaudited results of Paraprop for the 6 months ended 30 April 2003,
the pro forma financial effects of the transactions on Paraprop"s earnings per
linked unit ("EPS"), headline earnings per linked unit ("HEPS"), distribution
per linked unit, net asset value per linked unit ("NAV") and borrowings ratio
are set out below. This pro forma financial information has been prepared for
illustrative purposes only and because of its nature may not give a true picture
of Paraprop"s financial position and results of operations, nor the effect and
impact of the transactions on Paraprop going forward.
4.1 Financial effects of the Swiss Re acquisition
Before the After the After the %
ABSA ABSA Swiss Re Change
transaction transaction acquisition(3
(1) (2) )
EPS (cents) 24,1 23,1 18,2 (4) (21,2)
HEPS (cents) 24.1 23,4 18,6 (4) (20,5)
Distribution 24,0 23,4 18,6 (5) (20,5)
per linked
unit (cents)
NAV (cents) 480,8 431,1 431,1 (5) 0,0
Borrowings: 64 58 63 8,6
total fixed
assets (%)
Linked units 34 042 706 51 579 706 51 579 706
in issue
Notes
1. Based on the published consolidated unaudited results of Paraprop for the 6
months ended 30 April 2003.
2. Paraprop issued 17 537 000 new Paraprop linked units to ABSA Bank Limited
in exchange for a combination of cash and linked units in Growthpoint Properties
Limited as detailed in the circular to linked unit holders dated 12 August 2003
("the circular"). Part of the cash received will be utilised for the Swiss Re
and Wasteman acquisitions. Therefore, the "After the ABSA transaction" column
has been used in order to reflect the financial effects of the Swiss Re
acquisition.
3. Based on the assumption that the transactions took place on 1 November 2002
for purposes of adjusting EPS and HEPS and on 30 April 2003 for purposes of
adjusting NAV.
4. EPS and HEPS have been adjusted to include income attributable to Paraprop
from the Swiss Re property ("attributable income") of R584 000. The attributable
income was arrived at by pro-rating Mercantile"s audited after-tax profit for
the year ended 31 December 2002 for a six-month period in order to make it
comparable to Paraprop"s most recent reported six-month period. The attributable
income is historical and does not give a true reflection of future attributable
income as the Swiss Re property was substantially vacant during the historical
reported period.
5. EPS and HEPS have also been adjusted to take into account the interest
expense, calculated at rates relevant to the period under review, that would
have been incurred on the debt funding of the Swiss Re acquisition, for a six
month period.
Based on the assumption that all net income after financing expenses be
distributed to linked unit holders. The adjustments to EPS and HEPS as noted in
4) above, were also made in arriving at these amounts.
6. The effect on net tangible asset value, has not been disclosed as no
intangible assets were reflected on Paraprop"s balance sheet at 30 April 2003.
4.2 Financial effects of the Wasteman acquisition and the disposal
The financial effects of the Wasteman acquisition are not material and have,
therefore, not been disclosed.
The disposal has been categorised as less than category 3 in terms of section 9
of the JSE Securities Exchange South Africa Listings Requirements and
accordingly, financial effects are not disclosed.
5. Conditions precedent of the transactions
All conditions precedent relating to the transactions have been fulfilled.
6. Other matters
The articles of association of Mercantile will be amended in order to comply
with the JSE Listings Requirements.
A circular containing full details of the Swiss Re acquisition will be
despatched to Paraprop linked unit holders in due course.
Cape Town
13 November 2003
Investment bank and sponsor
Nedbank Corporate
Fund and property managers
Spire Property Services (Pty) Ltd
Date: 13/11/2003 02:19:54 PM Produced by the JSE SENS Department
