| Wed 25 Aug 2004, 18:19 | | DISPOSAL OF PROPERTIES TO MEET ORDERS OF |
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FAIRVEST PROPERTY HOLDINGS LIMITED - DISPOSAL OF PROPERTIES TO MEET ORDERS OF
THE HIGH COURT AND CAUTIONARY ANNOUNCEMENT
Fairvest Property Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1998/005011/06)
(`Fairvest`)
Share code: FVT ISIN: ZAE000034658
DISPOSAL OF PROPERTIES TO MEET ORDERS OF THE HIGH COURT AND CAUTIONARY
ANNOUNCEMENT
Introduction
Linked unit holders are referred to a detailed cautionary announcement made on
16 October 2003 in which linked unit holders were informed of the intended
disposal of the company`s entire property portfolio to Alpina Investments
Limited. The disposal referred to could not be implemented due to:
* Conditions precedent not being met by the agreed date;
* The delays experienced in finalising the Fairvest audit for the year ended 30
September 2003; and
* Property valuations not being completed timeously due to a lack of information
being provided to the property valuers.
Background to the Orders of the High Court
At the time of the formation of Fairvest in December 2001, linked unit holders
approved the acquisition of various properties from Gorfil Brothers Investments
(Pty) Limited (`Gorfil`) for a total consideration of R79,3 million, payable in
cash of R52,9 million (raised by way of a mortgage bond), and the issue of 17
615 616 linked units at 150 cents per linked unit. Gorfil was obliged to place
R10 million on deposit with the bondholder, Nedbank Limited, as additional
security for the amount raised as a first mortgage bond.
In approving the acquisition, Fairvest linked unit holders authorised the
specific repurchase of the 17 615 616 linked units from Gorfil at 150 cents per
linked unit. This obligation arose from Fairvest acting as surety for the
indebtedness to Gorfil in respect of a `put option claim` (`Gorfil put options`)
against Mr NG Vontas, a former director of Fairvest. Although the repurchases
were required to be made over a 36 month period after the transfer of the
properties, only R2 000 000 of the R26 423 424 Gorfil put option claims were
paid.
A legal settlement agreement (that was made an Order of Court on 10 March 2004
by the High Court of South Africa (Witwatersrand Local Division)) was entered
into obliging Fairvest to pay Gorfil an amount of R34,7 million (comprising
capital of R24,7 million, the R10 million deposit and interest up to 31 January
2004) plus interest from 1 February 2004 at prime overdraft rate.
In part settlement of the Gorfil put options, Gorfil obtained a High Court
declaratory order on 6 July 2004 that has the effect of transferring ownership
of certain properties from Fairvest to Gorfil (`Gorfil declaratory order`) at
the equity values set out below.
Properties being disposed of
Properties disposed of in settlement of Equity Value
Gorfil put options
Vryburg Shopping Centre, Nylstroom Edgars 9 138 297
Centre, Kings Building Potchefstroom, Capital
Protea Hotel Pretoria, Golden Orange Hotel
Welkom and Offices Dunkeld West, being six of
the properties originally acquired from
Gorfil now being transferred back to Gorfil
in terms of the Gorfil declaratory order
Constantia Park Centre Midrand, in terms of 8 100 000
the Gorfil declaratory order
Blue Heights Centre Westville, in terms of 8 177 109
the Gorfil declaratory order
Disposal of Protea Mall (Retail portion) 15 610 000
Umhlanga Rocks to Calicom Trading 54 (Pty)
Ltd (`Protea Mall disposal`)
Amount available for Gorfil put options 41 025 406
settlement
Amount due to Gorfil in terms of High Court 34 737 600
Order (initial capital and interest)
Estimated Interest due up to date of transfer 1 231 231
of Protea Mall property on 19 August 2004
Estimated total amount due to Gorfil on 19 35 968 831
August 2004
Net Amount due back to Fairvest as at 19 5 056 575
August 2004
Simultaneously with the implementation of the Gorfil declaratory order and the
Protea Mall disposal, the deposit currently in the name of Gorfil and held by
Nedbank for the amount of R10 000 000 will be transferred into the name of
Fairvest, and the 17 615 616 linked units held by Gorfil will be surrendered to
Fairvest for repurchase and cancellation.
Protea Mall disposal
In reaching the settlement set out above, the directors have approved the
disposal of a property to a company in which two directors (Messrs Bell and
Botsis) are shareholders. This approval was based on the need to obviate a
further application by Gorfil to the High Court to obtain a declaratory order
over the Protea Mall (Retail portion) property.
The Protea Mall disposal constitutes a related party transaction in terms of the
Listings Requirements of the JSE Securities Exchange South Africa (`JSE`) and
accordingly requires inter alia the approval of Fairvest linked unit holders and
a fair and reasonable opinion by an independent professional expert.
The Protea Mall (Retail portion) property located in Umhlanga Rocks, KwaZulu
Natal has been disposed of to Calicom Trading 54 (Pty) Ltd for a purchase price
of R40 410 000 payable in cash, with the proceeds being used to settle a
mortgage bond of R24 800 000 and a portion of the balance of R15 610 000 to be
used to settle the remaining Gorfil put option obligations.
The following directors of Fairvest have informed the board that they directly
or indirectly own equity in Calicom:
Mr T Bell : 7,8%
Mr T Botsis : 11,23%
Properties being disposed of in terms of the Gorfil declaratory order
Properties Property Mortgage
Carrying Bonds /
Value Other
Creditors
Vryburg Shopping 5 700 000 3 100 000
Centre,Vryburg
Nylstroom Edgars 7 000 000 4 170 000
Centre,Nylstroom
Kings Building 2 500 000 1 900 000
Potchefstroom
Capital Protea Hotel 10 000 000 7 000 000
Pretoria
Golden Orange Hotel Welkom 1 060 000 1 000 000
Offices Dunkeld West, 1 700 000 1 400 000
Johannesburg
Sub-total 27 960 000 18 570 000
Constantia Park, Midrand 22 000 000 5 181 600
Blue Heights Centre, 20 400 000 5 779 692
Westville
Financial effects of the properties being disposed of
Based on the audited financial results for the year ended 30 September 2003, the
financial effects of the properties being disposed of, are as follows:
Before After Change
Basic earnings per
linked unit (cents) 0,0 -8,9 (100)%
Headline earnings per
linked unit (cents) (12,8) (15,5) (20,8)%
Net asset value and net
tangible asset value per
linked unit (cents) 71,1 46,5 (34,5)%
Number of linked units
in issue 117 411 604 99 795 988
The above calculations have been based on the following assumptions that:
* the transactions relating to the properties being disposed of were concluded
at the beginning of the financial year ended 30 September 2003;
* the 17 615 616 linked units were repurchased from Gorfil at the beginning of
the financial year ended 30 September 2003;
* the fully diluted number of 117 411 604 linked units in issue have been used
in the calculations thereby altering the reported headline earnings per linked
unit of (13,1) cents;
* interest of 11% per annum was earned on the net cash received;
* income before tax equated the after tax income position for the properties;
* the transactions costs will amount to R2 million; and
* the effect of capital gains tax was not taken into account.
Publication of Interim Financial Results
The publication of Fairvest`s interim financial results for the six months ended
31 March 2004, which were due to be published on or before 30 June 2004, have
been delayed. It is anticipated that the interim financial statements will be
completed by the end of September 2004.
Circular to linked unit holders
The properties being disposed of represent approximately 44% of the total
property portfolio of Fairvest and a similar percentage of the net shareholders`
equity. Full details of the properties being disposed of will be contained in a
circular to linked unit holders of Fairvest, which will be posted to unit
holders within 28 days and after the circular has been approved by the JSE. In
terms of the JSE`s Listings Requirements with regard to related parties, certain
linked unit holders of Fairvest are not permitted to participate in the vote for
the approval of the Protea Mall (Retail portion) property disposal.
Update on other matters
It was previously reported that the holding of 4 920 512 Bonatla Property
Holdings Limited ordinary shares could not be accounted for. The board of
Fairvest has received a forensic audit report which has been referred to the
South African Police Services.
The board is at present reviewing a number of options relating to the future
listing status of the company. These options include considering proposals to
dispose of further properties and to settle certain liabilities, with the
objective to return value to the unit holders.
Cautionary announcement
In view of developments referred to above, linked unit holders of Fairvest are
advised to exercise caution in the trading of their units until such time as a
further announcement is made.
25 August 2004
Sponsor and Corporate Finance Advisor
Imara Corporate Finance South Africa (Pty) Limited
Company secretaries
Corporate Governance CCChartered Secretaries
Date: 25/08/2004 05:55:51 PM Produced by the JSE SENS Department
