| Mon 13 Dec 2004, 17:22 | | CONDITIONAL OFFER TO ACQUIRE A PORTFOLIO |
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GROWTHPOINT PROPERTIES LIMITED - CONDITIONAL OFFER TO ACQUIRE A PORTFOLIO OF
PROPERTIES FROM TRESSO TRADING 119 (PROPRIETARY) LIMITED (`TRESSO`) AND
WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
GROWTHPOINT PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Share code: GRT ISIN: ZAE000037669
(`Growthpoint`)
CONDITIONAL OFFER TO ACQUIRE A PORTFOLIO OF PROPERTIES FROM TRESSO TRADING 119
(PROPRIETARY) LIMITED (`TRESSO`) AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement published by Growthpoint on 19 November
2004, Investec Bank Limited (`Investec`) is authorised to announce that
Growthpoint has made an offer (`the offer`) to Tresso, in terms of which
Growthpoint proposes to acquire (`the proposed acquisition`) a portfolio of
properties from Tresso (`the Tresso property portfolio`) for an aggregate
purchase consideration of R1 080 million (`the purchase consideration`).
The proposed acquisition, the terms of which were accepted by Tresso on Friday,
10 December 2004 is subject, inter alia, to the fulfilment of the suspensive
conditions set out in paragraph 3 below.
2. THE PROPOSED ACQUISITION
2.1 Rationale for the proposed acquisition
Growthpoint`s stated objective is to offer investors geographically and
sectorally diversified exposure to physical property assets underpinned by long
term, sustainable, escalating income streams. The proposed acquisition will
offer Growthpoint and its linked unitholders increased exposure to the office
and industrial sectors, and the Western Cape region, all of which are expected
to provide attractive returns over the medium term.
The proposed acquisition will increase Growthpoint`s property asset base to
approximately R8,3 billion from R7,2 billion. The Tresso property portfolio will
be acquired at an average cost of R3 216/m2, in comparison with Growthpoint`s
historical average cost of R4 266/m2, and an average forward yield of
approximately 11,1%. Furthermore, the average forward monthly net rental after
operating costs amounts to R29,62/m2, which is considered low for a portfolio of
this quality and nature.
2.2 Background information on Tresso
Tresso is an unlisted property loan stock company formed in January 2002. The
linked unitholders of Tresso are Investec Group Limited, Investec Employee
Benefits Limited, Capital Alliance Life Limited and Liberty Group Limited.
2.3 Salient details of the Tresso property portfolio
The Tresso property portfolio consists of 48 buildings with a total gross
lettable area (`GLA`) of 335 792m2. At 30 September 2004 vacancies in the Tresso
property portfolio amounted to 30 068 m2 or 9% of the total GLA of the Tresso
property portfolio. A sectoral breakdown of the Tresso property portfolio by
GLA, as well as the impact on the regional composition of Growthpoint`s total
property portfolio by value, before and after the proposed acquisition is set
out in the tables below.
Tresso
Growthpoint property Combined
Sector Before portfolio After
Retail 47% 7% 40%
Commercial/Office 38% 45% 39%
Industrial 8% 45% 14%
Warehousing 5% - 5%
Hotels/Other 2% 3% 2%
Total 100% 100% 100%
The Tresso property portfolio will increase Growthpoint`s exposure to the
Western Cape region whilst marginally reducing its exposure to the other regions
throughout South Africa.
Tresso
Growthpoint property Combined
Region Before portfolio After
Gauteng (Johannesburg) 49% 35% 45%
Gauteng (Pretoria) 23% 6% 21%
KwaZulu-Natal 10% 6% 10%
Western Cape 8% 49% 14%
Eastern Cape 5% 4% 5%
Other 5% - 5%
Total 100% 100% 100%
2.4 Terms of the offer
2.4.1 The purchase consideration will be settled as to:
- R270 million through the issue of 43,5 million new Growthpoint linked units at
an issue price of 620 cents per linked unit, ex any distributions (`the vendor
units`). The issue price of the vendor units represents a premium of 0,3% to the
volume weighted average price of 618 cents over the 30 trading days ended 28
October 2004, the last trading day prior to Growthpoint extending the offer to
Tresso; and
- the balance of R810 million in cash (`the cash consideration`).
2.4.2 The cash consideration is to be raised by Growthpoint utilising short term
debt facilities, which may be refinanced by Growthpoint at a later stage
utilising the structures recently put in place to benefit from the lower cost of
finance resulting from commercial mortgage backed securitisation. These debt
facilities will be secured via mortgage bonds registered over the Tresso
property portfolio.
2.4.3 The effective date of the proposed acquisition will be the date that the
Tresso property portfolio is transferred to and registered in the name of
Growthpoint, which date is expected to be on or about the end of March 2005.
3. SUSPENSIVE CONDITIONS
The proposed acquisition is subject to, inter alia, the fulfilment of the
following suspensive conditions:
3.1 Growthpoint being afforded the opportunity to conclude a due diligence
review of the Tresso property portfolio to its satisfaction, which due diligence
review will terminate on Thursday, 6 January 2005;
3.2 the approval by Growthpoint linked unitholders in general meeting;
3.3 the conclusion of binding legal agreements between Growthpoint and Tresso to
the satisfaction of both parties; and
3.4 to the extent required, the approval by the relevant regulatory authorities,
including but not limited to the JSE Securities Exchange South Africa (`JSE`),
the Securities Regulation Panel and the Competition Authorities.
4. PRO FORMA FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION
The table below sets out the pro forma financial effects of the proposed
acquisition on the headline earnings, earnings, distribution and net asset value
per Growthpoint linked unit on the basis that:
4.1 The figures reflected in the `Published Before` column are the figures as
reflected in the audited results of Growthpoint for the 12-months ended 30 June
2004, published in the press on 25 August 2004;
4.2 The `Pro forma After` column assumes that:
4.2.1 the proposed acquisition had been implemented and the Tresso property
portfolio registered and transferred into the name of Growthpoint with effect
from 1 July 2003;
4.2.2 the extracted unaudited net property income attributable to the Tresso
property portfolio for the 12-months ended 31 March 2004 was earned by
Growthpoint for the 12-month period commencing 1 July 2003;
4.2.3 a weighted average interest rate of 9,26% per annum before tax was paid by
Growthpoint on the debt funding used to settle the cash consideration;
4.2.4 the vendor units were in issue for the 12-months ended 30 June 2004; and
4.2.5 in relation to the pro forma net asset value calculation the proposed
acquisition had been implemented on 30 June 2004.
Published Pro forma (Decrease)/
Before After Increase
Per Growthpoint linked unit (cents) (cents) (%)
Headline earnings for the year ended
30 June 2004 29,13 30,11 3,4
Earnings for the year ended
30 June 2004 74,80 72,28 (3,7)
Distribution for the year ended
30 June 2004 69,00 67,40 (2,3)
Net asset value at 30 June 2004 577 580 0,5
The pro forma financial effects set out in the table above are prepared for
illustrative purposes only and do not give a true reflection of the anticipated
benefits of the proposed acquisition. Taking into account the anticipated net
property income for the Tresso property portfolio for the 12-months ending 31
March 2006, on which the purchase consideration was based, Growthpoint
anticipates that the proposed acquisition will be enhancing for current
Growthpoint linked unitholders.
5. RELATED PARTY TRANSACTION AND CIRCULAR TO GROWTHPOINT LINKED UNITHOLDERS
In terms of the Listings Requirements of the JSE, Growthpoint and Tresso are
related parties as defined due to their relationship with Investec.
Accordingly, Growthpoint is required to obtain an independent fair and
reasonable opinion in respect of the proposed acquisition, and Growthpoint
linked unitholder approval is required for the successful implementation of the
proposed acquisition.
A circular, incorporating an independent fair and reasonable opinion and
including a notice convening a general meeting (`the general meeting`) of
Growthpoint linked unitholders for the purpose of voting on the proposed
acquisition, will be posted to Growthpoint linked unitholders in due course.
6. UNDERTAKINGS
Growthpoint linked unitholders who currently control in excess of 50% of the
Growthpoint linked units eligible to vote at the general meeting have given
their support for the proposed acquisition.
7. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Growthpoint linked unitholders are referred to the cautionary announcement
mentioned in paragraph 1 above and are advised that as a result of this
announcement, the cautionary announcement is now withdrawn.
Sandton
13 December 2004
Investment bank
Investec Corporate Finance
Investec Bank Limited
(Registration number 1969/004763/06)
Lead sponsor
Ernst & Young Sponsors (Pty) Ltd
(Registration number 2000/031843/07)
Joint sponsor
Investec Securities Limited
Member of the JSE
(Registration number. 1972/008905/06)
Legal adviser to Growthpoint
Fluxmans Attorneys
Website: www.fluxmans.com
Fluxmans Inc. Registration No: 2000/024775/21
