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FREESTONE PROPERTY HOLDINGS LIMITED - ACQUISITION OF PROPERTY LETTING
ENTERPRISES FROM HYPROP INVESTMENTS LIMITED (`HYPROP`)
Freestone Property Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration No. 2001/011887/06)
(Previously Arnold Property Fund Limited)
Share code: FSP ISIN code: ZAE000060299
(`Freestone` or `the company`)
ACQUISITION OF PROPERTY LETTING ENTERPRISES FROM HYPROP INVESTMENTS LIMITED
(`HYPROP`)
INTRODUCTION
Java Capital is authorised to announce that Freestone has acquired property-
letting enterprises (`acquisition properties`) from Hyprop for R57 000 000 with
effect from close of business on 31 December 2004 (`the acquisition`).
The aggregate purchase price payable is to be discharged in cash totalling
R28 500 000 and by the way of the allotment and issue by Freestone of 6 705 882
linked units at an issue price of 425 cents per linked unit (the `consideration
units`).
The acquisition is subject to the unconditional approval by the Competition
Authorities by not later than 31 January 2005.
The acquisition results in Freestone acquiring 10 office buildings with a total
rentable area of 14 038 m2 situated in Dunkeld West, Wierda Valley and Midrand.
The acquisition properties have been acquired on an anticipated forward yield of
approximately 11.2% per annum. Freestone expects to secure funding at an average
rate of approximately 10.4% per annum.
RATIONALE FOR THE TRANSACTIONS
The successful implementation of the acquisition will enhance the size of the
portfolio, improve the quality of the group`s earnings and increase its market
capitalisation. This should result in a sustained improvement in the performance
of the group and a continued positive re-rating of Freestone`s linked units.
In addition, the gearing ratio continues to reduce and after this acquisition
and the acquisition of a portfolio of properties from Momentum Property
Investments (Pty) Limited and Momentum Group Limited (`the Momentum
acquisition`), which has now been fully implemented, the gearing ratio is
expected be 57.99%.
THE FINANCIAL EFFECTS
The table below sets out the pro forma financial effects of the acquisition on
Freestone, which are presented for illustrative purposes only. These include
abnormal items pursuant to Freestone`s restructuring and fair value adjustments,
which because of their nature may not give a fair reflection of Freestone`s
financial position after the acquisition.
Before After %
acquisition acquisition
(cents) (cents)
Net asset value
Historical net asset value 243.571 266.13 2 9.26
per linked unit
Historical tangible net 243.571 266.13 2 9.26
asset value per linked unit
Number of linked units in 46,427 53,133
issue (`000)
Earnings
Historical earnings per 174.16 1 159.96 3 (8.15)
linked unit
Historical headline 134.83 1 130.24 4 (3.40)
earnings per linked unit
Weighted average number of 36,348 43,054
linked units in issue
(`000)
The financial effects reflected in the table above are not relevant as they are
based on historical results of both Freestone and the acquisition properties. In
addition, Freestone has in the interim concluded the Momentum acquisition, which
has not been taken into account in the table above.
Linked unitholders should utilise the forward yield on the acquisition
properties provided above, as a basis for their assessment of the acquisition.
Assumptions:
The figures in the `Before` column of the table have been extracted from the
published audited results for the year ended 30 June 2004 after adjusting for
the 5 for 1 linked unit consolidation (`the consolidation`).
The historical net asset value and tangible net asset value per linked unit in
the `After` column of the table assumes the acquisition occurred on 30 June 2004
and that the requisite payment was made and linked units were issued in respect
of the acquisition on that date. The costs of the acquisition have either been
capitalised to the investment properties or written off share capital and
premium as appropriate. A fair value adjustment to the debenture capital was
effected in order to reduce the value of the debentures to their market price as
at 30 June 2004.
The historical earnings per linked unit in the `After` column of the table
assumes the acquisition occurred on 1 July 2003 and the requisite income was
earned from that date, interest was paid on the cash consideration at a weighted
average rate of 12.09% and that the linked units were issued in respect of the
acquisition on that date. A fair value adjustment to the debenture capital was
effected in order to reduce the value of the debentures to their market price as
at 30 June 2004.
The historical headline earnings per linked unit in the `After` column of the
table is based on the historical earnings calculation above and adds back the
debenture interest, but excludes the profit on sale of the investment properties
and the unrealised surplus on the fair valuation of the investment properties.
Sandton
10 January 2005
Corporate advisor, legal advisor and sponsor to Freestone
Java Capital (Proprietary) Limited
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