| Mon 5 Sep 2005, 15:40 | | Resilient - Disposal announcement |
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Resilient - Disposal announcement
Resilient Property Income Fund Limited
(Incorporated in the Republic of South Africa)
Registration number 2002/016851/06
Share code: RES ISIN: ZAE000043642
(`Resilient`)
DISPOSAL OF DIVERSIFIED PROPERTIES (PROPRIETARY) LIMITED (`DIVERSIFIED
PROPERTIES`) AND CAPITAL PROPERTY FUND (`CAPITAL`) UNITS AND THE CUMULATIVE
EFFECT OF CAPITAL UNIT DISPOSALS
Disposal of Diversified and Capital units
Introduction
The directors of Resilient have conceptualised the proposed listing of
Diversified Property Fund Limited (`Diversified`) to take advantage of certain
attractive opportunities in rural retail developments. It is expected that
Diversified will be listed on the `Financials - Real Estate` sector of the JSE
Limited (`the JSE`) list in early October 2005. The listing is subject to inter
alia JSE approval, the fulfilment of all agreements entered into by Diversified
and Competition Authority approval.
In anticipation of this new listing, Resilient has entered into an agreement
with Diversified dated 30 August 2005 for the disposal of all its shares in and
claims against Diversified Properties, a wholly owned subsidiary of Resilient
which was incorporated to facilitate the sale of Resilient assets into the
proposed listing (`the first sale agreement`). With effect from 1 October 2005
(being the effective date of the first sale agreement), Resilient Properties
(Proprietary) Limited (`Resilient Properties`), a wholly owned subsidiary of
Resilient, will sell the properties known as Isando Business Park, City Deep
Industrial Park, Vryheid Plaza, Taxi Centre Polokwane, Shoprite Vryheid, Main
Road Wynberg, Jet Park Mini Factories, Jet Stores Queenstown and Chemserve
Spartan (`the properties`), to Diversified Properties.
Further to this, Resilient Properties has entered into an agreement with
Diversified Properties dated 31 August 2005, in terms of which Resilient
Properties will dispose of 12 500 000 Capital units to the value of R50 million
(`the Capital units`) on the effective date, being 1 October 2005 (`the second
sale agreement`).
The disposals to be effected in terms of the first and second sale agreements
are collectively referred to as `the disposals`.
Rationale for the disposals
Since listing, Resilient`s strategy has been to focus on two sectors of the
property market. The principal focus has been investment in dominant retail
developments in small cities and large towns tenanted predominately by national
retailers and anchored by large supermarkets. The second focus has been
investment in high specification, secure industrial parks in major transport
nodes.
The investment markets understand and place a premium on Resilient`s portfolio
of dominant non-metropolitan retail centres. Resilient`s exposure to smaller
retail developments and industrial parks detracts from this focus. The sale of
the properties will result in Resilient becoming a more focused retail fund with
a unique portfolio offering strong long-term growth prospects.
At the same time the sale of the properties will provide Resilient with an
exposure to Diversified. Diversified`s interest in rural retail together with
its ability to undertake its own developments will position it well for strong
earnings growth for the foreseeable future.
Consideration for the disposals
The total consideration for the disposals is R362.15 million, to be settled
through the issue of 28 972 000 Diversified linked units of R5 each (`the
consideration units`) amounting to a value of R144.86 million, with the balance
of the consideration to be settled in cash.
Subject to the disposals, Resilient will hold approximately 32.7% of Diversified
units in issue. This holding is expected to reduce to approximately 27.4% after
the private placing which precedes the proposed listing of Diversified. It is
Resilient`s intention to retain the consideration units in the short to medium
term. The cash portion of the consideration will be used to reduce existing
borrowings.
Unaudited pro forma financial effects of the disposals
Based on the published consolidated reviewed results of Resilient for the 6
months ended 30 June 2005, the unaudited pro forma financial effects of the
disposals on earnings per linked unit (`EPLU`), headline earnings per linked
unit (`HEPLU`), net asset value per linked unit (`NAV`) and distribution per
linked unit (`DPU`) are set out below. This unaudited pro forma financial
information has been prepared in compliance with the JSE Listings Requirements
(`the Listings Requirements`) for illustrative purposes only and because of its
nature may not give a fair reflection of Resilient`s financial position and
results of operations, nor of the effect and impact of the disposals on
Resilient. The preparation of the pro forma financial information is the
responsibility of Resilient`s directors.
In quantifying the pro forma financial effects on EPLU, HEPLU and DPU, income
attributable to the disposals for the 6 months to 30 June 2005 was excluded,
without corresponding adjustments for the interest cost saving that would have
been the result of reducing borrowings by the portion of the purchase price to
be settled in cash, and for the investment income from the Diversified linked
units to be received in part consideration of the disposals. The estimated
interest cost saving for the 6 months to 30 June 2005 is R10 million and the
estimated distribution per Diversified linked unit for the 9 months ending 30
June 2006 is 39.4 cents.
Before the After the % Change
disposals (1) disposals
(2)
EPLU (cents) 80.82 122.49(3) ) 51.6%
HEPLU (cents) 48.21 35.12 (27.2%)
NAV (cents) 770.32 824.78(3) 7.1%
DPU (cents) 47.94 34.92 (27.2%)
Average linked units
in issue for
calculating EPLU and
HEPLU 123 902 832 123 902 832
Linked units in issue
for calculating NAV
and DPU
124 603 384 124 603 384
Notes
Based on the published consolidated reviewed results of Resilient for the 6
months ended 30 June 2005.
Based on the assumption that the disposals took place on 1 January 2005 for
income statement purposes and on 30 June 2005 for balance sheet purposes.
After taking into account the after tax profit arising on the disposals of
R67.85 million.
The effect of the disposals on Resilient`s net tangible asset value has not been
disclosed as no intangible assets were reflected on Resilient`s balance sheet at
30 June 2005.
Conditions precedent relating to the disposals
Both the first sale agreement and the second sale agreement are conditional upon
any requisite approval being obtained from the Competition Authority, approval
being obtained from the JSE for the listing of Diversified and the approval of
the Diversified board.
Documentation
The disposals are a Category 2 transaction between related parties, in terms of
the Listings Requirements. Resilient has appointed Marriott Corporate Property
Bank Limited (`Marriott`) as independent experts to determine whether the terms
and conditions of the disposals are fair and reasonable to Resilient linked
unitholders.
A circular containing full details of the disposals, further details regarding
the proposed listing and Marriott`s opinion, will be despatched to Resilient
linked unitholders in due course (`the circular`). The circular will also
include a notice convening a general meeting of Resilient linked unitholders to
consider and, if deemed appropriate, pass the resolutions necessary to approve
the transactions entered into in the first and second sale agreements.
Cumulative effect of Capital unit disposals
Introduction
Resilient sold 17 187 008 Capital units for a consideration of R54.5 million on
the open market during the 6 months ended 30 June 2005 (`the first tranche
disposal`). Details of the first tranche disposal were announced in the interim
results for the six months ended 30 June 2005 on 5 August 2005. Subsequent to
the first tranche disposal, 19 901 828 Capital units were sold on the open
market for a consideration of R78.6 million (`the second tranche disposal`). As
discussed more fully in the `Disposal of Diversified and Capital units` part of
this announcement, Resilient entered into an agreement for the sale of R50
million in Capital units to Diversified with effect from 1 October 2005 (`the
third tranche disposal` or `the second sale agreement`). The Listings
Requirements provide for the aggregation of transactions in a similar asset
class, resulting in the aggregation of the first tranche disposal, the second
tranche disposal and the third tranche disposal (collectively `the Capital unit
disposals`), being categorised as a Category 3 disposal. It is intended that all
cash proceeds from the Capital unit disposals be applied to the reduction of
existing borrowings.
Rationale for the Capital unit disposals
Resilient currently equity accounts for its holding in Capital, resulting in a
major impact on Resilient`s financial statements. In addition, in terms of the
accounting standards relating to equity accounting, Resilient values the
investment in Capital at cost plus post acquisition share of reserves. The
Resilient board is of the opinion that by reducing the holding in Capital to
less than 20% of its units in issue, it will be possible to account for the
remaining holding as an investment at fair value. For similar reasons Resilient
has restricted its holding in Acucap Properties Limited to less than 20% of that
company`s units in issue.
Unaudited pro forma financial effects of the Capital unit disposals
Based on the published consolidated reviewed results of Resilient for the 6
months ended 30 June 2005, the unaudited pro forma financial effects of the
Capital unit disposals on EPLU, HEPLU, NAV and DPU are set out below. This
unaudited pro forma financial information has been prepared in compliance with
the Listings Requirements for illustrative purposes only and because of its
nature may not give a fair reflection of Resilient`s financial position and
results of operations, nor of the effect and impact of the Capital unit
disposals on Resilient. The preparation of the pro forma financial information
is the responsibility of Resilient`s directors.
In quantifying the pro forma financial effects on EPLU, HEPLU and DPU, income
attributable to the Capital unit disposals for the 6 months to 30 June 2005 was
excluded, without corresponding adjustments for the interest cost saving that
would have been the result of reducing borrowings by the portion of the Capital
unit disposals to be settled in cash, and for the investment income from the
Diversified linked units to be received in part consideration of the Capital
unit disposals. The estimated interest cost saving for the 6 months to 30 June
2005 is R7.6 million and the estimated distribution per Diversified linked unit
for the 9 months ending 30 June 2006 is 39.4 cents.
Before the After the % Change
Capital unit Capital unit
disposals (1) disposals (2)
EPLU (cents) 80.82 105.03 (3) 30%
HEPLU (cents) 48.21 42.01 (12.9%)
NAV (cents) 770.32 800.56 (3) 3.9%
DPU (cents) 47.94 41.77 ) (12.9%)
Average linked units in
issue for calculating 123 902 832
EPLU and HEPLU 123 902 832
Linked units in issue
for calculating NAV and
DPU
124 603 384 124 603 384
Notes
Based on the published consolidated reviewed results of Resilient for the 6
months ended 30 June 2005.
Based on the assumption that the Capital unit disposals took place on 1 January
2005 for income statement purposes and on 30 June 2005 for balance sheet
purposes.
After taking into account the after tax profit arising on the sale of the
Capital units of R37.7 million.
The effect of the Capital unit disposals on Resilient`s net tangible asset value
has not been disclosed as no intangible assets were reflected on Resilient`s
balance sheet at 30 June 2005.
Johannesburg
5 September 2005
Investment bank and sponsor
Nedbank Capital
Independent reporting accountants and auditors to Resilient
KPMG Inc.
Independent reporting accountants for the forecast income of Diversified
PricewaterhouseCoopers Inc.
Independent expert
Marriott Corporate Property Bank Limited
Date: 05/09/2005 03:25:16 PM
Produced by the JSE SENS Department
