| Fri 23 Sep 2005, 14:27 | | Diversified Property Fund Limited - Listing |
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Diversified Property Fund Limited - Listing Of Diversified Property Fund Limited
DIVERSIFIED PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2005/029685/06)
JSE code: DIV ISIN: ZAE000072369
(`Diversified` or `the company`)
ABRIDGED PROSPECTUS
Listing of Diversified linked units (`linked units`) on the JSE Limited (`JSE`).
This abridged prospectus is not an invitation to the public to subscribe for
linked units in Diversified, but is issued in compliance with the Listings
Requirements of the JSE for information purposes only. The information in this
abridged prospectus has been extracted from a full prospectus to be issued by
Diversified on 26 September 2005 (`the prospectus`), which is available as set
out below.
At the date of listing, the linked unit capital of Diversified comprises
800,000,000 authorised ordinary shares at a par value of one cent each linked to
variable rate unsecured subordinated debentures with a face value of 480 cents
each, and an issued linked unit capital of 88,559,007 linked units.
1. INTRODUCTION
Diversified was conceptualised by the directors of Resilient Property Income
Fund Limited (`Resilient`) to take advantage of attractive opportunities to
develop retail centres in rural areas. The present retail offering in many rural
areas is limited and generally of poor quality. Escalating social spending and
economic growth in rural areas have resulted in significant increases in
discretionary retail spending.
Diversified intends developing quality retail space attractive to national
retailers, many of which wish to expand their presence in these areas to take
advantage of the increased spending. Attractive returns can be achieved by
undertaking these new developments.
The base of the portfolio is comprised of quality industrial properties located
in strong industrial nodes. A common characteristic of all the properties is
their fundamental relevance to the current and future market demand for
industrial property.
In addition to its South African retail and industrial interests, Diversified
will in the medium term seek to obtain exposure to hard currency rental income.
Resilient, as promoter, is a well-established property industry participant
providing a wealth of asset and property management experience. Diversified,
with a predominantly independent non-executive board, it will provide a base
from which to create an attractive investment in the listed property sector.
2. GENERAL HISTORY OF THE COMPANY
Diversified was incorporated on 26th August 2005 as a public company. It was
established as a property holding and investment company with the intention of
conducting business directly through the ownership or lease of immovable
property, property trusts and indirectly through the holding of listed and
unlisted securities. In addition, it will undertake the business of development,
property management, and asset management.
Diversified has concluded agreements to acquire the property portfolios, and
listed securities as explained below.
Prior to the acquisitions detailed below, Diversified had no trading history.
Diversified will own its property portfolio indirectly via wholly owned
subsidiaries, namely Diversified Properties (Pty) Limited (`Diversified
Properties`)and Full Sail 66 (Pty) Limited (`Full Sail`)(to be renamed
Diversified Properties 2 (Pty) Limited).
3. THE ACQUISITIONS AND STATUS OF THE TRANSFER OF PROPERTIES
The acquisitions
The acquisitions have been effected as follows:
- the entire issued share capital and claims on loan account of Diversified
Properties have been acquired by Diversified from Resilient, with effect from 1
October 2005 (`the effective date`) for an aggregate purchase price of
R312,150,000 (the `Diversified Properties acquisition`);
- the entire issued share capital and claims on loan account of Full Sail have
been acquired by Diversified from the Full Sail vendors, with effect from the
effective date, for an aggregate purchase price of R63,350,000 (the `Full Sail
acquisition`);
- a portfolio of properties has been acquired by Full Sail from various vendors
(the `Third party properties`), with effect from the effective date, for an
aggregate purchase price of R258,150,000 (the `Third party acquisitions`); and
- Diversified Properties will acquire Capital Property Fund units totalling
R50,000,000 (the `Capital unit acquisition`).
The aggregate purchase price payable for the Diversified Properties acquisition,
Full Sail acquisition, the Third party acquisitions and the Capital unit
acquisition, being R683,650,000 (being the acquisition of the property portfolio
amounting to R633,650,000 and the Capital units at a cost of R50,000,000) is to
be discharged as follows:
- by way of the allotment and issue by Diversified of 73,759,000 linked units at
an issue price of 500 cents per linked unit (the `consideration linked units`);
and
- the payment of R314,855,000 in cash or cash equivalents.
The Diversified Properties acquisition and the Capital unit acquisition are
subject to the Resilient linked unitholders, to the extent necessary, approving
the conclusion and implementation of these acquisitions.
Notwithstanding the transfer date, the group shall have acquired possession of
the properties on the effective date from which date the group shall be entitled
to all benefits and income arising from the properties and from which date the
properties shall be held by the group at its risk and expense.
The vendors or their renouncees shall be entitled to the benefit from the
consideration linked units with effect from the effective date.
The acquisition agreements are subject to warranties normal for acquisitions of
this nature.
The status of the transfers of properties
All assets comprising the listing are scheduled to transfer into the group on or
before the date of listing. In the event that any property transfers are delayed
for reasons beyond the control of the directors, the prospectus contains
financial information detailing the complete portfolio (Scenario A) and the
portfolio excluding the transfer of properties acquired from Third party vendors
(Scenario B).
Transfer of each of the Third party properties is to be effected as soon as
possible on or before 1 October 2005. Linked unitholders will be kept informed
of the progress in terms of transferring any properties not transferred by
listing date by announcements published over SENS and in the press. As at 23
September 2005, 91% of the property portfolio (appearing in Scenario A) were
lodged at the respective deed offices for transfer. Of the Third party
properties, Diesel Road Isando and Market Square Grahamstown have yet to be
lodged at the respective deeds offices. Two buildings included in Scenario B,
namely Taxi Centre Polokwane (to be transferred into Diversified Properties) and
Bester Street Nelspruit (to be transferred into Full Sail) have yet to be
lodged.
4. PORTFOLIO COMPOSITION
An analysis of the property portfolio in respect of Scenario A for sectoral,
geographic and tenant spread as well as lease expiry profile is provided in the
press announcement.
Gross rentals as utilised in these graphs have been extracted from the profit
forecast that was prepared in accordance with International Financial Reporting
Standards and as set out in paragraph 6.
5. OTHER LINKED UNIT ISSUES
The purchase trust
Diversified has established a purchase trust, The Diversified Unit Purchase
Trust, in terms of which employees will be incentivised to promote the continued
growth of Diversified by giving them the opportunity to acquire linked units. In
addition, the benefits encapsulated in the purchase trust will seek to attract
and retain suitably skilled and qualified personnel.
An initial issue of 8,800,000 linked units on loan account to the purchase
trust, comprising 9.94% of the linked units in issue, will be undertaken at 500
cents per linked unit. All purchase trust linked units have been fully allocated
to directors as well as other employees.
Black Economic Empowerment
The sole purpose of the Education trust is to promote, improve, advance and
facilitate the education of black people in South Africa. The objectives of the
Education trust are to:
- provide financial assistance to black people in South Africa for the purpose
of bettering or furthering their education either on meritorious grounds because
they are deserving thereof or who because of a lack of means were unable to
access such opportunity previously; and
- facilitate the advancement of education of black people in South Africa by
providing financial assistance to black educational institutions which carry on
one or more public benefit activities.
An initial issue of 6,000,000 linked units, comprising 6.78% of the linked units
in issue, will be issued to the Siyakha Education Trust at 500 cents per linked
unit as part of the group`s black economic empowerment initiative. These linked
units are payable in cash on the issue thereof.
6. PROFIT FORECASTS
The forecasts set out below, including the assumptions on which they are based
and the financial information from which it has been prepared, are the
responsibility of the directors of Diversified.
The forecasts have been reported on by PricewaterhouseCoopers Inc. whose report
is available for inspection at the company`s registered office.
Scenario A
The profit forecast for Scenario A (compiled on the assumption that all property
letting enterprises are transferred prior to the listing date) the years ending
30 June 2006 and 2007 are as follows:
Forecast Forecast
for the for the
9 months 12 months
ending ending
30 June 30 June
2006 2007
(R 000`s) (R 000`s)
Revenue 73,649 104,282
Amortised lease escalations 4,248 2,347
Operating expenses 1 (25,892) (36,950)
Net rental and related income 52,005 69,679
Income from listed property 3,263
securities 4,675
Amortisation of costs associated (273)
with the transaction (364)
Net operating profit before 54,995
interest and taxation 73,990
Interest on loans (16,084) (20,654)
Valuation adjustment resulting from
amortised lease escalations (4,248) (2,347)
Interest to linked unitholders (34,936) (51,353)
Net loss before taxation (273) (364)
Taxation - -
Net loss for the period (273) (364)
Weighted average linked units in 88,559 88,559
issue and to be issued (000`s)
Earnings per linked unit (cents) 39.14 57.58
Headline earnings per linked unit 39.45 57.99
(cents)
Distribution per linked unit 39.45 57.99
Annualised yield based on 500 cent 10.52% 11.60%
issue price
Reconciliation of headline earnings
Earnings 34,663 50,989
Amortisation of costs associated 273 364
with the transaction
Headline earnings 34,936 51,353
Note 1
Material Expenditure Items
Electricity consumption 5,495 8,060
Rates and taxes 5,138 7,536
Other operating expenses 15,259 21,354
Total operating expenses 25,892 36,950
Scenario B
Set out below is the profit forecast of the group in respect of Scenario B
(compiled on the assumption that all property letting enterprises other than the
Third party portfolio are transferred prior to the listing date) for the period
ending 30 June 2006 and the year thereafter. As indicated in paragraph 0 above,
Taxi Centre Polokwane and Bester Street Nelspruit, to be transferred into
Diversified Properties and Full Sail respectively have yet to be lodged at the
respective deeds offices. The directors` believe that these properties, in the
unlikely event that they are not transferred, will not have a material impact on
the forecast below and undertake, if material, to republish a revised forecast
excluding such properties.
Forecast for Forecast for
the the
9 months 12 months
ending ending
30 June 2006 30 June 2007
(R 000`s) (R 000`s)
Revenue 43,491 61,896
Amortised lease escalations 2,779 1,760
Operating expenses 1 (16,757) (23,927)
Net rental and related income 29,513 39,729
Income from listed property 3,263
securities 4,675
Amortisation of costs associated (141)
with the transaction (188)
Net operating profit before 32,635
interest and taxation 44,216
Interest on loans (12,850) (16,732)
Valuation adjustment resulting (2,779)
from amortised lease escalations (1,760)
Interest to linked unitholders (17,147) (25,912)
Net loss before taxation (141) (188)
Taxation - -
Net loss for the period (141) (188)
Weighted average linked units in 47,174 47,174
issue and to be issued (000`s)
Earnings per linked unit (cents) 36.05 54.53
Headline earnings per linked unit 36.35 54.93
(cents)
Distribution per linked unit 36.35 54.93
Annualised yield based on 500 9.69% 10.98%
cent issue price
Reconciliation of headline
earnings
Earnings 17,006 25,724
Amortisation of costs associated 141 188
with the transaction
Headline earnings 17,147 25,912
Note 1
Material Expenditure Items
Electricity consumption 3,785 5,552
Rates and taxes 3,218 4,719
Other operating expenses 9,754 13,656
Total operating expenses 16,757 23,927
The forecasts incorporate the following material assumptions in respect of
revenue and expenses that can be influenced by the directors:
- Diversified management`s forecasts for the nine months ending 30 June 2006 and
the 12 months ending 30 June 2007 are based on information derived from the
previous property managers, historical information and work performed by the
valuer;
- Diversified will not acquire or dispose of any properties during the period of
the forecasts other than those being acquired or disposed of in terms of the
acquisitions;
- current vacant space has been forecast on a property-by-property basis and has
been assumed to remain vacant unless it is deemed probable that such space will
be let;
- leases expiring during the periods have been forecast on a lease-by-lease
basis. After the expiry of the lease the space is expected to remain vacant for
a period of one month to allow for refurbishing of the space and sourcing a new
tenant. The existing rental is escalated conservatively at 5% annually for the
remainder of the forecast period.
- the uncontracted revenue amounts to:
Scenario A Scenario B
(%) (%)
For the 9 months ending 15 12
30 June 2006
For the year ending 30 30 28
June 2007
- monthly leases are assumed to continue at no escalation for a period of 12
months after listing, following which the premises are re-let after a one month
vacancy at a 5% escalation. Monthly revenue accounts for the following
percentage of total revenue:
Scenario A Scenario B
(%) (%)
For the 9 months ending 8 4
30 June 2006
For the year ending 30 2 1
June 2007
- Diversified management`s forecast property operating expenditure has been
determined based on their review of historical expenditure, where available, and
the individual property forecast expenses prepared by the valuer, 90% of which
have been verified to source documents such as contracts and rates bills. The
valuers` forecast expenditure was utilised for the period ended 30 June 2006.
Thereafter, each operating expense line item is escalated on 1 July of each year
at either 5% or 10%, based on Diversified management`s individual assessment of
each expense and depending on the nature thereof;
- due to reliable historical operating expense information being available from
Resilient, a comparison of the forecast operating expenditure could be made with
historical operating expenditure for the Diversified Properties portfolio. No
variance of greater than 10% was detected in operating expenses of the
Diversified Properties portfolio. No operating expense variance tests were
performed on the Full Sail and Third Party portfolio`s as no reliable historical
operating expense information was available;
- income generated from expense recoveries is based on the June 2005 rent rolls.
The income is escalated at the same rates applied to operating expenses;
- no fair value adjustments to investment properties, other than the adjustment
as a result of amortised lease escalations, or deferred taxation have been
provided for; and
- this profit forecast has been compiled utilising the accounting policies of
Diversified.
The forecasts incorporate the following material assumptions in respect of
revenue and expenses that cannot be influenced by the directors:
- the effective date of the acquisitions is 1 October 2005;
- variable rate borrowings incur interest at 1.5% below the prime rate in
respect of Standard Bank funding and Johannesburg Interbank rate plus 1.7% in
respect of Nedbank funding. Directors estimate in Scenario A R210 million of
these borrowings will be hedged using interest rate swaps at an average
indicative rate of 9.24%, while in Scenario B R180 million will be hedged at the
same average indicative rate;
- the purchase of the Capital units has been based on a contracted price of R4
per unit;
- contracted revenue is based on existing lease agreements;
- there will be no unforeseen economic factors that will affect the lessees`
abilities to meet their commitments in terms of existing lease agreements;
- consumption based recoveries are based on the valuer`s property income
statements; and
- growth in the underlying value of the investment properties will be sufficient
to cover the capitalised cost associated with the transactions over the forecast
period.
7. DIRECTORS, COMPANY SECRETARY AND REGISTERED OFFICE
The board of directors of the company are:
Names and Business Qualification Occupation Listed
age address and directorships
experience held in
previous 5
years
Michael 57 6th B.Juris, Independent None
Tshishonga Road, Diploma Bus Chairman
(59)* + Hyde Mgmt, Adv
Park, Diploma Human
2196 Rights
Hayden 57 6th BCompt Executive None
Bamford Road, (Hons), Director
(36) Hyde CA(SA)
Park,
2196
Des de 57 6th BProc MAP Executive Acucap,
Beer (45) Road, Director Resilient and
Hyde Capital
Park, Property Fund
2196 via Property
Fund Managers
(Pty) Limited
David 57 6th BSc Managing Resilient
Lewis (39) Road, Bldg.Mgt., Director
Hyde N.Dip (Real
Park, Estate), MBA
2196
Holden 1a Park B.Com, CAIB Independent None
Marshall Road, (SA) Non -
(43)* Rondebosc Executive
h, Cape Director
Town,
7700
Gugu 9th MSc Town Independent None
Mazibuko Floor, Planning Non -
(39)* Braamfont Executive
ein Director
Centre,
23
Jorissen
Street,
Braamfont
ein, 2001
Marius Kagiso B Sc Quantity Independent Alternate
Muller House, 16 Surveying, Non - Director of
(35)* Fricker MBA Executive Resilient
Road, Director
Illovo,
2196
David Abcon BSc (Bldg), Independent None
Savage House, MSc (Bldg) Non -
(41)* Fairway Executive
Office Director
Park, 52
Grosvenor
Road,
Bryanston
, 2191
Manosagara 135 Nat.Dip.Prope Independent None
n Rivonia rty Non -
Subramanie Road, Valuations Executive
n (46)* Sandton, (Wits). Director
2196 M.I.V. (SA),
B.Tech.-
Bus.Admin
(Wits)
Nomatembo 21a BA Hons Independent None
Tambo Killarney (London Non -
(48)* Road, University), Executive
Sandhurst LLB Director
, 2196
Jacques 57 6th BCompt Executive Resilient
van Wyk Road, (Hons), Director
(29) Hyde CA(SA)
Park,
2196
Djurk 29 Wessel BCompt Independent None
Venter Road, (Hons), Non -
(38)* Rivonia, CA(SA) Executive
2128 Director
+ Chairman
* Non-executive
All directors are South African nationals.
The company secretary and registered office of the company are:
Abraham Albertus Bornman CA(SA)
57 6th Road
Hyde Park, 2196
(P O Box 411711, Craighall, 2024)
8. THE PLACEMENT
Pursuant to the Diversified Properties acquisition, Resilient will acquire
28,972,000 Diversified linked units amounting to 32.7% of Diversified. Hence,
Resilient will undertake the placement in order to achieve the minimum spread
requirements of the JSE Listings Requirements. The placement will not be
underwritten and is not subject to a minimum subscription being achieved.
Details of the placement are as follows:
Placement price per linked unit 500
(cents)
Number of linked units placed in 4,750,000
terms of the private placement
Total capital to be raised before R23,750,000
expenses
Should the placement be fully subscribed, Resilient`s
holding will amount to 24,222,000 Diversified linked
units, being 27.4% of the fund.
Dates and times
Opening date of the placement (09:00) Monday, 26
September 2005
Closing date of the placement (12:00) Tuesday, 27
September 2005
Proposed listing date of Thursday, 6 October
`Diversified` on the JSE (09:00) 2005
These dates are subject to change at the discretion of the company. Any changes
will be announced on SENS and published in the press.
9. LISTING ON THE JSE
The JSE has approved the listing of 88,559,007 linked units with effect from the
commencement of business on Thursday, 6 October 2005 subject to meeting the
linked unitholder spread requirements as contained in the JSE Listings
Requirements, the approval by Resilient linked unitholders of the Diversified
Properties and Capital unit acquisitions and the transfer of the requisite
property letting enterprises into the group. The linked units will trade under
the abbreviated name `Diversified` and the JSE code `DIV`.
10. COPIES OF THE PROSPECTUS
Copies of the full prospectus, in English, may be obtained, at the following
addresses during normal business hours:
* the registered office of the company - 57 6th Road, Hyde Park, 2196
* the offices of Java Capital (Pty) Limited - 2 Arnold Road, Rosebank, 2196; or
* the offices of Ultra Registrars (Pty) Limited - 5th floor, 11 Diagonal Street,
Johannesburg 2001.
Johannesburg
23 September 2005
Corporate Advisor Trustee for Reporting accountants
and Sponsor debentureholders
Java Capital (Pty) Webber Wentzel PricewaterhouseCoopers
Limited Bowens Inc.
Attorneys to Competition law Auditors
prospectus advisors
Ledwaba Mazwai Edward Nathan KPMG Inc.
Attorneys (Pty) Limited
Date: 23/09/2005 01:10:21 PM
