| Thu 2 Mar 2006, 10:12 | | Vukile Property Fund Limited - CEO Newsletter |
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VKE
VKE
Vukile Property Fund Limited - CEO Newsletter
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
Registration number 2002/027194/06
JSE code: VKE ISIN: ZAE000056370
("Vukile")
2 March 2006
Dear Stakeholder
The three months that have passed since the publication of our interim results
have been an eventful time for Vukile, with the company making great advances
towards the achievement of some of its key strategic objectives. You will no
doubt have seen our announcements in this regard in the media, but I thought it
might be useful at this point to review these developments for you in the
context of Vukile"s overall performance.
The BEE breakthrough
Last month, our major shareholder Sanlam, introduced a 25% BEE investor, Vukile
BEEShareCO, into Vukile. The R439 million investment by BEEShareCo - a black
owned and controlled entity with a broad base - is an industry first for a large
property fund and has resulted in Vukile immediately achieving its five-year BEE
equity target. In terms of the transaction, Sanlam has sold 67.4 million of its
Vukile linked units to BEEShareCo, reducing its own shareholding from 67% to 33%
and thus achieving another of our aims, which is to broaden Vukile"s shareholder
base. It is important to note that our new BEE shareholders will not be passive
investors, but will play an active, value-adding role in the business. The
Buhlobo consortium, with the largest (40%) interest in BEEShareCo, is already
actively engaged in the property market and will be able to contribute to
Vukile"s operations through its extensive property expertise and
networks.
MICC now within our grasp
Since we acquired some 75% of MICC Property Income Fund more than a year ago, it
has been our stated aim to acquire the remainder of MICC"s linked units in order
for us to effect a complete merger between the two companies, thereby realising
the full range of synergistic and cost-saving benefits. As was announced last
week, we have now made an offer to acquire the entire issued capital of MICC
that we do not already own at 862 cents per linked unit.
ApexHi, which holds 23.64% of MICC, has undertaken to accept the offer and the
90% unitholder approval threshold required by section 440K of the Companies Act,
has therefore already been achieved, making the offer itself a formality. As
the offer is classified as a related party transaction, however, the MICC
acquisition and the related disposal of some MICC properties to ApexHi will
require the approval of Vukile unitholders. We have already received
irrevocable undertakings from over 50% of Vukile unitholders that they will vote
in favour of the transaction. A circular giving full details of the
transactions and incorporating a notice of general meeting is being sent to
unitholders. The offer closes on 10 March 2006.
Blue-chip Oakhurst to join property portfolio
As we reported last week, Vukile is to acquire the Oakhurst office building in
Parktown, Johannesburg, from Sanlam Life Insurance for R34.4 million. The
building is a modern five-storey building with a lettable area of 9 085mSquared,
situated at the St Andrews off-ramp from the M1 South. Given its prime
location, the fact that it is almost fully let to blue-chip tenants, and its
longer-term upside potential in the strengthening Parktown node, Oakhurst more
than meets our investment criteria. The acquisition yield is 10.6%.
The JSE Limited (JSE) last week approved the listing of 4 240 000 new Vukile
linked units to fund the acquisition of Oakhurst. These linked units represent
1.58% of the company"s issued capital and were issued to Marriott Asset
Management at a weighted average price of 818 cents per linked unit.
A strong letting performance in 2005
In the meantime, it is gratifying to report that our existing portfolio posted a
strong letting performance last year. Renewals and new deals totalling close to
R270 million, over a combined area of approximately 154 000mSquared, were
concluded during the 2005 calendar year. Buildings on which deals with a
contract value of more than R5 million were done include the Durban Embassy
(R16.1 million), Midrand Sanitary City (R14.7 million), Bedforview GIS (R9.7
million), Bloemfontein Plaza (R9 million), Hellman International
(R5.6 million) and Pinetown Shopping Centre (R5.2 million).
Expanding and upgrading
Work has started on the major expansion and upgrade projects at the Phoenix
Plaza and Dobsonville shopping centres, both scheduled for completion in
September this year. We are spending some R80 million on increasing the gross
lettable area at Phoenix Plaza by some 3 500mSquared and that at Dobsonville by
almost 5 000mSquared, in line with our strategy of extracting organic growth
from our existing portfolio through redevelopment. The two projects have been
designed to enhance these properties by increasing their national tenant base,
strengthening their status as destination shopping experiences, and improving
the average lease term.
Following the renovation of the recently renamed Randburg Square, Vukile has
launched a marketing campaign to change perceptions of the Randburg CBD and to
promote the Centre. The Johannesburg Development Association invested some R17
million last year in the upgrading of the physical infrastructure and social
climate of this area, and local business has also made a major upliftment
effort. We believe the Randburg CBD is in the process of being transformed into
an attractive area with the potential to become one of Gauteng"s economic
powerhouses. Our campaign, Looking at Randburg in a New Light has been designed
to highlight this fundamental change and the opportunities it offers, not least
in the form of quality office space at highly competitive rates. The campaign
includes special incentives to brokers, extraordinary letting deals (discounted
rentals, unique tenant installation deals and signage opportunities), new
billboards, radio advertisements and a press campaign. We are already
experiencing a marked increase in enquiries for space in Randburg Square and we
are confident that we should see some good results soon.
The 2006 results
Vukile"s results for the year to March will be published on our about 29 May
2006. As usual, there will be presentations on the results in Johannesburg and
Cape Town at that time. If you would like attend either of these, please send
your details to vukile@dpapr.com or call 011-728-4701.
Your sincerely
Gerhard van Zyl
Chief executive
Date: 02/03/2006 10:12:10 AM Produced by the JSE SENS Department
