| Wed 12 Apr 2006, 8:55 | | CBS - Acquisition Of Properties For A Total Purcha |
|
CBS
CBS
CBS - Acquisition Of Properties For A Total Purchase Consideration Of
Approximately R616 Million And Withdrawal Of Cautionary Announcement
CBS Property Portfolio Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/009523/06)
Share code: CBS ISIN: ZAE000073995
("CBS")
ACQUISITION OF PROPERTIES FOR A TOTAL PURCHASE CONSIDERATION OF APPROXIMATELY
R616 MILLION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the cautionary announcement dated Friday, 24 March 2006, CBS linked
unitholders are advised that CBS has concluded various agreements to acquire 12
properties (the "properties") from:-
- various associated companies and trusts of Zenprop Property Holdings
(Proprietary) Limited ("Zenprop") (the "Zenprop acquisitions");
- Deventon Properties Limited ("Deventon") and one of its associated
companies (the "Deventon portfolio"); and
- the vendor(s) of JGM House ("JGM House"),
(collectively the "proposed acquisitions") for an aggregate purchase
consideration of R615 590 300 ("the purchase consideration")
In addition CBS has entered into a development agreement with Zenprop (the
"Zenprop development agreement").
The Zenprop acquisitions and the Zenprop development agreement are hereinafter
refered to as "the Zenprop transactions". The proposed acquisitions and the
entering into of the Zenprop development agreement are hereinafter referred to
as the "proposed transactions".
The proposed transactions are subject to, inter-alia, the fulfilment of the
suspensive conditions as set out in paragraph 4 below.
2. THE PROPOSED ACQUISITIONS
2.1 Rationale for the proposed acquisitions
CBS" objective is to offer growth in income and capital over the medium to long
term. In doing so CBS seeks acquisition opportunities which will enhance the
quality of the existing CBS property portfolio as well as its long-term
sustainable growth in distributions to linked unitholders. CBS also seeks to
maintain its exposure to a sectorally well-balanced, geographically diversified
property portfolio. The board of directors of CBS ("the board") is of the
opinion that the proposed acquisitions are in line with such investment
criteria.
The properties consist of mainly quality office buildings and have above average
annual rental escalations with a weighted average annual rental escalation of
10.2% per annum. 5 of the 12 properties, being 73% of the purchase
consideration, are occupied by single tenants and are triple net leases with the
tenant being responsible for all expenses. In addition, the proposed
acquisitions increase the critical mass of the existing CBS portfolio and
substantially improve CBS" lease expiry profile with the bulk of the leases
expiring between 2011 and 2014.
2.2 Salient details of the proposed acquisitions
The properties are quality commercial properties with A-Grade tenants and are
all situated in Gauteng. The proposed acquisitions will change CBS" property
portfolio, substantially, as follows:
- by region, Gauteng will increase from 32% to 56% and Cape Town will
decrease from 47% to 31%; and
- by Sector, Commercial properties will increase from 42% to 61% and retail
will decrease from 53% to 35%.
The Deventon portfolio will have an effective date as the date of transfer, JGM
House will have an effective date of 1 August 2006 and the Zenprop acquisition
will have an effective date of 1 June 2006. At the date of transfer the
properties being acquired from Zenprop ("Zenprop Portfolio") and JGM House are
expected to have no vacancies. In respect of the Deventon portfolio, to the
extent there are vacancies at the date of transfer, Deventon has provided CBS
with a 2 year rental guarantee in respect of any such vacancies. It is
anticipated that the rental guarantee will cover approximately 800m2 of space,
which may be vacant.
Property Vendor Property Purchase Gross Initial
location price rentable average
(Gauteng) R"million area m2 rental
R/m2 *
Zenprop portfolio 382 26 758 81.6
Bristol Myers Truzen 18 Bedfordview 60 4 578 77.8
Squibb Trust
South African Lemmie Alberton 66 4 760 77.7
Revenue Investments
Service (Pty) Ltd
SITA Truzen 16 Sunninghill 100 5 437 99.1
Trust
Palm Grove 110 Ferndale Randburg 16 3 599 61.5
Trust
Sun Intersun Sandown 140 8 384 85.0
International Trust
Deventon portfolio 197 17 837 61.3
Birchwood Deventon Midrand 28 3 488 70.5
Court
Royal Palms Deventon Midrand 12 5 729 30.6
Waterfall Deventon Midrand 23 2 954 73.0
Close
Waterfall Deventon Midrand 24 3 251 65.1
Edge
Waterfall Deventon Midrand 20 2 415 74.8
View &
Crescent
Verizon Erf no.9 Gallo Manor 80 7 493 69.9
(Pty) Ltd
JGM House NIB 2 Sandown 36 4 614 86.2
Shareblock
(Pty) Ltd
Total 616 56 702 73.3
* Excludes parking
The abovementioned vendors are hereinafter collectively refered to as "the
vendors"".
2.3 Purchase consideration
The purchase consideration is to be settled through the following sources of
funding:
2.3.1 a vendor placing of CBS linked units amounting to 82.5% (R508 million)
of the purchase consideration, of which:
2.3.1.1. approximately R490 million will be settled by the issue of 62 243 249
linked units at 787 cents per linked unit; and
2.3.1.2 approximately R18 million will be settled by the issue of 2 443 369
linked units at 737 cents per linked unit in respect of the acquisition of JGM
House; and
2.3.2 interest free loans from the vendors amounting to 17.5% (R108 million)
of the purchase consideration.
3. The Zenprop development agreement
3.1 Rationale for the Zenprop development agreement
Zenprop is recognised as one of the foremost developers of retail, commercial,
industrial and residential property in South Africa. The Zenprop development
agreement inter alia:-
- secures CBS development expertise which aligns both CBS" and Zenprop"s
interests and commercial insight; and
- secures the flow of quality private properties by way of a first refusal
undertaking provided by Zenprop to CBS.
3.2 Salient details of the Zenprop development agreement
The Zenprop development agreement contains the following salient provisions:
3.2.1 CBS has a right of first refusal on certain of those properties which
Zenprop may offer for sale in the market;
3.2.2 Zenprop will acquire the right, for a period of 5 years, to the
exclusive development of the CBS property portfolio;
3.2.3 Zenprop will be entitled to receive up to 40% of the increased value
added in any properties developed with CBS, subject to there being no yield
dilution to CBS, on each development undertaken;
3.2.4 development fees ranging from 3.5%-5% will be payable to Zenprop; and
3.2.5 70% of SAPOA tariffs on leasing commissions, or 3 months of the first
years" rental will be paid on those tenants introduced by Zenprop to the
development.
4. SUSPENSIVE CONDITIONS
The proposed acquisitions and the Zenprop development agreement are subject to,
inter alia, the fulfilment of the following suspensive conditions:
4.1 CBS being afforded the opportunity to conduct a due diligence review of the
properties to its satisfaction;
4.2 to the extent required, the approval by the relevant regulatory
authorities, including but not limited to the JSE Limited ("JSE") and the
Competition Authorities;
4.3 the approval of the Zenprop transactions, by the requisite majority of CBS
linked unitholders in general meeting; and
4.4 the Zenprop development agreement is subject to the Zenprop acquisitions
becoming unconditional in all respects.
5. VALUATION OF THE PROPERTIES
The properties are being valued by Mills Fitchet & Associates, an independent
external valuer, who is registered as a professional valuer in terms of the
Property Valuers Profession Act, 47 of 2000, as defined by Section 13 of the
Listings Requirements the JSE Limited ("the JSE Listings Requirements"). Where
relevant, extracts from the valuation report containing further details of the
properties within the respective portfolios will be published in the circular
referred to in paragraph 6 below.
6. FINANCIAL INFORMATION
The impact of the proposed acquisitions on forecast revenue, forecast
operational net income and net income after tax of the CBS property portfolio is
set out below:
Pro forma Pro forma
Pro forma Pro forma forecast forecast
forecast forecast including including
include-ing including Zenprop acquisitions
Acquisi-tion acquisition acquisi- 12 months
Previous of JGM House of Deventon tions, ending
forecast 12 months portfolio and Acquisition 31 October
per SENS ending JGM House of Deventon 2007
announce- 31 October 12 months portfolio
ment 6 2006 ending and JGM
R"000 December 31 October House
2005 2006 12 months
ending
31 October
2006
Forecast 157 711 159 292 164 659 172 501 227 645
revenue
Forecast 104 612 105 604 110 070 117 107 160 060
operatio
nal net
income
Forecast 63 512 64 503 68 969 75 638 116 880
profit
availabl
e for
distribu
tion to
CBS
linked
unithold
ers
Interest 63 512 64 503 68 969 75 638 116 880
paid to
CBS
linked
unithold
ers
Linked 92 323 113 96 237 683 117 740 403 157 009 731 157 009 731
units in
issue
after
the
proposed
acquisit
ions
Forward 69.00 69.10 70.10 69.90 74.40
yield
(cents)
Forward 9.45% 9.14% 8.91% 8.88% 9.46%
yield at
an issue
price of
787
cents
per CBS
linked
unit
Assumptions:
1. Forecast for the year ending 31 October 2006 includes the proposed
acquisitions (inclusive of costs) from 1 August 2006; and
2. Forecast for the year ending 31 October 2007 above includes a revenue
increase of 3% and expense increase of 5.5% for the period 1 November 2006 to 31
October 2007 in respect of the existing CBS portfolio and, in respect of the
properties being acquired from Zenprop, a 10.2% increase annualised to 4.2%.
(Note: the increase is annualised for October year end as increases are
effective as of 1 June).
The above forecast for the year ending 31 October 2007 is based on a 3% revenue
increase for the existing CBS portfolio prior to the proposed acquisitions which
the board of CBS believe is conservative.
The above forecast financial information is the responsibility of the board of
directors of CBS and has not yet been reviewed but will be reported on by the
reporting accountants and their report in this regard will be contained in the
circular referred to in paragraph 7 below and will lie open for inspection.
7. CIRCULAR TO CBS LINKED UNITHOLDERS AND WITHDRAWAL OF THE CAUTIONARY
ANNOUNCEMENT
In terms of the Listings Requirements of the JSE, the Zenprop transactions are
classified as a category 1 transaction, the acquisition of the Deventon
portfolio is classified as a category 2 transaction and the acquisition of JGM
House is classified as a category 3 transaction.
Accordingly a circular, incorporating the relevant information required for the
abovementioned category 1 and category 2 transactions, will be posted to CBS
linked unitholders within 28 days of this announcement, incorporating the notice
of general meeting in order for CBS linked unitholders to vote on the Zenprop
transactions ("the CBS general meeting").
CBS linked unitholders are advised that caution is no longer required to be
exercised by linked unitholders when dealing in their securities.
8. OPINION, RECOMMENDATIONS AND UNDERTAKINGS
The board is of the opinion that the terms of the Zenprop transactions are
beneficial to CBS linked unitholders and those members of the board who hold CBS
linked units undertake to vote in favour of the Zenprop transactions.
Accordingly, the board recommends that CBS linked unitholders vote in favour of
the resolutions to be proposed at the CBS general meeting.
As at the date of this announcement, eligible CBS linked unitholders holding
66.3% of CBS" linked units have indicated their support for the Zenprop
transactions.
Cape Town
12 April, 2006
Investment bank Sponsor Legal adviser CBS
?Investec Corporate ?Investec Bank Limited ?Jowell Glyn
Finance logoU logoU Marais logoU
Independent reporting
accountants
?BDO Spencer Stewart
LogoU
Date: 12/04/2006 08:55:09 AM Produced by the JSE SENS Department
