| Thu 8 Jun 2006, 12:17 | | BCX / Growthpoint - Disposal of BCX properties to |
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GRT BCX
GRT BCX
BCX / Growthpoint - Disposal of BCX properties to Growthpoint
Business Connexion Group Limited Growthpoint Properties Limited
(Incorporated in the Republic of (Incorporated in the Republic of
South Africa) South Africa)
(Registration number (Registration number
1988/005282/06) 1987/004988/06)
Share code: BCX ISIN: Share code: GRT
ZAE000054631 ISIN: ZAE000037669
("BCX") ("Growthpoint")
Disposal of BCX properties to Growthpoint
1. INTRODUCTION
Business Connexion (Proprietary) Limited, a subsidiary of BCX, has entered into
agreements to sell a portfolio of properties ("the BCX properties" or "the BCX
portfolio") to Growthpoint ("the proposed disposal") for an aggregate purchase
consideration of R 379 212 046 ("the purchase consideration") which purchase
consideration will be settled in cash by Growthpoint.
The proposed disposal is subject to, inter-alia, the fulfilment of the following
suspensive condition, namely approval by the relevant regulatory authorities,
including but not limited to the JSE Limited, the Securities Regulation Panel
and the Competition Authorities, to the extent required.
2. SALIENT DETAILS OF THE BCX PROPERTIES
The BCX properties consist of 8 Grade A commercial properties with a gross
lettable area ("GLA") of 48 065m2. The properties are situated in the following
locations:
- Midrand (Gauteng) - two properties
- Pretoria (Gauteng) - one property
- Durban (Kwa-Zulu Natal) - three properties
- Cape Town (Western Cape) - one property
- Port Elizabeth (Eastern Cape) - one property
BCX will rent the BCX properties back from Growthpoint for periods ranging from
three to ten years.
3. THE PROPOSED DISPOSAL BY BCX
3.1 Rationale for the proposed disposal
BCX has made the decision that property holding is not its core business. In
addition the restructuring of the BCX portfolio will result in more commercially
beneficial lease terms resulting in an improved cash flow to BCX on a monthly
basis.
The Group has owned the BCX properties for between eight and nine years which
have been funded via third party debt. The proposed disposal offers BCX the
opportunity to restructure its rental terms on a more commercially efficient
basis and permits the Group to settle its outstanding debt on the BCX
properties, whilst retaining approximately R130 million in cash.
Business Connexion (Proprietary) Limited will rent the properties from
Growthpoint at market-related rates.
3.2 Financial effects of the proposed disposal
The table below sets out the pro forma financial effects of the proposed
disposal on the headline earnings, earnings, net asset value and tangible net
asset value per BCX share on the basis that:
3.2.1 The figures reflected in the "Published Before" column are the figures
as reflected in the reviewed interim results of BCX for the six months ended 30
November 2005;
3.2.2 The "Pro forma After" column assumes that:
- the proposed disposal had been implemented and the BCX properties
registered and transferred into the name of Growthpoint with effect from 1 June
2005;
- the unaudited net property rental accrued in terms of IAS17 on the BCX
properties for the six months ended 30 November 2005 is R18.7 million;
- an average interest rate of 7.2% per annum before tax for the six months
ending 30 November 2005 was earned by BCX on the net cash received in terms of
the purchase consideration;
- in relation to the pro forma net asset value and tangible net asset value
calculation the proposed disposal had been implemented on 1 June 2005; and
- no adjustments have been made for any transactions other than the proposed
disposal, which have taken place subsequent to 30 November 2005.
Published Pro
Before forma Increase
Per BCX share ( cents ) (cents) After (%)
(1)
(cents)
Headline profit for the 21.6 22.5 4.4
six months ended 30
November 2005
Earnings for the six 21.5 60.7 182.4
months ended 30 November
2005
Net asset value at 30 471.1 495.8 5.2
November 2005
Tangible net asset value 398.2 422.9 6.2
at 30 November 2005
1. The pro forma financial effects include
transaction costs of R7.6 million.
The pro forma financial effects set out in the table above are prepared for
illustrative purposes only, are the responsibility of the directors of BCX, and
because of its historical nature, may not be a true reflection of the impact of
the proposed disposal on earnings or asset values into the future. Taking into
account the anticipated net property rental accruing on the BCX properties for
the 12-months ending 31 May 2007, BCX anticipates that the proposed disposal
will be earnings enhancing.
4. GROWTHPOINT
4.1 Rationale for the acquisition of the BCX properties
The acquisition of the BCX properties reaffirms Growthpoint"s stated objective
of investing in quality, diversified physical property assets that are
underpinned by long term, sustainable, escalating income streams. All the BCX
properties are Grade A commercial properties and are located in prime locations
in Johannesburg (Midrand), Pretoria (Menlyn), Durban (La Lucia), Port Elizabeth
(St George"s Park) and Cape Town (Montague Gardens). The acquisition of this
property portfolio will increase the size of Growthpoint"s commercial portfolio
from approximately R5 billion to R5.4 billion. With office vacancies continuing
to fall, Growthpoint believes that the commercial sector is poised for growth in
the short to medium term. As such, Growthpoint will continue to look for
investment opportunities in this sector without compromising on quality.
Six of the eight BCX properties are single tenanted with BCX as the only tenant
and in the remaining two, BCX is a tenant along with other companies. BCX has
provided a rental guarantee for the multi tenanted properties for the first
year. Having BCX, a blue chip company, as a tenant on long term leases (leases
range from three to ten years with a weighted average lease life of seven years)
and escalations of 8% and triple net rentals of R55.65/m2, is one of the key
attractions to Growthpoint.
The BCX properties will be acquired at an average cost of R7 889/m2 and a
forward yield of approximately 8.5%.
4.2 Effects of the acquisition of the BCX properties
The acquisition of the BCX properties will increase Growthpoint"s total asset
base from R11.5 billion to approximately R11.9 billion. Given the size of the
BCX property portfolio relative to Growthpoint"s total asset base the
acquisition will not have a material effect on Growthpoint"s forecast
distributions or net asset values.
Sandton
8 June 2006
Investment bank Sponsor to Legal adviser to
BCX BCX
(Investec Corporate (RMB logo) (Brink Cohen Le
Finance logo) Roux Inc logo)
Sponsor to Legal adviser to Growthpoint
Growthpoint
(Investec Securities (Jowel Glyn
logo) Marais Inc.
logo)
Date: 08/06/2006 12:17:30 PM Produced by the JSE SENS Department
