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PRA
PRA
Paraprop - Acquisition of New Heritage Market and Kulingile Building
PARAMOUNT PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1945/019928/06)
Share code: PRA
ISIN: ZAE000028577
("Paraprop" or "the Company" or "the Fund")
ANNOUNCEMENT REGARDING THE ACQUISITION OF NEW HERITAGE MARKET AND KULINGILE
BUILDING
1. Introduction
Linked unitholders are advised that Paraprop has entered into agreements
of sale dated 14 June 2006 and 21 July 2006 ("the agreements") with The
New Heritage Market (Proprietary) Limited and Marriott Worldwide Capital
Fund (Proprietary) Limited respectively ("the acquisitions") to acquire
the properties known as New Heritage Market (Phases 1 and 2) and the
Kulingile Building ("the properties"). The acquisitions will be effective
from the date of transfer of the properties, which is expected to be
before 30 September 2006 for New Heritage Market and 1 December 2006 for
the Kulingile Building.
Paraprop has also entered into an option agreement with The New Heritage
Market (Proprietary) Limited to acquire Phase 3 of New Heritage Market,
which is exercisable at Paraprop"s discretion upon completion of the
development
2. Rationale for the acquisitions
The rationale for the acquisition of both properties is to grow the Fund"s
property portfolio with quality properties. This is in terms of the
Fund"s strategy to increase market capitalisation in order to achieve the
benefits of scale (such as increased diversity, lower volatility and
increased liquidity) for our shareholders.
New Heritage Market
This lifestyle shopping centre has an unorthodox tenant profile and is
highly regarded in Durban as a leisure/retail destination. It is well
located in the heart of Hillcrest, and consists of small traders as well
as conventional retail. It contains a mix of shops, crafters and
entertainment, including some of Durban"s best restaurants. The centre
has traded well for the 15 years since inception and the diversified
tenant base ensures a stable and growing rental income stream.
Kulingile
This property is strategically situated in Isando, the industrial area of
Gauteng. It is a single tenanted building, and is occupied by Kulingile
Metals (Pty) Ltd, South Africa"s first significantly Black-empowered steel
group. The lease with Kulingile Metals is a long lease, expiring on 30
November 2015. The land area is some 10 hectares in extent and represents
a significant development opportunity.
3. Consideration for the acquisitions
The consideration for the New Heritage Market acquisition is R96 000 000,
of which R48 000 000 shall be payable in cash, with the remainder of the
consideration being settled by the placement of Paraprop linked units on
behalf of the vendors ("placement units"). The number of placement units
to be issued shall be determined by dividing R48 000 000 by an amount
equal to the weighted average closing price on the JSE for the 30 business
days immediately preceding the date of signature ("the average price"),
subject to Paraprop"s election to grant a discount of up to 7.5% on the
average price.
The value attributed to the New Heritage Market property by an independent
registered valuer, Mills Fitchet Magnus Penny (Proprietary) Limited is
R100 million as at 1 August 2006.
The consideration for the Kulingile Building acquisition is R108 000 000,
of which up to 100% of the purchase price may be settled by the placement
of Paraprop linked units on behalf of the vendors ("placement units"). The
number of placement units to be issued shall be determined by dividing
R108 000 000 by an amount equal to the average price, subject to
Paraprop"s election to grant a discount of up to 7.5% on the average
price. Should less than 100% of the units be placed, then such shortfall
shall be settled in cash.
The value attributed to the Kulingile Building property by an independent
registered valuer, Mills Fitchet Magnus Penny (Proprietary) Limited is
R105 million as at 1 December 2006.
4. Financial information relating to the acquisitions
The financial effects of the acquisitions on Paraprop"s net asset value
per linked unit have not been disclosed as the effects are not material.
Forecast information for the two months ending 31 October 2006 and the
year ending 31 October 2007 is set out below. The forecast financial
information has not been reviewed or reported on by Paraprop"s auditors in
terms of Section 8 of the JSE Limited Listings Requirements ("Listings
Requirements").
Property Description Forecast Uncontracted Forecast Uncontracted
for the revenue as a for the revenue as a
two % of the year % of the
months total ending 31 total
ending 31 revenue October revenue
October % 2007 (1) %
2006 (1)
R"000 R"000
New Revenue 2 124 16.6 13 504 24.1
Heritage ("000)
Market
Operational 1 502 9 676
net income
("000)
Kulingile Revenue 0 0 8 340 (2) 0
Building ("000)
Operational 0 8 217 (2)
net income
("000)
Notes:
1. Profit after tax has not been disclosed as it has been assumed that
all income before distribution will be distributed to linked
unitholders.
2. The forecast information for the Kulingile building for the year
ending 31 October 2007 is for an 11 month period.
5. Suspensive conditions of the acquisitions
All the suspensive conditions pertaining to the acquisition of the New
Heritage Market have been fulfilled.
The Kulingile transaction is still subject to Competition Board approval.
6. Property details
Details regarding the properties are set out below:
Property Location Sector Gross Single Weighted Vacancy
lettable or multi average by
area tenanted rental per rentable
m2 m2 area
R m2
New KwaZulu- Retail 12 798 Multi 83.48 916.80
Heritage Natal
Market
Kulingile Gauteng Industrial 49 000 Single 14.33 0
Building
Categorisation of the acquisitions
Each of the acquisitions is a Category 3 transaction in terms of the Listings
Requirements.
Cape Town
22 August 2006
Investment bank and sponsor
Nedbank Capital
Date: 22/08/2006 10:37:05 AM Produced by the JSE SENS Department
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