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CBS
CBS
CBS - Formation Of African Capital Property Portfolio Limited
CBS Property Portfolio Limited
(Incorporated in the Republic of South Africa)
(Registration number 2003/009523/06)
Share code: CBS & ISIN: ZAE000073995
("CBS")
FORMATION OF AFRICAN CAPITAL PROPERTY PORTFOLIO LIMITED
1 INTRODUCTION
CBS Property Portfolio Limited ("CBS") wishes to inform linked unit
holders that it has concluded an in principle transaction with a
broad based black economic empowerment ("BEE") entity led by Mr
Zwelakhe Sisulu, which will lead to the establishment of African
Capital Property Portfolio Limited ("Africap") a black economic
empowerment property holding joint venture company.
2 RATIONALE
CBS recognises that there are a number of compelling reasons to
support and enhance black economic empowerment transactions in the
property sector. These include, but are not limited to:
* transferring ownership of land to people who were previously
denied access to land through discriminatory policy and
legislation; and
* empowering previously disadvantaged individuals in order to
redress the imbalances of the past, thereby achieving a change
in the racial and gender composition of ownership, control and
management within the property sector.
The Property Sector Transformation Charter (the "Property Charter")
entered into between representatives of the South African property
industry and the Department of Public Works lists these reasons
amongst its objectives and CBS believes that the Africap transaction
is the first step towards achieving the targets as set out in the
Property Charter and CBS" broader empowerment strategy.
Africap represents sincere, sustainable transformation underpinned by
solid property assets and supported by valuable skills and knowledge
transfer. Africap will make a meaningful contribution to elevating
enterprise and skills development in the property industry.
3 SALIENT DETAILS OF THE AFRICAP TRANSACTION
3.1 BEE Parties
Abelusi Consortium (Proprietary) Limited ("Abelusi")
Abelusi is a broad based BEE company established by Mr Zwelakhe
Sisulu. It"s beneficial ownership is 100% held by previously
disadvantaged individuals and its principal strategy is to establish
the largest black-owned and managed unlisted commercial property
portfolio in South Africa. The shareholding structure of Abelusi is
as follows:
Zwelakhe Sisulu - 51%
Africap Management - 29%
Broadbased Groupings - 20 %
The Broadbased Groupings include Kgaatontle Holdings and Manyakabana
Womens Development Trust which are both broadbased women"s groupings
Menziwa Trust ("Menziwa Trust")
The Menziwa Trust is a trust with 100% of its beneficiaries being
previously disadvantaged individuals. The trust has been established
by Mr Jeff Molobela, a current non-executive director of CBS.
3.2 Mechanics of the Transaction
In terms of the transaction, CBS, Abelusi and Menziwa Trust will
establish a property loan stock company, Africap, the issued linked
units in respect of which company are to be held as follows:
Abelusi - 51%
CBS - 45%
Menziwa Trust - 4%
The intention is for Africap to be a black-owned company at all times
and, accordingly, CBS has agreed to dilute its interest down to not
less than 15% in favour of future equity partners. In this respect,
CBS will grant an option to the Public Investment Corporation (PIC),
the asset manager for the Government Pension Fund, to acquire up to a
30% stake in the company from CBS at the same price at which CBS
subscribed for the linked units, which will assist in the funding of
future growth. PIC is an existing shareholder in CBS and was
instrumental in the formation of this new venture.
Africap"s initial working capital will be provided by the
shareholders in accordance with the above ratios through their
subscription for linked units in Africap.
Africap will conclude a sale of letting enterprise agreement with CBS
Property Trust ("CBS Trust") pursuant to which the following
properties currently forming part of the CBS property portfolio will
be sold to Africap at their respective market values being:
1. Centex Close
2. Cleveland
3. 38 Dover Street
4. 37 Harley Street
5. Motown Randburg
6. Palm Grove Randburg
The funding required by Africap to settle the purchase consideration
in respect of the above acquisition will be obtained through third
party mortgage funding and a shareholder funding facility to be
advanced by CBS to Africap in terms of a facility agreement concluded
between them.
The funding will be secured by a mortgage bond over the above
properties in favour of the mortgage funder with a second mortgage
bond to be registered in favour of CBS as security for the
obligations of Africap under the shareholder funding facility.
3.3 Africap Board of directors ("Africap board")
The Africap board shall consist of a minimum of four and a maximum of
fifteen directors of whom the majority shall be black persons, with
CBS being entitled to appoint, remove or replace four directors, and
Abelusi being entitled to appoint, remove or replace four directors
of which three shall be black persons.
3.4 Asset management
An asset management company will also be established ("Asset ManCo"),
which company will be responsible for the overseeing of the asset
management functions in respect of Africap"s property portfolio. The
issued ordinary shares in the Asset ManCo will be held as follows:
Abelusi - 51%; and
The current asset managers of CBS - 49%. ("CBS Asset Manager")
One of the main purposes of the shareholders in Asset ManCo will be
to ensure that sufficient skills transfer is achieved in Asset ManCo
so as to enable it to grow the property portfolio of Africap and to
ensure that it will be in a position to operate independently from
CBS within the foreseeable future.
3.5 Performance and compliance criteria for Africap and the BEE parties
As it is crucial to the continued growth and success of Africap and
Asset ManCo that they are and remain black owned entities as
envisaged in current prevailing BEE legisation, the parties have
agreed, amongst others, that -
* Abelusi will not dispose of its interests in Africap and/or the
Asset ManCo for a period of 5 years or until the shareholder
funding facility has been repaid, whichever is the later;
* Abelusi and Menziwa Trust may only dispose (when entitled to) of
their respective interests to other BEE individuals or entities
acceptable to CBS;
* Abelusi and Menziwa Trust shall be obliged to procure that their
respective ultimate ownership entitlements are and remain
controlled by previously disadvantaged individuals and that the
BEE status afforded their respective interests do not change
from the position as at the date of the transaction, without the
consent of CBS; and
* Abelusi will grant a right of first refusal in favour of Africap
in respect of all commercial property opportunities in which it
wishes to participate.
CBS will have the right to acquire the properties sold to Africap at
a 10% discount to market value at the time, in the event of default
or non performance in terms of the abovementioned criteria.
4. SUSPENSIVE CONDITIONS
The transactions described above are subject to the following
suspensive conditions:
* the conclusion of the following agreements and in
accordance with their terms:
* the sale of letting enterprise agreement for the properties
detailed in paragraph 3.2;
* the conclusion between Africap and a third party lender
acceptable to the parties of a mortgage loan funding
agreement detailed in paragraph 3.2;
* the asset management agreement detailed in paragraph 3.4;
and
* the conclusion of the subscription and shareholders
agreement in respect of Africap asset management company;
* the obtaining of approval from the competition authorities
for the sale of the properties described above pursuant to
the sale of letting enterprise agreement; and
* the approval of each of the above transactions by the
respective boards of directors of each of CBS and Abelusi.
Cape Town
29 November, 2006
Investment bank Sponsor Legal adviser
Investec Corporate Finance Investec Bank Limited Jowell Glyn Marais
Date: 29/11/2006 05:04:04 PM Produced by the JSE SENS Department
