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Acquisition of Rental Enterprises
Fairvest Property Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/005011/06)
Share code: FVT
ISIN: ZAE000203808
(“Fairvest” or “the Company”)
(Approved as a REIT by the JSE)
ACQUISITION OF RENTAL ENTERPRISES
1. ACQUISITION AGREEMENT CONCLUDED
Shareholders of the Company are hereby advised that the
Company has entered into an agreement (“Acquisition
Agreement”) with Born Free Investments 385 Proprietary Limited
(“the Seller”) to acquire the rental enterprises carried on by
the Seller at the Remainder of Erf 93 Elliotdale, known as
Boxer Centre Elliotdale (“the First Property”), Erf 93
Tabankulu, known as Mpitshane Shopping Complex (“the Second
Property”) and Erf 871 Mqanduli, known as Boxer Centre
Mqanduli (“the Third Property”) (“the Acquisition”).
The First, Second and Third Properties are hereafter
collectively referred to as “the Properties” and the rental
enterprises conducted by the Seller at the respective
Properties are collectively referred to as the “Rental
Enterprises”.
In terms of the Acquisition Agreement, the Rental Enterprises
include:
a) All right, title and interest of the Seller in and to the
respective written notarial deeds of lease (“Notarial
Leases”) entered into by the Seller, as lessee, registered
over the Properties;
b) All right, title and interest of the Seller in and to the
lease agreements entered into by the Seller, as landlord,
in respect of the premises situated at the Properties;
c) The fixed assets of the Seller on the Properties
pertaining to the Rental Enterprises;
d) All right, title and interest of the Seller in and to the
contracts concluded in the ordinary course of business of
each Rental Enterprise;
e) The goodwill of and pertaining to each Rental Enterprise
as at the Registration Date, as defined below, howsoever
constituted; and
f) All right, title and interest (including goodwill) that
the Seller may have in the trade names and other
intellectual property of each Rental Enterprise.
The effective date of the Acquisition shall, in respect of
each Notarial Lease, be the date of registration of the
cession and delegation of the relevant Notarial Lease in the
name of the Company, which shall occur as soon as possible
after the fulfilment of the conditions precedent to the
Acquisition Agreement, which is anticipated to occur on or
about 1 December 2015 (“Registration Date”).
2. RATIONALE FOR THE ACQUISITION
The Acquisition is consistent with the Company’s growth
strategy whereby the Company will focus on acquiring retail
assets with a weighting in favour of non-metropolitan areas
and lower LSM sectors.
3. PURCHASE CONSIDERATION
The Acquisition Agreement provides for a purchase
consideration of R133 000 000 (one hundred and thirty three
million Rand) (“Purchase Consideration”), which includes VAT
at the rate of 0%, payable in cash on the Registration Date.
The Purchase Consideration will be allocated in total to the
Properties, including the retail enterprises conducted by the
Seller at the Properties.
The Company will fund the Purchase Consideration through debt
and/or equity funding.
4. THE PROPERTIES
Details of the Properties are as follows:
Property Name Geographical Sector GLA Weighted
and Address Location (m2) Average
Gross
Rental/m2
(R/m2)
Boxer Centre Remainder of Retail 6,945 84.13
Elliotdale, Erf 93
Remainder of Elliotdale,
Erf 93 District of
Elliotdale Xhora, Eastern
Cape
Mpitshane Erf 93 Retail 4,117 77.39
Shopping Tabankulu,
Complex, Erf Eastern Cape
93 Tabankulu
Boxer Centre Erf 871 Retail 4,689 81.28
Mqanduli, Erf Mqanduli,
871 Mqanduli Eastern Cape
5. PROPERTY SPECIFIC INFORMATION
Details regarding the Acquisition, as at the expected
Registration Date, are set out below:
Property Name Weighted Lease Vacancy
and Address Average Duration % by GLA
Escalation (years)
Boxer Centre 7.23% 2.52 0%
Elliotdale,
Remainder of
Erf 93
Elliotdale
Mpitshane 6.71% 4.34 3.5%
Shopping
Complex, Erf
93 Tabankulu
Boxer Centre 6.65% 3.43 2.92%
Mqanduli, Erf
871 Mqanduli
Notes:
a) The costs associated with the Acquisition are estimated at
R2 327 500.
b) The Purchase Consideration payable in respect of the
Rental Enterprises are considered to be their fair market
value, as determined by the directors of the Company. The
directors of the Company are not independent and are not
registered as professional valuers or as professional
associate valuers in terms of the Property Valuers
Profession Act, No. 47 of 2000.
6. CONDITIONS PRECEDENT
The Acquisition is subject to the following conditions
precedent, namely:
6.1 that by no later than the Due Diligence Approval Date, as
defined in paragraph 6.2 below, the Seller procures the
written unconditional consent of the owner of each of the
Properties to the Acquisition, as well as its consent to the
registration of the notarial deed of cession and delegation
of each of the Notarial Leases on the Registration Date;
6.2 within a period of 20 (twenty) business days after the date
of receipt of all documentation required by the Company to
conduct a due diligence investigation in respect of the
Rental Enterprises (“Due Diligence”), the Company has
concluded the Due Diligence to its entire satisfaction and
has given written notice thereof to the Seller, the date of
the Company giving the said written notice to the Seller
being hereinafter referred to as the "Due Diligence Approval
Date". The Seller undertakes to provide the Company with
access to all information which may be required by the
Company to conduct the Due Diligence;
6.3 within a period of 10 (ten) business days after the Due
Diligence Approval Date, the investment committee of the
Company approves the purchase of the Rental Enterprises and
the Company delivers a copy of such resolution to the Seller;
6.4 within a period of 15 (fifteen) business days after the Due
Diligence Approval Date, the board of directors of the
Company approves the purchase of the Rental Enterprises and
the Company delivers a copy of such resolution to the Seller;
6.5 within a period of 30 (thirty) business days after the date
on which the condition in paragraph 6.4 is fulfilled, the
Company confirms in writing to the Seller that adequate
funding has been secured by the Company from an acceptable
financial institution to acquire the Rental Enterprises, on
terms satisfactory to the Company and/or it has successfully
placed shares to be issued by the Company either in terms of
a vendor consideration placement and/or an issue of shares
for cash (the "Placement") with third party/ies such that the
Company is satisfied that it can fund, wholly or partially,
as the Company may require, the Acquisition from the proceeds
of the Placement and the financial institution funding
referred to above;
6.6 within a period of 90 (ninety) days after the date on which
the condition in paragraph 6.4 is fulfilled, the Acquisition
Agreement and all other agreements and transactions
contemplated in the Acquisition Agreement (to the extent
necessary) have been unconditionally approved by the
competition authorities in terms of the Competition Act, No.
89 of 1998, or conditionally approved on terms and conditions
which each of the parties confirms in writing to the other
(by not later than the said date and time) to be acceptable
to it;
6.7 The Seller shall use reasonable endeavours to procure the
fulfilment of the condition precedent contained in paragraph
6.1 as soon as reasonably possible after the date of
signature of the Acquisition Agreement (“Signature Date”) and
shall, to the extent that such condition has been fulfilled
prior to the expiry of the relevant time period set out in
paragraph 6.1 furnish to the Company documents evidencing the
fulfilment of such condition to the Company’s satisfaction.
6.8 The Company shall use reasonable endeavours to procure the
fulfilment of the conditions precedent contained in
paragraphs 6.3, 6.4 and 6.5, as soon as reasonably possible
after the Signature Date and shall, to the extent that such
conditions precedent have been fulfilled, prior to the expiry
of the relevant time periods set out in those paragraphs,
furnish to the Seller documents evidencing the fulfilment of
such conditions precedent to the Seller's satisfaction.
6.9 The Parties shall use their reasonable endeavours and the
Parties will co-operate in good faith to procure the
fulfilment of the conditions precedent contained in
paragraphs 6.2 and 6.6 as soon as reasonably possible after
the Signature Date.
6.10 The Conditions Precedent set out in –
6.10.1 Paragraphs 6.2, 6.3, 6.4 and 6.5 have been inserted for
the benefit of the Company which will be entitled to waive
fulfilment of any of the said conditions precedent, in
whole or in part, on written notice to the Seller prior to
the expiry of the relevant time periods set out above;
6.10.2 Paragraphs 6.1 and 6.6 are not capable of being waived.
7 WARRANTIES
The Sellers have provided warranties to the Company that are
standard for a transaction of this nature.
8 FORECAST FINANCIAL INFORMATION IN RESPECT OF THE ACQUISITION
The forecast financial information relating to the Acquisition
for the financial periods ended 30 June 2016 and 30 June 2017
are set out below. The forecast financial information has not
been reviewed or reported on by a reporting accountant in
terms of section 8 of the JSE Listings Requirements and is the
responsibility of the Company’s directors.
Forecast for Forecast for
the 7 month the 12 month
period ended period ended
30 June 2016 30 June 2017
Rental income 9,160,125 16,513,789
Straight-line rental accrual 804,497 702,041
Gross revenue 9,964,622 17,215,830
Property expenses (1,598,863) (2,877,807)
Net property income 8,365,760 14,338,023
Asset management fee (394,705) (676,638)
Operating profit 7,971,054 13,661,385
Finance cost - -
Profit before taxation 7,971,054 13,661,385
Taxation - -
Total comprehensive income 7,971,054 13,661,385
attributable to shareholders
Notes:
a) Gross revenue includes gross rentals and other recoveries,
but excludes any adjustment applicable to the straight-
lining of leases.
b) Property expenses include all utility and council charges
applicable to the Properties.
c) The forecast information for the 7 month period ended 30
June 2016 has been calculated from the anticipated
Registration Date, being on or about 1 December 2015.
d) Uncontracted revenue constitutes 3.61% of the revenue for
the 7 month period ended 30 June 2016.
e) Uncontracted revenue constitutes 12.03% of the revenue for
the 12 month period ended 30 June 2017.
f) Leases expiring during the forecast period have been
assumed to renew at the future value of current market
related rates.
g) This forecast has been prepared on the assumption that
100% of the Purchase Consideration is funded through new
equity. The Company could elect to partially or fully
utilise its existing and/or new debt facilities.
9 CATEGORISATION
The Acquisition qualifies as a Category 2 acquisition for the
Company in terms of the JSE Listings Requirements.
8 September 2015
Cape Town
Sponsor
PSG Capital Proprietary Limited
Date: 08/09/2015 10:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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