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CPL - Capital - Disposal Of A Subsidiary
Capital Property Fund
Share Code: CPL
ISIN: ZAE000001731
("Capital" or the "Fund")
(A portfolio in Capital Property Trust Scheme, a Collective Investment Scheme
in Property established in terms of the Collective Investment Schemes Control
Act, No 45 of 2002 managed by Property Fund Managers Limited ("PFM"))
(Incorporated in the Republic of South Africa)
(Registration No. 1980/009531/06)
DISPOSAL OF A SUBSIDIARY
INTRODUCTION
Unitholders are advised that an agreement was concluded between, inter alia,
ABSA Bank Limited (as trustee for Capital) and PFM (as asset manager of
Capital), as vendors, and Fortress Income Fund Limited, a newly listed
property loan stock company ("Fortress"), as purchaser, pursuant to which
Capital disposed of the entire issued share capital of and shareholder claims
against the Fund`s wholly owned subsidiary Fortress Income 5 (Proprietary)
Limited ("Fortress Income 5") ("the disposal agreement")(hereinafter referred
to as "the transaction"). Fortress Income 5 owns 14 properties valued at R321
350 000 ("the properties").
Capital signed surety for Fortress Income 5, whilst still a wholly owned
subsidiary of Capital, in respect of a bank loan on the basis that Capital
would be released from the suretyship on the listing of Fortress. Fortress
listed on the JSE Limited on 22 October 2009.
TERMS AND CONDITIONS PRECEDENT
With effect from 1 October 2009 ("the effective date"), Capital disposed of
Fortress Income 5 for an aggregate purchase price of R321 350 000 which
purchase price is to be settled as follows:
- by the allotment and issue or delivery to Capital of 17 289 250 "A"
linked units in Fortress at R9,00 per "A" linked unit and 17 289 250 "B"
linked units in Fortress at R1,00 per "B" linked unit; and
- the balance of the purchase price for cash in an amount of R148 457 500.
All properties have been transferred and all payments have been made.
The disposal agreement contains warranties normal for disposals of this
nature.
All of the conditions precedent to which the disposal agreement was subject
have been fulfilled.
RATIONALE FOR THE TRANSACTION
The disposal of Fortress Income 5 improves the overall quality of the Capital
property portfolio by disposing particularly of the "B" grade properties
acquired as part of the acquisition of Monyetla Property Fund Limited
("Monyetla"), which acquisition was detailed in the circular to unitholders
of Monyetla issued on 5 November 2008.
Capital will utilise the cash portion of the sale proceeds to reduce debt.
The Fund intends reducing its holding of Fortress "A" and "B" linked units
over time and will utilise the proceeds for direct property investments.
THE PROPERTIES
Details of the properties including property description, region, sector,
forecast weighted average rental per square metre, rentable area, purchase
price and the valuation attributed by Peter Parfitt of Quadrant Properties
(Proprietary) Limited, an independent professional associated valuer, as at 1
October 2009 to each of the properties is as follows:
Property description Region Sector Forecast Rentable Purchase
weighted area price/
average valuation
rental
per m2
(R) (m2) (R`000)
Erven 813, 815, 816 and GP Commercial 44,26 3 786 10 800
818 Benoni
SS Moneyline 755 Office GP Commercial - 295 2 300
Estate 328/2001, Unit 3
Erf 611 Hennopspark Ext 25 GP Retail 66,34 2 354 14 000
Ptns 18 and 19 of Erf 77 GP Commercial 55,20 3 111 25 300
Edendale
Erven 103, 104, 105 and GP Industrial 29,04 10 031 34 400
491 Jet Park
Erf 7933, Parow WC Retail 37,07 5 660 27 000
Erf 742 Gezina GP Retail 32,67 12 097 39 900
RE of Ptn 1 of Erf 904 FS Commercial 63,49 2 784 16 900
Bloemfontein
Erf 2351 Sinoville GP Retail 42,57 13 384 56 000
RE of Erf 2206, Shortts KZN Industrial 22,27 7 873 16 150
Retreat
Erf 2832, Brits NW Commercial 49,81 1 459 5 800
Ptn 3 of Erf 1335 NW Retail 42,38 2 523 7 000
Carltonville Ext 2
Erf 29036 Uitenhage EC Industrial 29,02 20 000 56 000
Erf 705, Gezina GP Industrial 22,02 4 162 9 800
FINANCIAL INFORMATION
The pro forma financial effects of the transaction on Capital`s financial
results for the six months ended June 2009 ("the financial information") are
set out below and have not been reviewed or reported on by the Fund`s
auditors.
The pro forma financial effects of the transaction on the net asset value and
tangible net asset value per unit are not material and have not been
disclosed.
The pro forma financial effects have been prepared for illustrative purposes
only, to provide information on how the transaction may impact the financial
information. Due to their nature, the pro forma financial effects may not
fairly present Capital`s financial position, changes in equity, and results
of operations or cash flows after the transaction. The pro forma financial
effects are the responsibility of the directors of PFM.
The pro forma effect of the transaction on the financial information of
Capital for the six months ended June 2009 is as follows:
Unadjusted Pro forma % Change
before the after the
transaction transaction
(cents) (cents)
Earnings per unit 25,18 23,25 (7,7%)
Headline earnings per unit 26,59 24,65 (7,3%)
Distribution per unit 25,72 23,79 (7,5%)
Weighted average number of units in 618 949 027 618 949 027
issue
Notes and assumptions:
- The amounts set out in the "Unadjusted before the transaction" column
have been extracted without adjustment from the financial information.
- The financial information and the pro forma financial effects thereon
have been prepared in compliance with International Financial Reporting
Standards.
- The transaction is assumed for the purposes of earnings per unit,
headline earnings per unit and distribution per unit to have been
implemented on 1 January 2009.
- The disposal was at the fair value of the assets disposed of.
- The historical rental income and related property expenditure was
extracted from the financial information.
- The cash proceeds of R148 457 500 has been utilised to reduce interest
bearing liabilities at an effective interest rate of 9,5%.
- R172 892 500 of the purchase consideration was received in the form of
17 289 250 "A" linked units in Fortress at R9,00 per "A" linked unit and
17 289 250 "B" linked units in Fortress at R1,00 per "B" linked unit.
Fortress listed on the JSE Limited in October 2009. The forecast yield
of 10,75% on the "A" linked units and 9% on the "B" linked units, as
reported on by the reporting accountants in the prospectus issued by
Fortress dated 16 October 2009, have not been taken into account in the
calculation of these financial effects in compliance with the SAICA
Guide on Pro Forma Financial Reporting.
CATEGORISATION OF THE TRANSACTION
The transaction is a category 2 transaction in terms of section 9.5(a) of the
Listings Requirements of the JSE Limited.
29 October 2009
Corporate advisor, legal advisor and sponsor
Java Capital (Proprietary) Limited
Date: 29/10/2009 17:49:13 Supplied by www.sharenet.co.za
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