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Redefine Announcement Regarding the Acquisition of Properties

Release Date: 31/05/2002 13:30
Code(s): RDF
Wrap Text

Redefine Announcement Regarding the Acquisition of Properties Redefine Income Fund Limited (Incorporated in the Republic of South Africa) (Registration No.1999/018591/06) JSE Share Code: RDF ISIN: ZAE000023503 ("Redefine") ANNOUNCEMENT REGARDING THE ACQUISITION OF PROPERTIES AND LINKED UNITS, THE CONCLUSION OF A MANAGEMENT AGREEMENT AND THE APPOINTMENT OF DIRECTORS 1. Introduction 1.1. Redefine, through its wholly owned subsidiary Outward Investments (Pty) Ltd ("Outward"), owns a portfolio of listed securities focused exclusively on the property sector of the JSE Securities Exchange South Africa ("JSE") and a portfolio of commercial properties covering the retail, office and industrial sectors. 1.2. Further to the cautionary announcement published by Redefine on 8 May 2002, Corpcapital Corporate Finance is authorised to announce that Outward has: * ("Redefine")concluded an agreement (the "acquisition") with Solomon Brothers Property Holdings (Proprietary) Limited and Kovacs Investments 238 (Proprietary) Limited (collectively "Solomon Brothers") for the acquisition of linked units in the Arnold Property Fund Limited and a portfolio of commercial properties; * ("Redefine")concluded an asset management agreement (the "management agreement") in terms of which Combined Projects (Proprietary) Limited, the operating subsidiary of Solomon Brothers, shall asset manage all of Outward`s Western Cape properties; and * ("Redefine")proposed the appointment of David and Jeffrey Solomon ("the new directors") to the board of Redefine with effect from 1 July 2002. 1.3. David, Irving and Jeffrey Solomon established Solomon Brothers in 1979. From their first commercial property acquisition in that year, they have grown to become one of the largest, privately owned, property groups in Cape Town specialising in property investment, management and development (with the emphasis on urban renewal). They hold prominent positions on various local authority forums. 2. ("Redefine")The acquisition 2.1. In terms of the acquisition agreement, Outward will acquire as one indivisible transaction and with effect from 1 July 2002: * ("Redefine")the rental enterprise businesses (which businesses comprise, inter alia, the rental earning properties known as Fountain Place, Old Town Square, Bromgood Studios, Rodene Studios, the Chambers and Parking on Pepper) all of which are situated in Cape Town (the "properties"); and * ("Redefine")20 million linked units in the Arnold Property Fund Limited (the "Arnold Property Fund linked units"). 2.2. The aggregate purchase consideration in respect of the acquisition is R133 million which is payable as follows: * ("Redefine")R80 million in cash; and * ("Redefine")R53 million by the issue of Redefine linked units at a price of R2.15 per linked unit. 2.3. The acquisition is subject to warranties that are standard for a transaction of this nature. 3. Rationale for the acquisition ("Redefine")The Board of directors of Redefine is of the view that the following benefits should accrue to Redefine: * ("Redefine")the acquisition of the Arnold Property Fund linked units will be earnings enhancing, given current market conditions, and will improve the balance of direct versus indirect property holdings within Redefine`s total asset base. In addition to the anticipated earnings growth in Arnold Property Fund, its underlying properties are of a complimentary nature to those held by Redefine. * ("Redefine")the acquisition of the properties represents the expansion of Redefine`s geographic footprint outside Gauteng. The Western Cape property sector offers distinct opportunities for both solid earnings growth and capital appreciation and Redefine intends achieving an investment profile in the region in the medium term. * ("Redefine")("Redefine")* the proposed appointment of the new directors to the Redefine Board as well as the conclusion of the management agreement will supplement Redefine`s existing knowledge of the Western Cape property market and provide the impetus to achieving its medium term objectives for the region. 4. Conditions precedent 4.1. The acquisition is subject to, inter alia, the following conditions precedent: * ("Redefine")the securing, to the extent necessary, of the requisite approvals from the JSE and the Securities Regulation Panel to the conclusion and implementation of the acquisition agreements; and * ("Redefine")the securing, to the extent necessary, of all approvals and consents for the acquisition required in terms of the Competition Act, 89 of 1998. 4.2. All of the conditions precedent must be fulfilled or waived by no later than 1 August 2002, or such later date as agreed between the parties. 5. ("Redefine")Financial Effects of the Acquisition ("Redefine")The pro forma financial effects of the acquisition on the historical earnings, headline earnings and net asset value per Redefine linked unit are illustrated in the table below: Cents per Cents per linked unit linked unit Cents per after after Cents per linked unit acquisition acquisition linked unit Total
before of the of linked after the % acquisition properties units acquisition change Historical earnings (28,53) (1) N/a (2) (25,81) (3) N/a (2) N/a Historical headline earnings 18,22 (1) N/a (2) 18,59 (3) N/a (2) N/a Historical net asset value 228,69 (1) 227,42 (4) 230,08 (4) 228,74 (4) - (1) The historical earnings and headline earnings per Redefine linked unit as set out in the "before acquisition" column of the table, are based upon Redefine`s interim results for the six month period ended 28 February 2002. The historical net asset value per Redefine linked unit as set out in the "before acquisition" column of the table, is based upon Redefine`s interim balance sheet at 28 February 2002, in which both the listed security portfolio and the direct property portfolio are stated at their fair value. (2) The historical earnings and headline earnings per Redefine linked unit as set out in the "after acquisition of the properties" column of the table cannot be meaningfully calculated as the properties were mainly vacant in the previous financial year whilst renovations and upgrading was being undertaken. These vacancies have either been leased to new tenants or secure head leases have been established to ensure future yields are achievable. Consequently, the historical earnings and headline earnings per Redefine linked unit as set out in the "after acquisition" column of the table are not capable of meaningful calculation. (3) The historical earnings and headline earnings per Redefine linked unit as set out in the "after acquisition of linked units" column of the table, are based upon the assumption that the Arnold Property Fund linked units were acquired on 1 September 2001 and the acquisition was settled by payment of the requisite cash amount and issue of Redefine linked units, on that date. The income on the Arnold Property Fund linked units was based on the distribution from 1 September 2001 (the date of listing) to 31 December 2001 and was "grossed up" for a period of six months. This amount may not be indicative of future distributions made by Arnold Property Fund. (4) The historical net asset value per Redefine linked unit as set out in the "after acquisition of the properties" column, the "after acquisition of linked units" column and the "after acquisition" column of the table, are based upon the assumption that the properties and Arnold Property Fund linked units were acquired on 1 September 2001 and the acquisition was settled by payment of the requisite cash amount and issue of Redefine linked units, on that date. The anticipated income from the properties as well as the distribution on the Arnold Property Fund linked units for the year ending 31 August 2003 are projected to contribute headline earnings of 38,20 cents per Redefine linked unit to be issued in terms of this acquisition. 6. Circular A circular containing the details of the acquisition will be sent to Redefine linked unit holders within 28 days of this announcement. 7. Extension of Cautionary Announcement Redefine linked unit holders are referred to the cautionary announcement published by Redefine on 8 May 2002 and are advised that Redefine is involved in other negotiations which, if successfully concluded, may have a material effect on the price of Redefine linked units. Unit holders are therefore advised to continue to exercise caution in dealing in their linked units. Johannesburg 31 May 2002 Corporate advisor and sponsor Corpcapital Corporate Finance a sponsor registered with the JSE Securities Exchange South Africa Reporting accountants and auditors Fisher Hoffman PKF (Jhb) Inc. Chartered Accountants (SA) Registered Accountants & Auditors (Registration number 1994/001166/21) Legal Advisor Corpcapital Transaction Support Date: 31/05/2002 01:28:45 PM Produced by the SENS Department

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