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RDF/APA/APB/AXC/MDN - Redefine/ApexHi/Madison - Additional information in
respect of Redefine`s proposed acquisition of Apexhi and Madison and
withdrawal of cautionaries for Redefine and Madison
Redefine Income Fund Limited
Registration No. 1999/018591/06
Share Code: RDF
ISIN Code: ZAE000023503
("Redefine")
ApexHi Properties Limited
Registration No. 1999/000238/06
Share codes: APA ISIN codes: ZAE000083598
APB ZAE000083606
AXC ZAE000083580
("ApexHi")
Madison Property Fund Managers Holdings Limited
Registration No. 2003/021772/06
Madison Property Fund Managers Limited
Registration No. 2005/021874/06
Share Code: MDN
ISIN: ZAE000080560
("Madison")
ADDITIONAL INFORMATION IN RESPECT OF REDEFINE`S PROPOSED ACQUISITION OF APEXHI
AND MADISON AND WITHDRAWAL OF CAUTIONARIES FOR REDEFINE AND MADISON
INTRODUCTION
Linked unitholders are referred to the announcement dated 15 January 2009 in
respect of Redefine`s firm intention to make an offer to acquire 100% of the
linked units in Madison and up to 100% of the linked units in ApexHi (not
already owned by Redefine or its subsidiaries)(collectively "the
transactions").
This announcement updates linked unitholders on the transactions and provides
additional information regarding the transactions as required in terms of the
JSE Listings Requirements.
CHANGE OF EFFECTIVE DATE
Redefine, Apexhi and Madison have agreed that the effective date of the
transactions be changed from 1 June 2009 to 1 July 2009 in order to coincide
with the end of ApexHi`s financial year and quarterly distribution period and
the end of Madison`s interim period.
Accordingly:
- ApexHi`s income distribution for the three months ending 30 June 2009;
- Madison`s income distribution for the six months ending 30 June 2009; and
- a special income distribution by Redefine for the four months ending 30
June 2009 (replacing the normal income distribution for the three months
ending 31 May 2009),
will be paid prior to the implementation of the transactions for the benefit
of the respective linked unitholders.
FINANCIAL INFORMATION AND PRO FORMA FINANCIAL EFFECTS
Forecast financial information in respect of ApexHi, Madison and Redefine
together with the pro forma financial effects of the transactions on the net
asset value and net tangible asset value of Redefine are set out below.
On the implementation of the transactions, the financial year ends of ApexHi
and Madison will be changed to 31 August and accordingly the forecast
information has been prepared for the financial period ending 31 August 2009
and the financial year ending 31 August 2010 in respect of each of ApexHi,
Madison and Redefine.
APEXHI FORECASTS
The forecast revenue, net operating profit, net profit after taxation,
distributable earnings and distributions per linked unit for ApexHi in respect
of the 14 months ending 31 August 2009 and the 12 months ending 31 August 2010
are summarised below.
The forecast figures do not include cost savings or other financial
consequences that will result from the implementation of the transactions and
are prepared on a stand alone basis for ApexHi.
Forecast for Forecast for
the 14 months the 12 months
ending 31 ending 31
August 2009 August 2010
R`000 R`000
Revenue (incl. straight lining of 1 637 374 1 616 168
leases)
Net operating profit 1 180 502 1 199 944
Net profit after taxation 126 281 152 025
Distributable earnings 1 190 257 1 167 403
Distributions per linked unit (cents): 430.78 410.20
`A` linked unit 158.32 147.67
`B` linked unit 193.50 180.49
`C` linked unit 78.96 82.04
The figures set out above are extracted from detailed ApexHi profit forecasts
for the periods in question that have been reported on by PKF (JHB) Inc. The
detailed profit forecasts, the reporting accountants` report on the forecasts
and the assumptions on which they have been based are set out in the Redefine
circular to be posted to Redefine linked unitholders during the course of the
week. The detailed assumptions include, inter alia, the following assumptions
in relation to uncontracted rental income:
- the uncontracted revenue as a percentage of conventional rental income
before straight lining amounts to 9% for the period ending 31 August 2009
and 37% for the 12 months ending 31 August 2010;
- all leases that terminate during the forecast periods have been
considered. Where it is not considered likely that the existing tenant
will renew the lease, a vacancy period has been assumed based on vacancy
levels and demand for space in the location concerned;
- rentals on renewals and on the letting of vacant space during the
forecast periods have been analysed on a building by building basis
giving consideration to:
- market rental rates and rent escalations by location, property and
premises;
- term of the lease;
- cost of tenancy; and
- the nature of the tenant.
Where existing rentals are viewed as being market related for comparable
buildings, rentals have been escalated by 10%. Where existing rentals are
considered below market for comparable buildings, rentals have been increased
to a market related monthly rental which, for office spaces in the major
metropolitan areas of Johannesburg, Pretoria and Durban, has been assumed to
be R65m2 and for industrial space has been assumed to be R35m2. No general
assumptions as to market related rentals have been applied to retail space or
office space outside of the major metropolitan areas, both of which have been
dealt with on a building by building basis after an analysis of the factors
detailed above.
MADISON FORECASTS
The forecast revenue, net operating profit, net loss after taxation,
distributable earnings and distributions per linked unit for Madison in
respect of the 8 months ending 31 August 2009 and the 12 months ending 31
August 2010 are summarised below.
The forecast figures do not include cost savings or other financial
consequences that will result from the implementation of the transactions and
are prepared on a stand alone basis for Madison.
Forecast for Forecast for
the 8 months the 12 months
ending 31 ending 31
August 2009 August 2010
R`000 R`000
Revenue 142 257 223 221
Net operating profit 62 400 124 281
Net loss after taxation (46 510) (56 099)
Distributable earnings 110 236 181 538
Distributions per linked unit 53.09 87.43
(cents):
The figures set out above are extracted from the detailed Madison profit
forecasts for the periods in question that have been reported on by PKF (JHB)
Inc. The detailed profit forecasts, the reporting accountants` report on the
forecasts and the assumptions on which they have been based are set out in the
Redefine circular to be posted to Redefine linked unitholders during the
course of the week. The detailed assumptions include, inter alia, the
following assumptions in respect of uncontracted income:
- that a new management contract will be concluded with Hyprop Investments
Limited ("Hyprop") with effect from 1 January 2010, in terms of which (i)
asset management fees will be earned at a rate of 0.25% of the enterprise
value (market capitalisation plus debt) of Hyprop; and (ii) Hyprop will
employ all staff currently seconded to Hyprop by Madison and accept
responsibility for all costs currently being incurred in the asset
management fee paid by Hyprop to Madison. Linked unitholders` attention
is drawn to the fact that, while negotiations and discussions in relation
to the renewal of the Hyprop contract are ongoing, a renewal has not yet
been concluded and the Hyprop board has advised that it needs to consider
the implication of the proposed transactions before making a final
decision in this regard. Any renewal of the Hyprop asset management
contract would be subject to Hyprop linked unitholder approval; and
- that Madison will establish an opportunity fund of approximately
USD75million in 2009 which will be invested in offshore listed
securities. A prospectus is currently being prepared and the fund will be
managed by Madison which will earn an asset management fee plus a
performance fee. Only the net asset management fee of 0.75% has been
accounted for in the forecast. Linked unitholders` attention is drawn to
the fact that the capital raising has not yet commenced and that any fees
from the fund are dependent upon the minimum capital for the fund of
USD50 million being successfully raised.
REDEFINE FORECASTS
The forecast revenue, net operating profit, net (loss)/ profit after taxation,
distributable earnings and distributions per linked unit for Redefine in
respect of the years ending 31 August 2009 and 31 August 2010 are summarised
below.
The forecast figures for Redefine include the forecast figures of ApexHi and
Madison as well as the financial consequences that will result from the
implementation of the transactions on the following basis:
- the forecast distributions per linked unit of Redefine for the years
ending 31 August 2009 and 31 August 2010 excluding the financial impact
of the transactions are 62.6 cents and 68.6 cents respectively;
- the forecast figures for the year ending 31 August 2009 include forecast
results for ApexHi and Madison for July and August 2009;
- the forecast figures for the year ending 31 August 2010 include forecast
results for ApexHi and Madison for the full year; and
- economies of approximately R4.9 million for the year ending 31 August
2009 and R29.8 million for the year ending 31 August 2010 (which are
expected to be achieved in respect of property expenses, administrative
expenses and net finance charges after the transactions are implemented)
have been taken into account.
Forecast for the year Forecast for the
ending 31 August 2009 year ending 31
R`000 August 2010
R`000
Revenue (incl. straight lining of 1 307 317 2 805 869
leases)
Net operating profit 1 064 574 2 229 699
Net (loss)/profit after taxation (1 925 449) 115 597
Distributable earnings 741 928 1 855 976
Distributions per linked unit 62.21 74.67
(cents):
The figures set out above are extracted from the detailed Redefine profit
forecasts for the years in question that have been reported on by PKF (JHB)
Inc. The detailed profit forecasts, the reporting accountants` report on the
forecasts and the assumptions on which they have been based are set out in the
Redefine revised listing particulars to be posted to Redefine unitholders
during the course of the week. The detailed assumptions include, inter alia,
the following assumptions in relation to uncontracted rental income:
- the uncontracted revenue as a percentage of conventional rental income
before straight lining amounts to 9% for the year ending 31 August 2009
and 31% for the year ending 31 August 2010;
- all leases that terminate during the forecast periods have been
considered. Where it is not considered likely that the existing tenant
will renew the lease, a vacancy period has been assumed based on vacancy
levels and demand for space in the location concerned;
- rentals on renewals and on the letting of vacant space during the
forecast periods have been analysed on a building by building basis
giving consideration to:
- market rental rates and rent escalations by location, property and
premises;
- term of the lease;
- cost of tenancy; and
- the nature of the tenant; and
- in respect of rentals on renewals and letting of vacant space in the
ApexHi portfolio the assumptions detailed under the ApexHi forecast
figures set out above have been applied. In respect of the Redefine
portfolio no general assumptions have been applied and rentals have been
assumed at a market rate specific to each building after an analysis of
the factors detailed above.
Impact of the transactions on the forecast distributions per unit
Based on the forecast distributions set out above and the swap ratios
applicable to the transactions, the effect of the transactions on the forecast
distributions to Redefine, ApexHi and Madison linked unitholders for the 12
months ending 31 August 2010 (the first full financial year after the
implementation of the transactions) will be as follows:
Forecast Forecast Change
distribution for distribution
the year ending 31 for the year
August 2010 - ending 31 August
before the 2010 -after the
transactions transactions
(cents per unit) (cents per unit)
Redefine 68.59 74.67 8.9%
Madison 87.43 67.20 (23.1%)
ApexHi 410.20 412.79 0.6%
ApexHi A 147.67 150.83 2.1%
ApexHi B 180.49 184.29 2.1%
ApexHi C 82.04 77.66 (5.3%)
Notes:
- the figures in the "Forecast distribution for the year ending 31 August
2010 - before the transactions" are extracted from the forecasts of
ApexHi, Redefine and Madison for the period and do not take the impact of
the transactions into account;
- the figures in the "Forecast distribution for the year ending 31 August
2010 - after the transactions" are based on the forecast distribution of
Redefine for that period taking into account the impact of the
transactions and the swap ratios applicable to the acquisition of the
ApexHi and Madison linked units in terms of the transactions.
PRO FORMA FINANCIAL EFFECTS ON REDEFINE`S NET ASSET VALUE AND NET TANGIBLE
ASSET VALUE PER LINKED UNIT
The pro forma financial effects of the acquisition on Redefine`s net asset
value per linked unit and tangible net asset value per linked unit as at 31
August 2008 are set out below.
The pro forma financial effects have been prepared for illustrative purposes
only, to provide information on how the transactions may have impacted on the
historical net asset value and net tangible asset value of Redefine. Because
of their nature, they may not fairly present Redefine`s financial position,
changes in equity, results of operations or cash flows after the transactions.
The pro forma financial effects are the responsibility of the directors of
Redefine and have been reported on by PKF (Jhb) Inc.
Unadjusted Pro forma after Change
before the the transactions
transactions (Rand)
(Rand)
Net asset value per linked unit 6.72 5.71 (15%)
Net tangible asset value per linked
unit 6.72 5.25 (22%)
Net asset value per linked unit
(excl deferred tax) 7.58 6.37 (16%)
Net tangible asset value per linked
unit (excl deferred tax) 7.58 5.91 (22%)
Linked units in issue (excl
treasury linked units) 893 160 737 2 485 475 381
Notes and assumptions:
- For the purposes of the pro forma financial effects it is assumed that
the transactions were implemented on 31 August 2008 and that they
resulted in the acquisition by Redefine of 100% of the linked units in
ApexHi and Madison.
- The amounts set out in the "Unadjusted before the transactions" column
have been extracted from the audited balance sheet of Redefine as at 31
August 2008.
- The amounts set out in the "Pro forma after the transactions" column are
derived from combining the amounts from the audited balance sheet of
Redefine as at 31 August 2008; the reviewed balance sheet of ApexHi as at
31 December 2008; and the audited balance sheet of Madison as at 31
December 2008 subject to the following adjustments:
- the elimination of Redefine`s investment in ApexHi linked units
valued at approximately R1.12 billion in Redefine`s balance sheet
and the reversal of the deferred tax provided on such investment;
- the elimination of the ApexHi management contract, reflected as a
R106 million intangible asset in Madison`s balance sheet;
- the payment of the costs of the transactions amounting to
approximately R20 million;
- the elimination of the issued capital of Madison and ApexHi on
consolidation and the increase in the issued capital of Redefine
resulting from the issue of the Redefine linked units as
consideration for the Madison and ApexHi linked units; and
- the impairment of the excess of the purchase price (based on a
market price per Redefine unit of R6.41) over the fair value of the
net assets of ApexHi acquired in terms of the transactions.
PROPERTY SPECIFIC INFORMATION AND VALUATION OF APEXHI`S PORTFOLIO
The ApexHi property portfolio comprises 289 properties located throughout the
country. As at 31 December 2008, the property portfolio had a total rentable
area of 2 378 698 m2, of which retail properties comprised 932 831m2 (39%),
office properties comprised 920 346m2 (39%) and industrial properties
comprised 525 521m2 (22%). The weighted average monthly rental per square
metre of the ApexHi property portfolio is R48.65 (R59.83 in respect of retail
properties, R53.10 in respect of office properties and R22.51 in respect of
industrial properties).
The entire property portfolio has been valued at R9 635 842 000 (as at 28
February 2009) by Asset Valuation Services CC, DDP Valuers (Pty) Ltd, Mills
Fitchet (Tvl) CC, Mills Fitchet (KZN) CC, Quadrant Properties (Pty) Ltd and
Alliance Group (Pty) Ltd, all of which are external valuers as defined in
section 13 of the JSE Listings Requirements.
The details of the location, rentable area, weighted average monthly rental
per square metre and valuation attributable to each specific property in
ApexHi`s property portfolio is included in the Redefine circular to be sent to
Redefine linked unitholders during the course of the week.
INDEPENDENT ADVICE AND VIEWS OF THE BOARDS
Given the nature of the transactions, the respective boards of ApexHi, Madison
and Redefine appointed independent advisors to advise the boards on whether or
not the transactions are fair and reasonable to their respective linked
unitholders.
Each of the independent advisors, being:
- Deloitte & Touche Corporate Finance in respect of ApexHi;
- Grant Thornton Corporate Finance in respect of Madison; and
- JPMorgan in respect of Redefine,
has concluded that the terms and conditions of the transactions are fair and
reasonable to the linked unitholders in question. The content of their advice
is detailed in the circulars to be sent to linked unitholders during the
course of the week.
In addition, each of the boards of ApexHi, Madison and Redefine has concluded
that the terms and conditions of the transactions are fair and reasonable to
their linked unitholders and recommends that their linked unitholders vote in
favour of the transactions.
CIRCULARS AND WITHDRAWAL OF CAUTIONARIES
The following circulars will be posted to linked unitholders during the course
of the week:
- a circular and revised listing particulars to Redefine linked
unitholders;
- ApexHi A, B and C scheme circulars (together with the Redefine revised
listing particulars) to the ApexHi A, B and C linked unitholders; and
- a Madison scheme circular (together with the Redefine revised listing
particulars) to Madison linked unitholders.
Caution is no longer required to be exercised by Redefine or Madison linked
unitholders when dealing in their securities.
ApexHi linked unitholders are referred to the announcement dated 20 February
2009 in relation to the proposed acquisition by ApexHi of 100% of the linked
units in Ambit Properties Limited that it does not already own (the "Ambit
transaction") and are advised to continue exercising caution until such time
as a further announcement in relation to the Ambit transaction is released.
9 March 2009
Corporate advisor, legal advisor and sponsor to Redefine and sponsors to
ApexHi and Madison
Java Capital (Proprietary) Limited
Independent transaction advisor to Redefine
JPMorgan Chase Bank N.A., (Johannesburg Branch)
Independent advisor to ApexHi
Deloitte & Touche Corporate Finance
Independent advisor to Madison
Grant Thornton Corporate Finance
Reporting Accountants to Redefine
PKF (Jhb) Inc.
Attorneys to the scheme
Fluxmans Inc.
Independent sponsors to ApexHi and Madison
Deloitte & Touche Sponsor Services (Proprietary) Limited
Competition Law Advisor to Redefine
Vani Chetty Competition Law (Proprietary) Limited
Date: 09/03/2009 16:30:44 Supplied by www.sharenet.co.za
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