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IPF - Investec Property Fund Limited - Abridged pre-listing statement

Release Date: 06/04/2011 14:00
Code(s): JSE
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IPF - Investec Property Fund Limited - Abridged pre-listing statement Investec Property Fund Limited (Incorporated in the Republic of South Africa) (Registration number 2008/011366/06) ISIN ZAE000155099 Share Code IPF ("Investec Property Fund" or "the Fund") ABRIDGED PRE-LISTING STATEMENT Abridged pre-listing statement relating to the listing of Investec Property Fund on the securities exchange operated by the JSE Limited ("JSE") with effect from the commencement of business on Thursday, 14 April 2011 ("Listing Date"). This abridged pre-listing statement is not an invitation to the public to subscribe for Investec Property Fund Linked Units, but is issued in compliance with the Listings Requirements of the JSE for the purpose of providing information to the public with regards to the Fund. This abridged pre-listing statement contains extracts of the salient features of the Investec Property Fund pre-listing statement dated 18 March 2011 ("Pre-listing Statement"), which extracts are contextualised by, and should be read with, that Pre-listing Statement. 1 INTRODUCTION 1.1 Background and nature of business The Fund was incorporated as a public company under the name Afropulse 405 Limited as a newly formed property investment company in South Africa on 7 May 2008. The Fund`s name was changed to Investec Property Fund Limited on 6 April 2011. The Fund is a limited liability, variable loan stock company formed with the purpose of investing in direct real estate. At the Listing Date, the authorised share capital of the Fund will comprise 1,000,000,000 shares with a par value of 1 cent each. The Fund will have a total issued capital of R1,700,000,000 comprising 170,000,000 shares with a par value of 1 cent each, linked to 170,000,000 variable rate, unsecured, subordinated debentures of R1,698,300,000 in aggregate with each debenture having a nominal value of 999 cents (together comprising a "Linked Unit"). The Fund will be ungeared on listing. The Fund has a financial year which ends on 31 March of each year. Apart from the conclusion of the sale and purchase agreements ("Sale and Purchase Agreements") which provided for the acquisition of the initial property portfolio set out in 5 below ("Property Portfolio"), the Fund has been dormant since incorporation and has no trading history. 1.2 Future prospects and strategy The objective of the Fund is to grow its asset base by investing in well-priced income producing properties to optimise capital and income returns over time for holders of its Linked Units ("Linked Unit Holders"). The Fund may also, from time to time, redevelop properties to enhance value and support longer-term income and capital growth. The primary objectives of the Fund are to: - provide an income stream through the acquisition and redevelopment of office, retail and industrial investment properties; - invest in a well diversified property portfolio that provides good growth opportunities; - optimise and secure long-term distribution and capital growth; - allow Linked Unit Holders to participate in the net income (after providing for related expenditure) by distributing significantly all the net income to Linked Unit Holders. 1.3 Purpose of the listing The main purposes of the listing of the issued Linked Units of the Fund are to: - provide investors, both institutional and private, with an opportunity to participate over the long term in the income streams and future capital growth of the Fund; - obtain a spread of investors in order to enhance the liquidity and tradability of the Linked Units; - provide the Fund with access to capital markets; - provide the Fund with access to a central trading facility thereby providing liquidity to Linked Unit Holders; - provide the Fund with a platform to raise funding to pursue growth and investment opportunities in the future; - enhance the public profile and general public awareness of the Fund. 2 LISTING AND PARTICULARS OF THE PRIVATE PLACING Approval of an application for the listing of 170,000,000 Linked Units in the "Real Estate Holdings and Development" sector of the JSE, under the name "Investec Property Fund Limited" has been granted by the JSE, subject to the Fund confirming the required spread of Linked Unit Holders. 2.1 Structure On 1 April 2011, 170,000,000 Linked Units were issued to Investec Limited ("Investec") at a subscription price of R10. In terms of this subscription, Investec acquired a 100% interest in the Fund, thereby raising total subscription proceeds of R1,700,000,000. With effect from this date, the Fund utilised R1,696,500,000 of the subscription proceeds to acquire the Property Portfolio. The surplus subscription proceeds of R3,500,000 remaining in the Fund will be utilised for working capital requirements. 2.2 Details of the Private Placing The offer comprised of a private placing by Investec by way of an offer for sale of 85,000,000 Linked Units ("Private Placing"). Therefore following the Private Placing, Investec will hold 50% of the Fund`s issued Linked Units. The Private Placing was offered at the price range described in 2.4 below, to: - institutional investors in South Africa; and - the private clients of selected stockbroking companies in South Africa. 2.3 Time and date of the opening and closing of the Private Placing 2011 Opening date of the Private Placing (09:00) Tuesday, 22 March Closing date of the Private Placing (16:00) by Friday, 1 April which date invited investors were required to submit their applications to the Corporate Finance Division of Investec Bank Limited (the "Bookrunner") in order to qualify for participation in the Private Placing Date upon which investors were notified of their Wednesday, 6 April selection to participate in the Private Placing and the number of Linked Units which they have been allocated Investec Property Fund Linked Units listed on the Thursday, 14 April JSE 2.4 Offer price Linked Units offered for sale in terms of the Private Placing were offered at a price range between R9.50 and R10.50 per Linked Unit. Offers could, however, be outside of the price range. The offer price was exclusive of Securities Transfer Tax and is payable in full in Rand without deduction or set-off. The Bookrunner solicited indications of interest from selected investors to acquire Linked Units in terms of the Private Placing as part of a "book- building" process. Following this book-building process, and after consultation with Investec, the price of the Linked Units offered for sale in the Private Placing, was set at R9.50 per Linked Unit. 2.5 Allocation The basis of allocation of the issued Linked Units was determined by the Bookrunner in its sole discretion, after consultation with the nominated representative of the board of directors of the Fund. Applicants in the Private Placing have been provided with notice of their allocations. No preference of allotment was given to any applicant. Due to the level of demand, applicants received fewer Linked Units than the number they applied for. Any dealing in Linked Units prior to delivery of the Linked Units is entirely at the applicant`s own risk. 3 DIRECTORS OF THE FUND Full name Age Capacity Business address Sam Hackner 55 Executive chairman 100 Grayston Drive, Sandown,
Sandton, 2196 Michael P Crawford 68 Lead independent Stratford House, non-executive The Braes,
director Bryanston Drive, Bryanston, 2021 Samuel R Leon 61 Chief executive 100 Grayston officer Drive, Sandown, Sandton, 2196 David A J Donald 60 Executive 100 Grayston financial director Drive, Sandown, Sandton, 2196 Brian Molefe 44 Independent non- 759 Camelford executive director Road, Cornwall Hill Estate, Irene, Pretoria, 0157
Moses M Ngoasheng 53 Independent non- Safika House, 89 executive director Central Street, Houghton, 2198
A fourth independent non-executive director will be appointed following the listing. In terms of the JSE Listings Requirements, all Directors will retire at the first annual general meeting of the Fund but will make themselves available for re-election by the Linked Unit Holders. 4 MANAGEMENT OF THE FUND The Fund will be managed by Investec Property Limited (the "Manager") in terms of an asset management and property management agreement ("Manco Agreement"). The Manager is a wholly-owned subsidiary of Investec. The management team of the Manager has significant experience and a reputable track record in managing and developing large property funds. This management team will be responsible for managing the Fund in an efficient manner, diligently and in good faith in accordance with acceptable and prevailing industry standards, within an approved budget, so as to obtain the optimum long-term yield and capital growth of the Fund. The Manco Agreement is available for inspection. A summary of the services to be provided by the Manager and the fees payable by the Fund in respect thereof is set out in the Pre-listing Statement. The Manco Agreement will operate for an initial period of seven years and in the event of a breach, may be terminated on six months` notice by the Fund or otherwise with the approval of a majority of the votes cast by Linked Unit Holders (excluding the votes of any Linked Unit Holders who are related parties of the Manager and their associates) in a general meeting of the Fund called by the Fund or the Linked Unit Holders. If the Manager is not in default and Linked Unit Holders require the termination of the Manco Agreement, the Manager shall be entitled to sell the asset management business to the Fund which shall be obliged to purchase the business for fair market value. Fair market value shall be an amount equivalent to the anticipated aggregate fees payable to the Manager in terms of the Manco Agreement for the year following the date of termination, determined by multiplying the last month`s fees payable prior to the date of termination by 12, capitalised at a rate equivalent to the forward yield of the Fund determined as at the date of termination. In the event of any dispute between the parties as to the calculation of the termination purchase price, the dispute shall be referred to an expert for determination. 5 PROPERTY PORTFOLIO The Fund acquired the Property Portfolio from Investec for a total purchase consideration of R1,696,500,000. The Property Portfolio had been independently valued at R1,771,000,000 by Mills Fitchet ("Independent Valuer"). A detailed list of the Property Portfolio is set out in Annexure 1 to the Pre-listing Statement. As at the date of this announcement 28 of the 29 properties have been transferred to the Fund, representing 98.17% of the Property Portfolio by value. The remaining property to be transferred is Aeroton Table Choice where rates clearance certificates remain outstanding. The Property Portfolio consists of 29 properties with a total GLA of 368,530mSquared. An analysis of the Property Portfolio by market value, sector, tenancy, geographical spread and by lease expiry profile is set out in the Pre- listing Statement. The 10 largest properties by market value in the Property Portfolio include: Property name Mills Acquisition Acquisition Percentage Fitchet price at cost / price/mSquar of total valuation Directors` ed acquisition
(R`000) valuation (R/mSquared) price (R`000) Woolworths House 288,000 288,000 9,463 17.0% Investec Offices 215,000 215,000 32,860 12.7% Durban Alrode Multipark 180,000 180,000 2,080 10.6% 345 Rivonia 130,000 130,000 11,350 7.7% Boulevard 373 Pretorius 125,000 125,000 9,370 7.4% Street 4 Protea Place 115,000 90,000 12,941 5.3% 5 Walnut Road 85,000 71,000 5,057 4.2% Benoni Multipark 83,000 70,000 1,757 4.1% Makro Montague 80,000 80,000 7,120 4.7% Gardens Business 57,500 57,500 8,580 3.4% Connexion Randjiespark Total for 10 1,358,500 1,306,500 5,754 77% largest properties Total Property 1,771,000 1,696,500 4,601 100% Portfolio Note: The amount of R1,696,500,000 represents the aggregate of the Directors` valuation of the 29 properties acquired which equals the aggregate cost thereof as set out in the respective Sale and Purchase Agreements. The Directors` valuations agreed to those of the Independent Valuer in respect of 23 of the 29 properties to be acquired. In the case of 6 properties, the Directors` valuation was less than that of the Independent Valuer for reasons set out in the Pre-listing Statement. This resulted in the Directors` valuation of the entire Property Portfolio being R74,500,000 less than that of the Independent Valuer`s valuation in aggregate. The average gross rental per square metre (excluding vacancies) for the Property Portfolio by sector is as follows: - Office: R103.74/mSquared - Industrial: R30.86/mSquared - Retail: R41.56/mSquared The weighted average rental escalation (by GLA) for the Property Portfolio is: - Office: 7.6% - Industrial: 8.8% - Retail: 8.1% 6 FINANCIAL INFORMATION The table below sets out the salient unaudited profit forecast information of the Fund and should be read in conjunction with the unaudited profit forecast information disclosed in the Pre-listing Statement. Such information has been prepared for illustrative purposes only and because of its nature may not fairly reflect the financial position and results of the Fund. The unaudited profit forecast is the responsibility of the Directors of the Fund. Unaudited forecast
for the year ending 31 March 2012 (R`000)
Revenue Gross rental and related revenue, excluding straight-line 214 055 rental revenue adjustment Straight-line rental revenue adjustment 28 159 Rental revenue 242 214 Property expenses (54 093) Net rental and related revenue 188 121 Operating expenses Fund expenses (2 383) Asset management fee (8 483) Operating profit 177 255 Finance income 3 816 Profit before debenture interest and taxation 181 071 Debenture interest (152 742) Profit before taxation 28 329 Taxation (7 902) Profit after taxation attributable to equity holders/Total 20 427 comprehensive income Reconciliation of attributable earnings to distributable earnings Attributable earnings 20 427 Debenture interest 152 742 Earnings 173 169 Straight-line rental revenue adjustment (28 159) Deferred tax on straight-line rental revenue adjustment 7 885 Distributable earnings 152 895 Distributed to Linked Unit Holders 152 895 Interest on debentures 152 742 Dividends on ordinary shares 153 Undistributed earnings -
Linked Units in issue on listing 170,000,000 Distribution per Linked Unit (cents) 89.94 Earnings per Linked Unit (cents) 101.86 Headline earnings per Linked Unit (cents) 101.86 Forward yield (based on distribution) per Linked Unit with 9.0% a Linked Unit price of 1 000 cents (assuming sold at the midpoint of the offer range)
Notes to the unaudited forecast for the year ending 31 March 2012 are set out in Annexure 7 to the Pre-listing Statement. In terms of the Private Placing, 85,000,000 Linked Units were issued to investors at a price of R9.50 per Linked Unit, providing a yield to such investors of 9.47%. This was calculated on the basis of a distribution of 89.94 cents on an acquisition price of R9.50 per Linked Unit. 7. DIVIDENDS AND DISTRIBUTION POLICY The directors anticipate that the first dividend and distribution payable to Linked Unit Holders will be the dividend and distribution in respect of the six month period ending 30 September 2011 which is expected to be paid in December 2011. It is the directors` intention to declare a dividend and distribution biannually, which is expected to be paid in June and December, as stated in the amended debenture trust deed governing the debentures of the Fund ("Debenture Trust Deed"). The Debenture Trust Deed was amended following the publication of the Pre-listing Statement to provide for interim and final distribution payments in December and June, respectively, as previously it provided for payments in January and July respectively. 8. COPIES OF THE PRE-LISTING STATEMENT Copies of the Pre-listing Statement can be obtained during normal business hours from: - the Corporate Finance Division of Investec Bank Limited, 100 Grayston Drive, Sandown, Sandton, 2196; - KPMG Services (Proprietary) Limited, 85 Empire Road, Parktown, 2193 and Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001 06 April 2011 Corporate Advisor and Sponsor: Investec Bank Limited Transactional Sponsor: KPMG Services (Proprietary) Limited Attorneys: Glyn Marais Inc Independent Valuers: Mills Fitchet Magnus Penny (Proprietary) Limited Debenture Trustee: Ironwood Trustees (Proprietary) Limited Independent Reporting Accountants and Auditors: Ernst & Young Inc Date: 06/04/2011 14:00:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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