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FFA/FFB - Fortress - Proposed Acquisition of a Portfolio Of Retail Properties

Release Date: 30/08/2011 09:05
Code(s): FFA FFB
Wrap Text

FFA/FFB - Fortress - Proposed Acquisition of a Portfolio Of Retail Properties FORTRESS INCOME FUND LIMITED Incorporated in the Republic of South Africa Registration number 2009/016487/06 Share codes "FFA" ISIN ZAE000141313 and "FFB" ISIN ZAE000141321 respectively ("Fortress") PROPOSED ACQUISITION OF A PORTFOLIO OF RETAIL PROPERTIES INTRODUCTION Linked unitholders are advised that Fortress has concluded an agreement with Capital Property Fund ("Capital") for the acquisition of a portfolio of retail properties ("the property portfolio") from Capital (the "transaction"). RATIONALE FOR THE TRANSACTION Capital is disposing of the property portfolio as part of its strategy to reduce its retail holdings. From a Fortress perspective the property portfolio represents an attractive opportunity to increase its retail holdings with a portfolio of good quality retail properties, providing steady income flow and enhancing the underpin of Fortress` distribution commitments. TERMS OF THE TRANSACTION, USE OF PROCEEDS AND CONDITIONS PRECEDENT The effective date of the transaction is 1 December 2011. The purchase consideration payable by Fortress to Capital pursuant to the transaction is R704 million which will be settled by the issue of 51 014 493 Fortress A linked units and 51 014 493 Fortress B linked units. The transaction is subject to approval by the Competition authorities. THE PROPERTY PORTFOLIO Details of the property portfolio, including property name and address, geographical location, rentable area, sector, weighted average rental per square meter, effective date of acquisition, purchase price and the valuations attributed to the properties as at 1 December 2011 by Quadrant Properties (Proprietary) Limited, an independent professional associated valuer, are as follows - Property name Geographical Rentable area Sector and address location (m2) Park Central Gauteng 8 613 Retail Shopping Centre, Noord and Twist Streets, Johannesburg Mutsindo Mall & Limpopo 12 330 Retail Capricorn Plaza Post Office Street, Thohoyandou Morone Shopping Limpopo 13 487 Retail Centre Burgersfort Kastania Street, Burgersfort Crossroads Mpumalanga 10 708 Retail Crossroads Centre, KwaMahlanga Venda Plaza Limpopo 10 284 Retail Main Street, Thohoyandou West Street, KwaZulu-Natal 6 202 Retail 336 - 342 West Street, Durban Shoprite Port KwaZulu-Natal 8 792 Retail Shepstone Dick King Road, Port Shepstone Total 70 416 Weighted Effective date Valuation as average of acquisition Purchase at 1 December Property rental per price as at 1 2011 name and m2 December 2011 (R`000) address (R) (R`000) Park Central R172 1 December 2011 156 500 Shopping Centre, Noord and Twist Streets, 154 000 Johannesburg Mutsindo R91 1 December 2011 131 000 Mall & Capricorn Plaza Post Office Street, 145 000 Thohoyandou Morone R77 1 December 2011 115 800 Shopping Centre Burgersfort Kastania Street, Burgersfort 120 500 Crossroads R78 1 December 2011 Crossroads Centre, KwaMahlanga 90 000 104 600 Venda Plaza R82 1 December 2011 87 500 Main Street, Thohoyandou 81 000 West Street, R97 1 December 2011 74 500 336 - 342 West Street, Durban 83 500 Shoprite R36 1 December 2011 34 100 Port Shepstone Dick King Road, Port 30 000 Shepstone Total 704 000 704 000 CATEGORISATION OF THE TRANSACTION The transaction constitutes a Category 2 transaction in terms of the JSE Listings Requirements and is accordingly not subject to approval by Fortress` linked unitholders. FINANCIAL INFORMATION The unaudited pro forma financial effects have been prepared for illustrative purposes only, to provide information on how the transaction may have impacted on the historical financial results of Fortress for the year ended 30 June 2011. Due to their nature, the unaudited pro forma financial effects may not fairly present Fortress` financial position, changes in equity, results of operations or cash flows after the transaction. The unaudited pro forma financial effects are the responsibility of the directors of Fortress and have not been reviewed or reported on by Fortress` auditors. The unaudited pro forma financial effects of the transaction on Fortress` basic earnings per A and B share, basic earnings per B linked unit, headline earnings per A and B share, distribution per B linked unit for the year ended 30 June 2011 as well as net asset value and net tangible asset value per B linked unit at 30 June 2011 are set out below. The unaudited pro forma financial effects of the transaction on basic earnings per A linked unit, headline earnings per A and B linked unit, distribution per A linked unit, as well as net asset value and net tangible asset value per A linked unit are not material and have not been disclosed. Unadjusted Pro forma after % Change before the the transaction
transaction (cents) (cents) Basic earnings per A share 62.62 64.79 3.5% Basic earnings per B share 62.62 64.79 3.5% Basic earnings per B linked 75.30 80.39 6.8% unit Headline earnings per A share 11.81 9.64 (18.4%) Headline earnings per B share 11.81 9.64 (18.4%) Distribution per B linked unit 12.67 15.59 23.0% Net asset value and net 142.00 164.00 15.5% tangible asset value per B linked unit Weighted average number of A 225 875 000 276 889 493 and B shares/linked units in issue Actual number of A and B 231 000 000 282 014 493 linked units in issue Notes and assumptions: - The amounts set out in the "Unadjusted before the transaction" column have been extracted, without adjustment, from the audited consolidated financial statements of Fortress for the year ended 30 June 2011. - The transaction is assumed to be implemented on 1 July 2010 for purposes of basic earnings per A share and B share, basic earnings per B linked unit, headline earnings per A and B share and distribution per B linked unit. - The transaction is assumed to be implemented on 30 June 2011 for purposes of net asset value and net tangible asset value per B linked unit. - The property portfolio is assumed to have been acquired from Capital for a consideration of R615.2 million which was settled by the issue of 51 014 493 Fortress A linked units at R9.96 per A linked unit and 51 014 493 Fortress B linked units at R2.10 per B linked unit, being the 30-day VWAP prior to 1 July 2010 for the Fortress A and B linked units, respectively. - The fair value of the property portfolio at 30 June 2011 is assumed to be R704 million and accordingly the fair value adjustment for the year ended 30 June 2011 is assumed to be R76.0 million (net of deferred taxation). - For the year ended 30 June 2011 the property portfolio earned historic net rental income of R66.4 million. - The historical property revenue and expenses were extracted from the underlying books and records of each property which have not been reviewed or reported on by reporting accountants. However, the directors of Fortress are satisfied with the quality of the information. - Distributable income is assumed to be earned evenly throughout the year ended 30 June 2011. - Estimated transaction costs of approximately R0.4 million are assumed to be incurred by Fortress and have been capitalised. - All adjustments have a continuing effect. 30 August 2011 Sponsor Java Capital Date: 30/08/2011 09:05:06 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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