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CPL - Capital Property Fund - Disposal of retail properties
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
(Registration No. 1980/009531/06)
("PFM")
DISPOSAL OF RETAIL PROPERTIES
INTRODUCTION
Unitholders are advised that Capital has concluded an agreement with Fortress
Income Fund Limited ("Fortress") for the disposal of a portfolio of retail
properties to Fortress (the "Fortress transaction") and an agreement with
Resilient Property Income Fund Limited ("Resilient") for the disposal of
Boardwalk Shopping Centre to Resilient (the "Resilient transaction").
RATIONALE FOR THE TRANSACTIONS
As previously communicated to unitholders, although Capital`s portfolio
currently includes R3.8 billion of retail centres, retail properties are not
part of Capital`s strategy and focus and it is the intention to reduce the
retail component of the portfolio over time. To this end, Capital has entered
into the Fortress transaction and the Resilient transaction (together, "the
transactions").
TERMS OF THE TRANSACTIONS, USE OF PROCEEDS AND CONDITIONS PRECEDENT
The effective date of the transactions is 1 December 2011.
The purchase consideration payable by Fortress pursuant to the Fortress
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 to Capital.
The purchase consideration payable by Resilient in respect of the Resilient
transaction is R1.028 billion, which will be settled as to R514 million in cash
and as to the balance through the issue to Capital of 16 211 238 Resilient
linked units.
The Fortress A and B linked units and the Resilient linked units being issued to
Capital pursuant to the transactions will be retained by Capital for the time
being.
The cash proceeds from the Resilient transaction will be used by Capital to
reduce interest-bearing borrowings.
The Fortress transaction is subject to approval by the Competition authorities.
The Resilient transaction is subject to:
- approval by Capital`s unitholders (as further detailed below); and
- approval by the Competition authorities.
THE FORTRESS TRANSACTION
Details of the property portfolio being sold to Fortress, 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
("Quadrant"), 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 Purchase price Valuation
average date of (R`000) as at 1
Property name rental per m2 acquisition December
and address (R) 2011
(R`000)
Park Central R172 April 2011 146 400 156 500
Shopping
Centre, Noord
and Twist
Streets,
Johannesburg
Mutsindo Mall R91 September 65 250 131 000
& Capricorn 2005 &
Plaza August 2006
Post Office
Street,
Thohoyandou
Morone R77 April 2011 102 000 115 800
Shopping
Centre
Burgersfort
Kastania
Street,
Burgersfort
Crossroads R78 April 2011 86 000 104 600
Crossroads
Centre,
KwaMahlanga
Venda Plaza R82 April 2011 84 800 87 500
Main Street,
Thohoyandou
West Street, R97 August 2004 18 912 74 500
336 - 342
West Street,
Durban
Shoprite Port R36 April 2011 31 800 34 100
Shepstone
Dick King
Road, Port
Shepstone
Total 535 162 704 000
THE RESILIENT TRANSACTION
The property known as Boardwalk Shopping Centre, situated in Krugerrand Road,
Richards Bay is being sold to Resilient with effect from 1 December 2011. Based
on a valuation attributed to the property by Quadrant as at 1 December 2011, it
is valued at R1.028 billion with a total rentable area of 65 516 m2 at a
weighted average rental of R115 per m2. The property was originally purchased by
Capital with effect from April 2011 for a purchase price of R948 million.
CATEGORISATION OF THE TRANSACTIONS, RELATED PARTY CONSIDERATIONS AND FURTHER
DOCUMENTATION
Each of the Fortress transaction and the Resilient transaction constitutes a
Category 2 transaction in terms of the JSE Listings Requirements (and if
aggregated, would still constitute a Category 2 transaction).
As Resilient owns PFM, the Resilient transaction is a disposal to a related
party under the JSE Listings Requirements, requiring Capital unitholder
approval. Accordingly, a circular setting out further details of the Resilient
transaction, including the independent property valuation required in the
context of related party transactions, and containing a notice convening a
general meeting of unitholders, will be sent to Capital unitholders in due
course.
The Fortress transaction is not subject to approval by Capital`s unitholders.
FINANCIAL INFORMATION
The unaudited pro forma financial effects have been prepared for illustrative
purposes only, to provide information on how the Fortress transaction and the
Resilient transaction may have impacted on the historical financial results of
Capital for the six months ended 30 June 2011. Due to their nature, the
unaudited pro forma financial effects may not fairly present Capital`s financial
position, changes in equity, results of operations or cash flows after the
Fortress transaction or the Resilient transaction. The unaudited pro forma
financial effects are the responsibility of the directors of PFM and have not
been reviewed or reported on by Capital`s auditors.
The unaudited pro forma financial effects of the Fortress transaction and the
Resilient transaction on Capital`s basic earnings per unit for the six months
ended 30 June 2011 are set out below. The unaudited pro forma financial effects
of the Fortress transaction and the Resilient transaction on distribution per
unit, headline earnings per unit, net asset value per unit and net tangible
asset value per unit are not material and have not been disclosed.
Unadjusted Pro forma % change
before the after the
Fortress Fortress
transaction transaction
and before but before
the Resilient the Resilient
transaction transaction
(cents) (cents)
Basic earnings per unit 28.56 32.16 12.6%
Weighted average number of units in 1 606 986 279 1 606 986 279
issue
Unadjusted Pro forma % change
before the after the
Fortress Resilient
transaction transaction
and before but before
the Resilient the Fortress
transaction transaction
(cents) (cents)
Basic earnings per unit 28.56 33.17 16.1%
Weighted average number of units in 1 606 986 279 1 606 986 279
issue
Unadjusted Pro forma % change
before the after the
Fortress Fortress
transaction transaction
and before and after the
the Resilient Resilient
transaction transaction
(cents) (cents)
Basic earnings per unit 28.56 36.77 28.7%
Weighted average number of units in 1 606 986 279 1 606 986 279
issue
Notes and assumptions:
- The amounts set out in the "Unadjusted before the Fortress transaction and
before the Resilient transaction" column have been extracted, without
adjustment, from the condensed consolidated unaudited interim financial
report of Capital for the six months ended 30 June 2011.
- The amounts set out in the "Pro forma after the Fortress transaction but
before the Resilient transaction" column reflect the impact on the
historical financial results of Capital for the six months ended 30 June
2011 assuming that the Fortress transaction is implemented but the
Resilient transaction is not implemented.
- The amounts set out in the "Pro forma after the Resilient transaction but
before the Fortress transaction" column reflect the impact on the
historical financial results of Capital for the six months ended 30 June
2011 assuming that the Resilient transaction is implemented but the
Fortress transaction is not implemented.
- The amounts set out in the "Pro forma after the Fortress transaction and
after the Resilient transaction" column reflect the impact on the
historical financial results of Capital for the six months ended 30 June
2011 assuming that both the Fortress transaction and the Resilient
transaction are implemented.
- The transactions are assumed to be implemented on 1 January 2011 for
purposes of basic earnings per unit.
- The property portfolio was disposed of to Fortress for a consideration of
R708.6 million which was settled by the issue of 51 014 493 Fortress A
linked units at R11.30 per A linked unit and 51 014 493 Fortress B linked
units at R2.59 per B linked unit, being the 30-day VWAP prior to 1 January
2011 for the Fortress A and B linked units, respectively.
- Boardwalk Shopping Centre was disposed of to Resilient for a consideration
of R1.040 billion which was settled as to R514 million in cash and the
balance by the issue of 16 211 238 Resilient linked units at R32.42 per
linked unit, being the 30-day VWAP prior to 1 January 2011 of a Resilient
linked unit.
- The property portfolio disposed of to Fortress earned historic net rental
income of R32.5 million for the six months to 30 June 2011.
- Boardwalk Shopping Centre earned historic net rental income of R38 million
for the six months to 30 June 2011.
- 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 the reporting accountants. However, the directors of PFM
are satisfied with the quality of the information.
- The cash proceeds of R514 million from the disposal of Boardwalk Shopping
Centre is assumed to be used by Capital to partly settle interest-bearing
borrowings. Accordingly, interest on loans is assumed to be saved at a rate
of 9.99%, being the historical cost at which Capital incurred interest for
the six month period ended 30 June 2011.
- There is a saving on asset management fees which were incurred at 0.4% per
annum in respect of the cash proceeds of R514 million received from
Resilient, which were assumed to partly settle the interest-bearing
borrowings.
- The issue of 51 014 493 Fortress A linked units and 51 014 493 Fortress B
linked units to Capital results in Capital`s voting rights in Fortress
changing from approximately 9.7% to 26.1%. Consequently, the accounting
treatment changes and this investment has been treated as an associate and
equity accounted, with distributable income from associate of R32.3 million
assumed to be received from Fortress in respect of the six month period
ended 30 June 2011. The equity accounted income from associate was based on
a distribution of 50.80 cents per Fortress A linked unit and a distribution
of 6.63 cents per Fortress B linked unit, in respect of the six months
ended 30 June 2011.
- The issue of 16 211 238 Resilient linked units to Capital results in
Capital acquiring a holding in Resilient of approximately 5.9%.
Consequently, the investment in Resilient has been accounted for as an
investment, with distributable income of R17.7 million assumed to be
received from Resilient in respect of the six month period ended 30 June
2011. The distributable income received from Resilient was based on
Resilient`s interim distribution of 109.36 cents per linked unit for the
six months ended 30 June 2011.
- The fair value loss on the investment in Resilient is assumed to be R5.8
million based on a closing bid price of R31.35 per Resilient linked unit at
30 June 2011.
- Estimated transaction costs of approximately R0.9 million are assumed to be
incurred by Capital in respect of the transactions and have been expensed.
- With the exception of transaction costs, all adjustments have a continuing
effect.
30 August 2011
Sponsor
Java Capital
Date: 30/08/2011 09:05:14 Supplied by www.sharenet.co.za
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