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SGA/SGB - Synergy Income Fund Limited - Abridged pre-listing statement

Release Date: 05/12/2011 15:15
Code(s): JSE
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SGA/SGB - Synergy Income Fund Limited - Abridged pre-listing statement SYNERGY INCOME FUND LIMITED (formerly Capital Land Retail Fund Limited) (Incorporated in the Republic of South Africa on 13 November 2007) (Registration number 2007/032604/06) JSE share code for A linked units: SGA ISIN Code: ZAE000161550 JSE share code for B linked units: SGB ISIN Code: ZAE000162293 ("Synergy" or "the company") ANNOUNCEMENT TO INVESTORS SETTING OUT THE ABRIDGED PRE-LISTING STATEMENT REGARDING THE LISTING OF SYNERGY ON THE JSE LIMITED, CONFIRMING THE PRICING AT WHICH SYNERGY A LINKED UNITS ARE TO BE OFFERED TO INVESTORS, NOTIFYING INVESTORS OF A POTENTIAL VENDOR CONSIDERATION PLACING AND DEALING WITH CERTAIN MATTERS ANCILLARY TO THE OFFER ABRIDGED PRE-LISTING STATEMENT This abridged pre-listing statement relates to: - an offer to invited investors to subscribe for a maximum of up to 35 144 571 Synergy A linked units ("the private placement") at an offer price now set at R8.58 per Synergy A linked unit, being a forward yield of 9.4%; and - the listing on the JSE Limited ("JSE") of up to 35 144 571 Synergy A linked units and 60 000 000 Synergy B linked units ("the listing"). This abridged pre-listing statement is not an invitation to the public to subscribe for linked units in the company, but is issued in compliance with the JSE Limited ("JSE") Listings Requirements for the purposes of giving information to the public in relation to Synergy and to invited investors in relation to the private placement. This announcement contains the salient information in respect of Synergy, which is more fully described in the pre-listing statement which was issued to invited investors ("the pre-listing statement"). For a full appreciation of Synergy, the private placement and the listing, the pre-listing statement should be read in its entirety. Introduction Subject to obtaining a spread of public linked unitholders acceptable to the JSE, the JSE has granted Synergy a primary listing of a maximum of up to 35 144 571 Synergy A linked units and 60 000 000 Synergy B linked units in the "Real Estate - Real Estate Holdings and Development" sector of the JSE lists, in terms of the FTSE classification, under the abbreviated name "Synergy A", JSE share code "SGA" and ISIN ZAE000161550 in respect of the Synergy A linked units and abbreviated name "Synergy B", JSE share code "SGB" and ISIN ZAE000162293 in respect of the Synergy B linked units, with effect from the commencement of trade on Wednesday, 14 December 2011. Background to Synergy Synergy was incorporated as a public company on 13 November 2007. Synergy was established by Capital Land Asset Management (Proprietary) Limited ("Capital Land Asset Management") as a property income fund investing in and managing convenience retail centres with the benefits of Synergy`s close association with the SPAR Group Limited ("SPAR"). Capital Land Asset Management prefers specialised property funds to generalist funds that invest across multiple sectors of investment property. This preference reflects the view that focussed specialisation will drive superior investment performance in listed property income funds in South Africa. Synergy specialises in convenience retail, with a key differentiator being its relationship with SPAR. Capital Land Asset Management has a close association with SPAR, which culminated in the conclusion of a co-operation agreement with the objective of creating and operating a specialised retail property investment fund comprising retail shopping centres anchored by SPAR to participate in and benefit from the investment and development opportunities arising from the retail growth of SPAR in South Africa. The primary objective of Synergy is to establish a vehicle that will support the growth and development of SPAR`s retail network within the framework of the SPAR new business development strategy. Currently, the retail footprint of SPAR in South Africa comprises approximately 850 SPAR retail outlets nationwide. This South African retail footprint is increasing by approximately 40 new SPAR outlets each year. SPAR`s retail growth is premised on property development activities underpinned by independent demographic research. Through SPAR, Synergy has access to a number of opportunities arising from the development pipeline, which is a key differentiator in positioning Synergy for acquisitive growth. The relationship with SPAR positions Synergy to achieve scale and critical mass as a property investment fund focussed on convenience retail and to grow through attractive acquisitions following the expansion of the SPAR retail footprint. Through SPAR, Synergy is in close contact with the independent retailers who operate the SPAR outlets anchoring Synergy owned retail centres. The result is that these retail assets are more effectively managed in an integrated management partnership between the independent retailer who anchors the centre and Capital Land Asset Management. Where appropriate, tenant risk on SPAR outlets may be mitigated by a corporate head office lease. As a result of these factors, Synergy`s retail property investment risk is significantly reduced by operating in a structured investment partnership with SPAR. Synergy`s primary objectives are: - to provide a growing income stream to linked unitholders through the acquisition and management of quality retail assets; - to invest in a well diversified portfolio of properties located in strong demographic nodes demonstrating good growth opportunities, supporting the growth and development of the SPAR retail network; and - to provide a sustainable, superior long-term distribution and capital growth to linked unitholders. Synergy has, as at the date hereof, acquired and taken transfer of two properties (the "initial portfolio") and has entered into binding acquisition agreements in respect of a further 10 properties. Of these, transfer of two is imminent, with the balance subject to various conditions, all as further detailed in the pre-listing statement. The initial portfolio represents a GLA of 22 008 m2 comprising: - Sediba Plaza Shopping Centre is centrally located within the heart of Hartebeespoort which is close to Johannesburg and Pretoria and has a growing population both permanently and weekenders; and - KwaMashu Shopping Centre which is located 25 kilometres north of the Durban Central Business District, which is highly accessible by foot (from the taxi and train station through the western ramp, and from the east side of the residential area) and by car. The main purposes of the listing and private placement are to: - provide South African investors the opportunity to participate in the income streams and future capital growth through an investment in Synergy; and - fund a portion of the purchase consideration payable in respect of the Ruimsig Boulevard Shopping Centre, Taxi City Shopping Centre and the King Senzangakhona Shopping Centre ("acquisition portfolio one"). Leadership and Management William Brooks is the chief executive officer of Synergy. He, together with Uys Meyer the financial director, founded Capital Land Asset Management in 2007. The management team of Capital Land Asset Management are experienced asset managers with strong deal making expertise. The asset management and property management of the company`s portfolio will be undertaken by Capital Land Asset Management. Capital Land Asset Management is entitled to sub-contract the property management services or any portion thereof to third party administrators and in this regard Capital Land Asset Management has appointed Spire Property Management (Proprietary) Limited as property manager. Linked Unit Capital and Distribution Policy The linked unit capital of the company is divided into A ordinary shares and B ordinary shares. Each A ordinary share is indivisibly linked to an unsecured variable rate subordinated A debenture and each B ordinary share is indivisibly linked to an unsecured variable rate subordinated B debenture. For so long as there are both A and B linked units in issue, unless otherwise authorised by an ordinary resolution passed by the A debenture holders, the total number of A linked units in issue may never exceed the total number of B linked units in issue. After the expiry of the 5th anniversary of the listing date, the A debentures are redeemable at any time by a resolution of the board, provided the redemption is authorised by resolution approved by linked unitholders in combined general meeting, as is more fully dealt with under "Ancillary Matters" below. If so redeemed, the A linked units will be redeemed by the company at the volume weighted average sales price of an A linked unit over the 60 trading days immediately preceding the date on which the redemption resolution is passed. It is the directors` intention to make semi-annual interest distributions, which are expected to be declared for the periods ending 30 June and 31 December each year. The distribution in respect of the period from the listing date to 31 December 2011 will be paid together with the distribution in respect of the six month period ending 30 June 2012, unless the board declares a special distribution prior to this date. Prospects Synergy`s objective is to grow a specialised retail property investment fund comprising of convenience shopping centres anchored by and operated in partnership with SPAR. It is the directors` opinion that specialisation will increasingly be a key driver of property investment performance in South Africa. Synergy`s key competitive advantage is a strategic association and operating relationship with SPAR. Synergy will create value for its investors through owning and managing quality retail assets in a focused specialised investment vehicle. Fundamental to the growth strategy of Synergy is access to development opportunities that present themselves through Synergy`s relationship with SPAR. SPAR expands its retail footprint by approximately 25 000 m2 to 50 000m2 of retail trading area annually. All of its new store investments are backed by independent demographic research reports supporting the site selections, site development plans and the development feasibilities. SPAR`s retail growth in South Africa drives a significant number of retail development opportunities upon which Synergy can leverage its growth. The spread of assets will therefore include a geographic spread of assets across the demographic range of South Africa underpinned by strong rental income predominantly from the large retailers of South Africa. SPAR supports Synergy`s sustainable growth by providing: - access to retail development opportunities; - access to attractive acquisition opportunities; - access to SPAR development personnel in each region who understand their markets and identify strategic opportunities; - established relationships with many convenience retail developers; - access to extensive demographic research; - ability to anchor developments with corporate head leases; and - property management expertise through integrated management structures and continual assessment. Further to this strategy, Synergy has concluded acquisition agreements in respect of acquisition portfolio one and the Richdens Centre, Hubyeni Shopping Centre, Nzhelele Shopping Centre, the Van Riebeeckshof Shopping Centre, Highland Mews, Ermelo Game Centre and the Renbro Centre ("acquisition portfolio two") which collectively have a GLA of 108 013m2 and have been independently valued by Mills Fitchet Magnus Penny (Proprietary) Limited at R897 800 000. In respect of acquisition portfolio one, transfer of the Ruimsig Boulevard Shopping Centre and Taxi City Shopping Centre is expected imminently, while the acquisition of the King Senzangakhona Shopping Centre is conditional on approval of the Competition Authorities being obtained. The acquisition of the Richdens Centre, Hubyeni Shopping Centre and the Nzhelele Shopping Centre is subject to: - Synergy confirming in writing that loan finance is in place in order to fund the purchase price; - the Competition Authorities unconditionally approving Synergy`s acquisition of these properties; and - Synergy advising SA Corporate Real Estate Fund, the owner of the properties, by 17h00 on 20 January 2012 whether it will acquire and take transfer of the Richdens Centre. The acquisition of the Van Riebeeckshof Shopping Centre, Highland Mews, Ermelo Game Centre and the Renbro Centre is subject to: - Synergy obtaining the funding necessary to settle the purchase consideration payable to SA Corporate Real Estate Fund. Synergy intends raising this funding by way of a vendor consideration placement; - obtaining the requisite approval from the Competition Authorities; and - any pre-emptive rights in respect of Ermelo Game Centre and Renbro Centre having been waived. Details of the Offer The private placement comprises an offer to invited investors to subscribe for up to a maximum of 35 144 571 Synergy A linked units at an offer price now set at R8.58 per Synergy A linked unit. There is no minimum amount which, in the opinion of the directors, must be raised pursuant to the private placement. Conditions Precedent to the Private Placement and the Listing The private placement and the listing are conditional on the minimum spread requirements of the JSE being satisfied in respect of both the A and the B linked unit capital. Salient Dates and Times The table below sets out the salient dates and times in respect of the private placement and the listing. 2011 (1)
Abridged pre-listing statement published on SENS Monday, 5 December Opening date of the private placement (09:00) Monday, 5 December Abridged pre-listing statement published in the Monday, 5 December press Closing date of the private placement (12:00)(2) Thursday, 8 December Results of private placement released on SENS Monday, 12 December Results of private placement released in the Monday, 12 December press Notification of allotments Tuesday, 13 December Listing of linked units on the JSE (09:00) Wednesday, 14 December Accounts at CSDP or broker updated and debited in Wednesday, 14 December respect of dematerialised linked unitholders(3) Notes: 1. These dates and times are South African dates and times and are subject to amendment. Any such amendment will be released on SENS and published in the press. 2. Invited investors may only receive linked units in dematerialised form and must advise their CSDP or broker of their acceptance of the private placement in the manner and cut-off time stipulated by their CSDP or broker. 3. CSDP`s effect payment on a delivery-vs-payment basis. Applicants should consult their broker or CSDP to ascertain the timing for submission of applications as this may vary depending on the broker or CSDP in question. Directors The full names, nationalities and business addresses of the directors of Synergy are set out below. Directors of Synergy Martin Kuscus Independent non-executive chairman Nationality South African Business address 68C Waterfront Street, Hartebeespoort William Brooks Chief executive officer Nationality South African Business address 23rd Floor, Triangle House, 22 Riebeeck Street, Cape Town
Uys Meyer Financial director Nationality South African Business address 23rd Floor, Triangle House, 22 Riebeeck Street, Cape Town
Craig Coetzee Non-executive director Nationality South African Business address 22 Chancery Lane, Pinetown Sean Segar Independent non-executive director Nationality South African Business address 1 Ameshoff Street, Braamfontein Maurice Mdlolo Non-executive director Nationality South African Business address Libridge Building, 5th Floor West, 25 Ameshoff Ave, Braamfontein Amanda Ramsden Independent non-executive director Nationality South African Business address 23rd Floor, Triangle House, 22 Riebeeck Street, Cape Town Lizwi Mtumtum Independent non-executive director Nationality South African Business address Unit B7, The Stables Business Park, 13 Third Road, Linbro Park Pre-listing Statement The pre-listing statement is available only in English. Copies may be obtained during normal business hours between 08h30 and 17h00 from Monday, 5 December 2011 to Wednesday, 14 December 2011 from: - the registered offices of Synergy at 23rd Floor, Triangle House, 22 Riebeeck Street, Cape Town, 8000, South Africa; - Java Capital (Proprietary) Limited at 2 Arnold Road, Rosebank, Johannesburg, 2196, South Africa; and - Computershare Investor Services (Proprietary) Limited at Ground Floor, 70 Marshall Street, Johannesburg, 2001, South Africa. OFFER PRICE OF A LINKED UNITS Synergy has determined that the A linked units being offered in terms of the private placement will be offered at R8.58 per A linked unit, which is within the range indicated in the pre-listing statement. POTENTIAL VENDOR CONSIDERATION PLACING As set out in the pre-listing statement, the authorised but unissued linked unit capital of the company has been placed under the control of the board of directors. Under the JSE`s Listings Requirements Synergy may issue linked units in order to settle the consideration payable for the acquisition of assets and accordingly the board has authorised a vendor consideration placing of up to 28 571 430 B linked units at an issue price of R5.25 per unit shortly after listing in order to fund the balance of the consideration payable in respect of acquisition portfolio one. Further details of any such placing will be announced in due course. ANCILLARY MATTERS The board of Synergy has resolved that, without the consent in each case of a resolution of its linked unitholders in combined general meeting, which resolutions will require at least 75% of the votes exercisable by the holders of A and B linked units present in person or by proxy or representative and entitled to vote at such combined meeting being cast in favour thereof: - Synergy`s debt gearing levels will not be allowed to exceed 50% of the value of its property portfolio as independently valued from time to time; and - the A linked units will not be redeemed,and that amendments to the company`s memorandum of incorporation and debenture trust deed to this effect will be proposed at the company`s next annual general meeting. Monday, 5 December 2011 Corporate advisor, legal advisor, sponsor and joint bookrunner Java Capital Independent sponsor Deloitte & Touche Sponsor Services (Proprietary) Limited Independent reporting accountants and auditors Moore Stephens BKV Inc. Attorneys DLA Cliffe Dekker Hofmeyr Inc. Date: 05/12/2011 15:15:10 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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