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ANP - Annuity - Acquisition of the Ethos Building
ANNUITY PROPERTIES LIMITED
(formerly Niqsha Beleggings CC)
Incorporated in the Republic of South Africa
(Registration number 2011/145994/06)
Share code: ANP ISIN: ZAE000165643
("Annuity" or "the company")
ACQUISITION OF THE ETHOS BUILDING
1. Introduction
Annuity linked unitholders are hereby advised that Annuity, a company
primarily involved in property investment, has entered into an agreement
("the Sale and Purchase Agreement") with Zephan Properties (Proprietary)
Limited ("the Seller") in terms of which Annuity will acquire the Ethos
Building in Illovo, Sandton ("the Property") from the Seller for a purchase
consideration of R46 million ("the Purchase Consideration") ("the
Acquisition").
2. Rationale for the Acquisition
The Acquisition is consistent with Annuity`s growth and investment strategy
of building a quality property portfolio, offering long term distribution
and capital growth underpinned by strong underlying contractual cash flows.
The Property is situated in a prime location within a growing business node
in Illovo, Sandton and offers a high quality tenant profile, which includes
Ethos Private Equity Limited ("Ethos") as the anchor tenant. Ethos is
considered to be a leading private equity fund manager in South Africa, is
independently owned and managed by its investment professionals and has a
25 year track record of successful investing.
The Acquisition is yield and value enhancing for Annuity unitholders and is
expected to show enhanced growth prospects going forward.
3. The Purchase Consideration
The Purchase Consideration will be settled in cash as follows:
- by way of a deposit of R1 million, which was paid into the trust
account of Annuity`s attorneys on 25 May 2012; and
- the balance of the Purchase Consideration of R45 million is payable on
the date of transfer of the Property into the name of Annuity.
In addition, Annuity has agreed to provide a tenant installation and
refurbishment allowance ("the refurbishments") of R2,9m in aggregate. These
amounts are subject to the five year lease extension to be entered into by
Ethos as set out in further detail in paragraph 8 below. The Purchase
Consideration and the cost of the refurbishments will be funded through
debt facilities that Annuity already has in place with the Standard Bank of
South Africa Limited.
4. Suspensive conditions
All suspensive conditions as set out in the Sale and Purchase Agreement
have been fulfilled and the Property is expected to transfer into the name
of Annuity by 1 September 2012.
5. Categorisation of the Acquisition
The Acquisition is categorised as a Category II transaction in terms of the
JSE Limited ("the JSE") Listings Requirements.
6. Financial effects
Based on an effective date of the Acquisition of 1 September 2012, the
forecast financial information relating to the Acquisition for the 11
months ending 31 March 2013 is set out below. The forecast financial
information is the responsibility of the directors and has not been
reviewed and reported on by the reporting accountant in terms of Section 8
of the JSE Listings Requirements.
On the basis of the above, the financial effects of the Acquisition are as
follows:
Forecast Forecast
for the Acquisition for the
eleven eleven
months months
ending 31 ending 31
March 2013 March 2013
before the after the
Acquisition Acquisition
as per Pre
Listing
Statement
R R R
Revenue 75 793 569 2 909 510 78 703 080
Expenses (22 291 443) (701 464) (22 992 907)
Net operating profit 62 906 090 2 895 261 65 801 351
before interest and
taxation
Net profit for the 7 601 078 303 396 7 904 474
period
Distributable earnings 38 477 980 61 603 38 539 582
Number of linked units 93 340 341 - 93 340 341
in issue
Weighted average number 93 340 341 - 93 340 341
of linked units in issue
Earnings per linked unit 49.28 49.68
(cents)
Headline earnings per 41.50 41.12
linked unit (cents)
Distribution per linked 41.22 41.29
unit (cents)
Dividend 0.08 0.08
Interest 41.14 41.21
Annualised distribution 45.28 45.35
per linked unit (cents)
Annualised yield 9.06% 9.07%
Notes and assumptions relating to the forecasts:
The forecasts incorporate the following material assumptions in respect of
revenue and expenses:
- The forecasts are based on the same material assumptions as are listed
in Annuity`s Pre Listing Statement dated 25 April 2012.
In addition, further assumptions which had to be made in respect of the
Acquisition are:
- that the effective date of the Acquisition is 1 September 2012;
- that payment for the Ethos Building will be from debt facilities which
will incur interest at a 3 year fixed rate of 8.31% pa;
- that the rental from Ethos will be 100% contracted for the period
ending 31 March 2013;and
- that the Asset Manager has waived an amount of R21 776 of its annual
asset management fees, which it will earn as a result of the
Acquisition.
7. Pro-forma financial information
The table below sets out the unaudited pro forma financial effects of the
Acquisition on net asset value ("NAV") and tangible net asset value
("TNAV") per linked unit based on the financial information extracted from
the Pre Listing Statement dated 25 April 2012. The unaudited pro forma
financial effects are the responsibility of the directors and have been
prepared for illustrative purposes only to provide information relating to
how the Acquisition may have impacted unitholders on the relevant reporting
date and, due to their nature, may not give a fair reflection of Annuity`s
financial position after implementation of the Acquisition.
Pro forma as per Acquisition Pro forma %
Pre Listing after the change
Statement(Note Acquisition
1)
NAV per 499,49 0,43 499,92 0,1
linked
unit
(cents)
TNAV per 499,49 0,43 499,92 0,1
linked
unit
(cents)
Linked 93 340 341 93 340 341 0,0
units in
issue
Assumptions:
The financial effects have been calculated on the basis of the following
assumptions:
1. Extracted from the pro forma balance sheet as contained in annexure 5 of
the Pre Listing Statement dated 25 April 2012.
2. The pro forma effects are therefore based on the same material
assumptions as are listed in Annuity`s Pre Listing Statement dated 25 April
2012.
3. In addition, the Acquisition will result in an increase in assets of R49
900 000.
4. Furthermore, the Acquisition will be funded from existing debt
facilities, which will increase by R49 773 405.
8. Property specific information
The letting enterprise being acquired by Annuity in terms of the Sale and
Purchase Agreement includes the Property, buildings situated thereon and
the lease agreement entered into between the Seller and Ethos and the new
lease agreement to be entered into between Annuity and Ethos.
The Property is located at 35 Fricker Road, corner Harries Road, Illovo
Boulevard, Illovo, Gauteng comprising Erf 51, Illovo Township, measuring 3
718 m2 together with all buildings and improvements thereon. The Property
is an office building providing Gross Lettable Area ("GLA") of 2 496 m2 and
has no vacancies. The Property is occupied by Ethos (1 696 m2), the Dermal
Institute of South Africa (Proprietary) Limited ("the Dermal Institute" or
"Dermalogica") (585 m2) and Loredana Maraschin trading as a sole proprietor
("Maraschin") (215 m2) which are all sub-tenants of Ethos. Ethos is the
anchor tenant and has occupied the Property for 12 years since it was built
in 1999. The current lease with Ethos expires on 31 October 2012 and Ethos
has agreed to enter into a new five year lease agreement commencing 1
November 2012, escalating at 8% per annum. The lease is a triple net lease
with all operating costs being for the tenant`s account (excluding external
roof maintenance). In addition, Ethos has signed a five year head lease
over the space occupied by Maraschin and a one year head lease over the
remaining 585 m2 occupied by the Dermal Institute. In terms of the new
lease agreement commencing 1 November 2012, the net rental rate per square
meter for the Property is R117 per m2.
9. Property valuation
An independent valuation of the Property was performed by JHI Properties
(Proprietary) Limited and amounted to R49.9 million, which approximates the
aggregate of the Purchase Consideration and the costs of the
refurbishments. The independent property valuer is an independent
registered valuer as defined in section 13 of the JSE Listings
Requirements.
Illovo, Johannesburg
8 June 2012
Merchant bank and sponsor to Annuity
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Joint transaction sponsor
Sasfin Capital (a division of Sasfin Bank Limited)
Date: 08/06/2012 17:34:03 Supplied by www.sharenet.co.za
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