Wrap Text
Abridged pre-listing statement
Delta Property Fund Limited
(formerly Tuffsan 89 Investment Holdings Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2002/005129/06)
Share code: DLT ISIN: ZAE000172052
("Delta" or "the company")
Abridged pre-listing statement
This abridged pre-listing statement relates to:
an offer by Delta to selected institutional and other investors in South Africa ("qualifying investors") to subscribe for up
to 119 512 195 linked units (each comprising one ordinary no par value share linked to a unsecured variable rate
subordinated debenture ("linked unit") in Delta, for cash, at an issue price of R8.20 per linked unit, amounting
to a capital raise of R980 000 000 (the "private placement"); and
the subsequent listing of up to 164 935 366 linked units (the "listing") in Delta on the "Real Estate Real
Estate Holding and Development" sector of the JSE Limited (the "JSE") under the abbreviated name
"DELPROP", Share code: DLT, ISIN: ZAE000172052, with effect from the commencement of
business on Friday, 2 November 2012 (the "listing date").
This abridged pre-listing statement is not an invitation to the public to subscribe for linked units in
Delta, or an offer to the public to purchase linked units in Delta, but is issued in compliance with the
JSE Listings Requirements (the "Listings Requirements"), for the purpose of providing information to the
public with regards to Delta. The private placement, details which are set out in this abridged pre-listing
statement, is open for acceptance by qualifying investors only, each applying as principals for a minimum
subscription of R1 000 000 in linked units. Prior to the opening of the private placement, the company had
accepted irrevocable subscription commitments in an aggregate amount of R850 million.
This abridged pre-listing statement contains the salient features of the company, the private placement
and the listing and as such is not intended to be comprehensive. For a full appreciation of the company,
the private placement and the listing, the pre-listing statement issued to qualifying investors on
Tuesday, 23 October 2012 (the "pre-listing statement") should be read in its entirety.
1. INTRODUCTION TO DELTA
Delta is a black-managed and substantially black-owned property loan stock company,
established by Johannes Magwaza, Sandile Nomvete, Ipeleng Mkhari, Bruce Zungu and Jabulani
Mriga (collectively, the "initial shareholders") and Bronwyn Corbett (collectively, "the founders").
Delta offers investors, inter alia:
access to a quality office portfolio with secure income streams underpinned by long-term
government leases, low vacancies and strong anchor tenants;
access to Delta's ability to acquire government-tenanted properties, and secure long-term
leases in respect of these properties;
an opportunity to invest in a 100% black-managed fund that is managed and serviced
by highly experienced property investors, asset managers and property managers with an
outstanding track record in the property industry;
access to Delta's robust acquisition pipeline; and
an attractive initial forward yield of 9.12% for the 12 months from listing to 31 October 2013
and a forward yield of 9.61% for the financial year ending 28 February 2014, representing a
forecast return considerably in excess of expected averages for the sector.
2. OVERVIEW OF THE PROPERTY PORTFOLIO
The property portfolio has been independently valued at a fair value of R2.1 billion in aggregate,
consisting of 20 properties with a total gross lettable area of 203 261 m2 and comprises 92%
office space and an 8% retail component.
Delta's property portfolio comprises:
the initial property portfolio, which comprises the following two properties with a combined
fair value of R473 million, currently owned by Delta:
the Forum building, which is a 37 942 m2 building located in Pretoria which has a lease
with the National Department of Public Works ("DPW") until the year 2020 and is in the
process of being upgraded to a B-grade building;
the PwC Polokwane building, which is a 1 951 m2 building located in Polokwane which
has a lease with PricewaterhouseCoopers Inc. until the year 2016;
the additional property portfolio, which comprises:
the following six properties with a combined fair value of R316 million, which were
previously owned by various special purpose vehicles owned by the founders, or their
associates, and which are in the process of being transferred to Delta (the "restructure
properties"):
the NPA Cape Town building, which is a 10 552 m2, A-grade building located in
Cape Town that has a lease with DPW until the year 2013, which is in the process
of being renewed;
the 110 Hamilton building, which is a 4 511 m2, A-grade building located in Pretoria
that has a lease with DPW until the year 2020;
the SARS Kimberley building, which is a 2 950 m2, B-grade building located in
Kimberley that has a lease with the South African Revenue Service ("SARS") until
the year 2015;
the Cooper House building, which is a 2 111 m2, C-grade building located in
Bloemfontein that has a lease with DPW until the year 2022;
the Tivoli building, which is a 2 759 m2, B-grade building located in Klerksdorp that
has a lease with DPW until the year 2013;
the SARS Springs building, which is a 1 922 m2, B-grade building located in Springs
that has a lease with SARS until the year 2013; and
the following 12 properties with a combined fair value of R1.3 billion, which Delta
has entered into agreements to acquire, and which are expected to be transferred to
Delta before or shortly after listing:
the Liberty Towers building, which is a 40 555 m2, B-grade building located in
Durban that has a multitude of tenants, including Mass Stores Proprietary Limited
with a lease until the year 2017;
the Block G building, which is a 7 992 m2, AAA-grade building located in Pretoria
that has a multitude of tenants, including the Small Enterprise Development
Agency and Khula Financial Services Limited, with lease expiries of 2020 and 2021,
respectively;
the Beacon Hill building, which is a 13 648 m2, AAA-grade building located in King
Williams Town that has a lease with the Eastern Cape Provincial Public Works,
(a division of DPW) until the year 2015;
the Presidia building, which is a 12 884 m2, A-grade building located in Pretoria that
is earmarked for a lease with the National Youth Development Agency until the
year 2022, which lease is in the process of being concluded;
the 88 Field Street building, which is a 21 104 m2, B-grade building located in
Durban that has a multitude of tenants with lease expiries ranging from the year
2013 to 2017;
the 5 Walnut Road building, which is a 12 884 m2, A-grade building located in
Durban that has a lease with Durban Technology Hub Proprietary Limited, trading
as Smart Xchange, until the year 2015;
the Cape Road building, which is a 7 992 m2, AAA-grade building located in Port
Elizabeth that has a lease with Eskom Holdings Limited and Old Mutual South Africa
Limited with lease expiries ranging from 2012 to 2014;
the Broadcast House building, which is a 4 923 m2, B-grade building located in
Mthatha that has a lease with the DPW until the year 2014;
the WB Centre building, which is a 7 674 m2, C-grade building located in Kimberley
that has a multitude of tenants, including Edcon Holdings Proprietary Limited until
the year 2014;
the North Ridge Road building, which is a 3 354 m2, A-grade building located in
Durban that has a lease with Butterworths Publishers Proprietary Limited until the
year 2016;
the Richmond Forum building, which is a 3 968 m2, C-grade building located in
Auckland Park that has a lease with the Law Society of South Africa until the year
2013; and
the Old Mutual building, which is a 3 294 m2, B-grade building located in
Bloemfontein that has a lease with the DPW until the year 2014.
All of the restructure properties have been lodged in the various deeds offices and transfer
is expected to take place on or before the listing date. In terms of the requisite acquisition
agreements, Delta is entitled to all benefits and all income attributable to the restructure
properties with effect from 1 August 2012, regardless of whether or not transfer has taken place.
Similarly, it has been agreed with the cedents of the Block G rental enterprise and the vendors of
the Cape Road building, Broadcast House building, North Ridge Road building, Richmond Forum
building and Old Mutual building, that the income attributable to these buildings will accrue to
Delta with effect from the listing date, regardless of whether or not transfer has taken place.
The initial property portfolio and additional property portfolio are collectively recognised as the
"property portfolio".
A detailed list and analysis of the property portfolio by sector, tenancy, geographical spread,
rental per square metre and lease expiry profile is set out in the pre-listing statement.
3. PROSPECTS AND INVESTMENT STRATEGY
The board of directors of Delta (the "directors") is of the opinion that Delta is well-positioned
to capitalise on opportunities for growth by continuing to develop its niche position as a 100%
black-managed property fund by strategically identifying and securing government-tenanted
properties, which has been Delta's springboard to success.
Delta is also well-positioned to leverage its black economic empowerment ("BEE") credentials to
acquire yield-enhancing properties from other property companies or investors who are looking
to obtain accreditation in terms of the recently gazetted Property Sector Code for disposing of
property to a BEE entity. In terms of the Property Sector Code, property companies are required
to demonstrate commitment to economic development by selling 35% of all assets that are
being disposed of to black-owned enterprises that have a broad-based BEE status of Level 1 to
Level 3 BEE contributor. Delta is currently a Level 3 BEE contributor.
The company's objective is to achieve a maximum total return on capital, consisting of both
current income and capital gains, consistent with a diversified, risk-managed real estate
investment portfolio.
The company will in general not assume development or leasing risk and will not acquire
incomplete developments with unsecure income streams or vacant buildings with no lease or
income-generating ability.
Deltas vision is to grow its property portfolio to approximately R7 billion by the year 2017 to
ensure critical mass and liquidity. It is also Delta's intention to diversify the property portfolio by
investing in non-government offices, retail and industrial properties to the extent that attractive
investment opportunities arise. It is however anticipated that the majority of leases will remain
government and SARS leases in the medium-term. Delta has an attractive pipeline of acquisition
opportunities that are anticipated to progress to formal agreements and will be implemented
post-listing.
4. MANAGEMENT OF DELTA
DPW is a tenant of a substantial number of the properties constituting the property portfolio. In
accordance with DPW requirements, it is critical to Delta's investment and growth strategy that
the asset manager is 100% owned and controlled by black persons.
For the purposes of achieving this objective, Delta has appointed MPI Asset Management
Proprietary Limited (the "asset manager") to manage the property portfolio.
Furthermore, the asset management of the property portfolio will continue to be undertaken
by the same management team that has successfully managed and tenanted the restructure
properties and the Forum building to date.
The asset management team has over 75 years of property experience collectively, and has
been instrumental in establishing the property portfolio and positioning Delta as a landlord to
the government and SARS.
The shareholders and certain key management of the asset manager, who are also the founders,
will, directly or indirectly, also have a vested interest in Delta in terms of linked units held by
them or their associates post listing, which will ensure that their interests are aligned with those of
other linked unitholders.
The property management of Delta will be undertaken by Motseng Property Services Proprietary
Limited, who has competently managed the restructure properties and the Forum building to
date and has a wealth of experience in the field of property management.
5. DIRECTORS
The full names, ages, qualifications, business addresses and functions of the directors are set out
below:
Name Business address Function
Johannes Bhekumuzi Magwaza (70) 42 Addison Drive Non-executive Chairman
BA MA (Warwick UK) La Lucia
Durban, 4001
Sandile Hopeson Nomvete (39) Motseng House Chief Executive Officer
Exec Dep. & Prop Dev. Prog. 204 Rivonia Road
(Wits & UCT Business Schools) Morningside, 2199
Bronwyn Anne Corbett (31) Motseng House Chief Financial Officer
CA(SA) 204 Rivonia Road
Morningside, 2199
Nooraya Khan (43) Suite 8b, 1st Floor Lead independent
CA(SA) 3 Melrose Boulevard non-executive director
Melrose Arch, 2196
Ipeleng Nonkululeko Mkhari (38) Motseng House Non-executive director
BSoc.Sc (University of Natal, Durban) 204 Rivonia Road
Morningside, 2199
Jose Jorge Goncalves da Costa (57) 2 Ayrshire Avenue Independent
(Portuguese citizen) Longmeadow Business non-executive director
Estate, Edenvale, 1610
Karl Ernst Schmidt (58) 9 Catherine Avenue Independent
CA(SA) Cowies Hill non-executive director
Durban, 3610
Paul David Simpson (59) 10 Surcingle Avenue Independent
Royal Institute of British Architects Part 1 Hout Bay, 7806 non-executive director
(British citizen)
6. RATIONALE FOR THE PRIVATE PLACEMENT AND LISTING
The purpose of the private placement is to:
raise equity capital of up to R980 000 000 for Delta with a view to reducing gearing levels;
provide qualifying investors the opportunity to participate directly in Delta's income
streams and future capital growth; and
create a spread of qualifying investors that will provide liquidity and tradability in the linked
units.
7. THE PRIVATE PLACEMENT
7.1 Particulars of this private placement
The private placement comprises an offer by Delta of up to R980 000 000, comprising
119 512 595 linked units in Delta at a price of R8.20 per linked unit to qualifying investors,
each applying as principals for a minimum subscription of R1 000 000 in linked units.
7.2 Conditions to the private placement
The private placement is conditional on the listing taking place by no later than
30 November 2012, failing which the private placement and any acceptance thereof shall
not be in force or effect and no person shall have any claim whatsoever against Delta or
any other person as a result of the failure of any condition.
The listing is subject to:
Delta obtaining JSE consent regarding the spread of linked unitholders. The linked
unitholder spread will be finalised on Thursday, 1 November 2012 when notification
of allotment takes place. Following this, the linked unitholder spread will be provided
to the JSE for approval; and
the minimum amount of R954 744 175, comprising 116 432 216 linked units in Delta
at a subscription price of R8.20, being received.
7.3 Subscription commitments
Delta has received irrevocable subscription commitments in an aggregate amount of
R970 000 000, of which R850 000 000, comprising 103 658 538 linked units at a price
of R8.20 per linked unit, has been accepted and allocated to certain qualifying investors.
7.4 Minimum subscription
In the opinion of the directors, a minimum amount of R954 744 175, comprising
116 432 216 linked units in Delta at a subscription price of R8.20, is required to be raised by
the private placement in order to reduce the company's overall gearing level to acceptable
levels and to pay for costs related to the listing and the private placement.
No other proceeds or resources, other than those raised by way of the private placement,
are required to settle any other amounts owing.
7.5 Over-subscriptions
The maximum number of linked units that can be subscribed for in terms of the private
placement is 119 512 195 linked units. Other than in respect of the subscription commitments, in
the event of an over-subscription, linked units will be allocated and issued at the discretion
of the directors, in consultation with Nedbank Capital, a division of Nedbank Limited
("Nedbank Capital"), as bookrunners. Factors to be considered by the company in allocating
linked units include:
achieving a spread of linked unitholders that is acceptable to the JSE; and
promoting liquidity, tradability and an orderly after-market in the linked units of the
company.
7.6 Dates and times of the opening and closing of the private placing
2012
Private placement opens at 09:00 on Tuesday, 23 October
Abridged pre-listing statement published in the
South African press on Tuesday, 23 October
Private placement closes at 16:00 on Monday, 29 October
Results of the private placement released on the Securities
Exchange News Services of the JSE ("SENS") on Wednesday, 31 October
Results of the private placement published in the
South African press on Thursday, 1 November
Notification of allotments on Thursday, 1 November
Listing of linked units commences at 09:00 on Friday, 2 November
Accounts at Central Securities Depository Participant or
broker updated and debited in respect of dematerialised
linked unitholders on Friday, 2 November
All references to time are to local time in South Africa. Any changes to the above dates and
times will be announced on the SENS and published in the South African press.
8. FINANCIAL INFORMATION
The table below sets out the abridged unaudited forecast financial information of Delta for the
four months from listing to 28 February 2013, the twelve months ending 28 February 2013
(consisting of reviewed results of Delta for the six months ended 31 August 2012 and forecast
financial information of Delta for six months ending 28 February 2013), the twelve months from
listing to 31 October 2013 and the twelve months ending 28 February 2014 ("forecast financial
information").
The forecast financial information assumes the private placement is taken up in full.
The forecast financial information should be read in conjunction with the unaudited forecast
financial information disclosed in the pre-listing statement. Such information has been presented
for illustrative purposes only and because of its nature may not fairly reflect the financial position
and results of Delta. The forecast financial information is the responsibility of the directors.
4 months 12 months 12 months 12 months
ending ending ending ending
Unaudited forecast 28 February 28 February 31 October 28 February
financial information 2013 2013 2013 2014
Linked units in issue on
listing 164 935 366 164 935 366 164 935 366 164 935 366
Weighted average
number of linked units
in issue 164 935 366 57 628 455 164 935 366 164 935 366
Earnings per linked unit
(cents) 41.82 169.10 102.08 92.58
Headline earnings per
linked unit (cents) 28.84 65.90 89.11 92.58
Distribution per linked
unit (cents) 23.68 36.32 74.76 78.78
Annualised yield (based
on distribution per linked
unit and a linked unit
price of R8.20) (%) 9.01 4.43 9.12 9.61
Distribution growth
(based on annualised
distributions) (%) 6.58
Notes to the forecast financial information are disclosed in the pre-listing statement.
9. DISTRIBUTIONS
The company intends making semi-annual distributions which are expected to be declared for
the periods ending on the last day of February and August. These distributions are expected to be
payable at the end of May and November, respectively.
10. COPIES OF THE PRE-LISTING STATEMENT
Copies of this pre-listing statement may be obtained in English only during normal business
hours from 08:30 until 17:00 from Tuesday, 23 October 2012 to Monday, 29 October 2012 from
the offices of:
Delta (Motseng House, 204 Rivonia Road, Morningside, 2199);
Nedbank Capital (135 Rivonia Road, Sandown, 2196);
KPMG Services Proprietary Limited (85 Empire Road, Parktown, 2193); or
Computershare Investor Services Proprietary Limited (70 Marshall Street, Johannesburg,
2001).
The pre-listing statement may also be obtained from Delta's website (www.deltafund.co.za).
Johannesburg
23 October 2012
Bookrunner, corporate advisor and sponsor
NEDBANK CAPITAL
Independent sponsor
KPMG
Legal advisor
BOWMAN GILFILLAN
Competition law and tax advisor
DLA CLIFFE DEKKER HOFMEYR
Independent reporting accountants and auditors
BDO
Independent property valuer
ACTIVE BLUE VALUATION SOLUTIONS CC
Debenture trustee
MAITLAND
Transaction communication advisor
COLLEGE HILL
Date: 23/10/2012 07:38:00 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
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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.