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Detailed cautionary announcement regarding the acquisition of a 50% undivided share in the East Rand Mall
Vukile Property Fund Limited
(Incorporated in the Republic of South Africa)
Registration number 2002/027194/06
JSE Share code: VKE
ISIN: ZAE000056370
NSX Share code: VKN
(“Vukile” or “the company”)
Detailed cautionary announcement regarding the acquisition of a 50%
undivided share in the East Rand Mall
1. Introduction
Further to the cautionary announcement dated 1 November 2012, Vukile linked
unitholders (“unitholders”) are advised that Redefine Properties Limited (“Redefine”)
has reached agreement with Sanlam Life Insurance Limited (“Sanlam”) to acquire the
East Rand Mall (the “Property”) for a purchase consideration of R2.23 billion.
As Vukile has a pre-emptive right to acquire the Property, Vukile has agreed with
Redefine that it will acquire a 50% undivided share of the Property from Redefine for
R1.115 billion on the same terms and conditions and at the same time that Redefine
will acquire the Property from Sanlam (the “Acquisition”). The formal legal
agreements have been finalised, but the Acquisition is still subject to Competition
Commission approval.
In terms of the JSE Limited Listings Requirements, the Acquisition constitutes a
category 2 transaction for Vukile. The interim results for the company are due to be
released on SENS on 23 November 2012 and will include the financial effects of the
Acquisition.
2. Rationale
The Acquisition is in line with Vukile’s stated objective of growing a quality portfolio of
properties with a special emphasis on the retail sector in order to achieve meaningful
capital appreciation and sustainable growth in distributions. Vukile already manages
the Property on behalf of Sanlam and accordingly has deep insight into all aspects of
the Property, making this a low risk acquisition that will improve the quality of Vukile’s
portfolio and be easily integrated. The Property is a well located, quality retail asset
and hence the Acquisition will enhance the value of Vukile’s retail portfolio.
Furthermore, additional bulk of c.10 000 m² is available for future development.
The total acquisition cost of R35 711/m² is 451% higher than the valuation of Vukile’s
current retail portfolio of R7 910/m², which now increases to R9448/ m², an increase
of 19%. The Acquisition increases the company’s exposure to retail and, post the
conclusion of the Acquisition, the retail component of Vukile will be c.55% of the total
portfolio by value.
3. Purchase Consideration
The Property will be acquired for a purchase consideration of R1.115 billion (One
billion, one hundred and fifteen million Rand), payable in cash (the “Purchase
Consideration”) on fulfilment or waiver of the last of the conditions precedent set out
in paragraph 4 below , which is expected to be on or about 1 April 2013 (“Effective
Date”).
The Property being acquired has been externally valued as described more fully in
paragraph 5 below. The value attributed to the Property by the external valuer of
R1.090 billion, equates to 97.8% of the Purchase Consideration.
The Purchase Consideration has been determined assuming that the Property will be
transferred on 31 May 2013. To the extent that the Effective Date is prior to or post
31 May 2013, the Purchase Consideration will be adjusted upwards or downwards by
0.0133681% compounded daily (c.5.0% per annum)(“Adjusted Purchase
Consideration”). The first and second year forecast yields in respect of the Property,
based on the Adjusted Purchase Consideration including transaction costs, are
6.72% and 7.18% respectively.
Vukile, through a combination of cash and well negotiated debt facilities,expects the
Acquisition to be marginally earnings dilutive in year one and enhancing from year
two onwards.
4. Conditions precedent
The Acquisition is subject to the approval by the South African Competition
Authorities and the transfer of the Property to Vukile.
5. Salient details of the Property
Specific information relating to the Property:
Details East Rand Mall
Location Boksburg
Sector Retail
Rentable area / GLA (m²) 62 446m²
Multi tenanted 177 tenants
Weighted average rental per m² (Rand) contractual R208,40/m²
Vacancy by rentable area (m²) 505m²
Vacancy % of total rentable area / GLA (m²) 0.8%
Annualised property yield on Adjusted Purchase 6.76%
Consideration excluding transaction costs
Independent external valuer registered in terms of the Peter Parfitt, Quadrant
Property Valuers Profession Act, No 47 of 2000 Properties Proprietary
Limited
External valuation (Rand billion) as at 31 May 2013 1.090 (50%)
excluding transaction costs
Price (Rand billion) including transaction costs less price 1.111 (50%)
adjustment for early transfer (assumed to be on or about 1
April 2013)
6. Financial effects of the Acquisition
The Adjusted Purchase Consideration will be used to calculate the financial effects.
The interim results for the company are due to be released on SENS on 23
November 2012 and will include the financial effects of the Acquisition.
7. Continuing cautionary announcement
Unitholders are advised to continue exercising caution when dealing in the
company’s linked units until such time as the financial effects of the Acquisition have
been published.
Johannesburg
23 November 2012
Merchant bank and transaction sponsor: RAND MERCHANT BANK (A division of
FirstRand Bank Limited)
Date: 23/11/2012 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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