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FAIRVEST PROPERTY HOLDINGS LIMITED - Acquisition of new property - The Matsulu Centre Acquisition

Release Date: 06/02/2013 16:00
Code(s): FVT     PDF:  
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Acquisition of new property - The Matsulu Centre Acquisition

Fairvest Property Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/005011/06)
Linked unit code: FVT   ISIN: ZAE000034658
(“Fairvest” or “the Company”)

ACQUISITION OF NEW PROPERTY

1.   THE MATSULU CENTRE ACQUISITION

     Linked unitholders of the Company are hereby advised that the
     Company has entered into an agreement (“the Agreement”) with
     Huwani Projects (Pty) Ltd (“Huwani”), to acquire from Huwani a
     property situated at Erf 2039 Matsulu-A in the Mbombela Local
     Municipality, Mpumalanga (“Matsulu Centre Property”) and the
     associated rental enterprise conducted in respect of the
     Matsulu Centre Property as a going concern (“the Matsulu
     Centre Acquisition”).

     The effective date of the Matsulu Centre Acquisition will be
     the date of registration of transfer of the Matsulu Centre
     Property into the name of the Company at the Deeds Office,
     which, subject to fulfilment of the conditions precedent, is
     expected to occur on or about 1 May 2013.

2.   RATIONALE FOR THE MATSULU CENTRE ACQUISITION

     The Matsulu Centre Acquisition is consistent with the
     Company’s growth strategy whereby the Company will focus on
     acquiring retail assets with a weighting in favour of non-
     metropolitan areas and lower LSM sectors.

3.   PURCHASE CONSIDERATION

     The purchase consideration applicable to the Matsulu Centre
     Acquisition is R54 350 000 (fifty four million three hundred
     and fifty thousand rand) (“Purchase Consideration”), which
     includes VAT at the rate of 0%, payable in cash against
     registration of the Matsulu Centre Property into the name of
     the Company at the Deeds Office. The Company will fund the
     Purchase Consideration through debt and/or equity funding.

4.   THE MATSULU CENTRE PROPERTY

     Details of the Matsulu Centre Property are as follows:

                                                             Average
                                                     Cost    gross
                                      Cost/          per     rental per
                                      Value   GLA    GLA     m2
Property Name   Geographical
and Address     Location     Sector   (R’m)   (m2)   (R/m2)  (R/m2)

Erf 2039        Mbombela     Retail   54.35   6,102   8,907   81.8
Matsulu-A,      Local
Mbombela Local  Municipality,
Municipality    Province of
                Mpumalanga


5.   PROPERTY SPECIFIC INFORMATION

     Details regarding the Matsulu Centre Acquisition, as at the
     expected effective date, are set out below:

                  Purchase Yield
                  attributable
                  to Linked      Average       Lease
  Property Name   Unitholders    Escalation    Duration  Vacancy
  and Address         (%)           (%)        (years)   % by GLA

  Erf 2039          10.42           7.8%          4.6       3.9
  Matsulu-A,
  Mbombela Local
  Municipality



     Notes:
     a)   The purchase yield attributable to linked unitholders
          assumes that the acquisition is funded through new equity.
     b)   National or corporate tenants with low levels of default
          risk (‘A Type’ Tenants) constitute 76.7% of the GLA and
          66.9% of the gross rentals within the Matsulu Centre
          Property.
     c)   The costs associated with the Matsulu Centre Acquisition
          are estimated at R2.3 million.
     d)   The cost of the property is considered to be its fair
          market value, as determined by the directors of the
          Company. The directors of the Company are not independent
          and are not registered as professional valuers or as
          professional associate valuers in terms of the Property
          Valuers Profession Act, No 47 of 2000.

6.   CONDITIONS PRECEDENT

     The Matsulu Centre Acquisition is subject the following conditions
     precedent:

     6.1.   in the event that the Company elects to conduct a due
            diligence investigation of the Matsulu Centre
            Acquisition, the Company providing Huwani with written
            notification by no later than 15 days after receipt of
            all information requested in the due diligence
            investigation, stating that the result of the due
            diligence investigation has been to its satisfaction and
            that it will be proceeding with the Matsulu Centre
            Acquisition;

     6.2.   by no later than 15 March 2013, a bank or financial
            institution granting in writing on its normal terms and
            conditions relating to loans of a similar nature, a loan
            to the Company in the amount applied for by it, or such
            lesser amount as the Company agrees to accept in
            writing;

     6.3.   by no later than 15 March 2013, the Company providing
            written confirmation to Huwani of the successful
            placement of the Company’s linked units for cash with
            third party placees in terms of a vendor consideration
            placement and/or an issue of linked units for cash
            (“placement”) that will be undertaken in order to
            partially fund the Matsulu Centre Acquisition. If the
            proceeds of such placement, together with the proceeds
            of the loan finance accounts for less than the Purchase
            Consideration, this condition and the condition referred
            to in paragraph 6.2 above shall be deemed not to have
            been fulfilled;

     6.4.   by no later than 30 business days after the signature
            date of the Agreement or 15 March 2013 (whichever is the
            sooner), the Company obtaining all the relevant
            approvals and completing all relevant processes required
            under the Listings Requirements of the JSE Limited;

     6.5.   the board of directors of the Company approving the
            Matsulu Centre Acquisition by no later than 10 business
            days after the successful completion of the due
            diligence investigation referred to in paragraph 6.1
            above;

     6.6.   the board of directors of Huwani approving the Matsulu
            Centre Acquisition by no later than 3 business days
            after the signature date of the Agreement; and

     6.7.   to the extent necessary, the shareholders of Huwani
            approving the Matsulu Centre Acquisition in terms of
            section 112 and section 115 of the Companies Act, No 71
            of 2008 (as amended), by no later than 3 business days
            after the signature date of the Agreement.

     The Company is entitled to waive the conditions precedent set
     out in paragraph 6.2 and paragraph 6.3 above. The parties to
     the Agreement can extend the dates for fulfilment of the
     conditions precedent by written agreement.

7.   WARRANTIES

     Huwani has provided warranties to the Company in the Agreement
     that are standard for a transaction of this nature.

8.   PRO FORMA FINANCIAL EFFECTS OF THE MATSULU CENTRE ACQUISITION

     The pro forma financial effects of the Matsulu Centre
     Acquisition on net asset value and net tangible asset value
     per linked unit are not significant and have therefore not
     been disclosed.

9.   FORECAST FINANCIAL INFORMATION OF THE MATSULU CENTRE
     ACQUISITION

     The forecast financial information relating to the Matsulu
     Centre Acquisition for the financial periods ended 30 June
     2013 and 30 June 2014 are set out below. The forecast
     financial information has not been reviewed or reported on by
     a reporting accountant in terms of section 8 of the Listings
     Requirements of the JSE Limited and is the responsibility of
     the Company’s directors.


                            Forecast for the 2     Forecast for the 12
                            month period ended      month period ended
                               30 June 2013            30 June 2014
                                   (R)                      (R)

     Revenue                     1,097,476                6,954,375

     Operating costs              (191,991)              (1,222,048)

     Net operating                 905,485                5,732,327
     income

     Debenture interest           (905,485)              (5,732,327)

     Total
     comprehensive
     income
     attributable to
     linked unitholders                  -                       -


     Notes:
     a) Contractual revenue includes gross rentals and other
        recoveries but excludes any adjustment applicable to the
        straight lining of leases.
     b) Operating costs include all utility and council charges
        applicable to the Matsulu Centre Property.
     c) The forecast information for the 2 month period ended 30
        June 2013 has been calculated from the anticipated
        effective date of the Matsulu Centre Acquisition, being 1
        May 2013.
     d) Un-contracted revenue constitutes 4.7% of the revenue for
        the 2 month period ended 30 June 2013.
     e) Un-contracted revenue constitutes 4.6% of the revenue for
        the 12 month period ended 30 June 2014.
     f) Current vacant space has been has been assumed to remain
        vacant unless it is deemed probable that such space will
        be let, in which case the rental is forecast at prevailing
        rates.
     g) Leases expiring during the forecast period have been
        assumed to renew at current market rates, unless the
        lessee has indicated its intention to terminate the lease.
     h) It is assumed that 100% of net operating income is
        distributed to linked unit holders, as interest, in
        accordance with the debenture trust deed of the Company.

10. CATEGORISATION

   The Matsulu Centre Acquisition is a Category 2 acquisition in
   terms of the listings requirements of the JSE Limited.


6 February 2013
Cape Town

Sponsor
PSG Capital

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