DELTA PROPERTY FUND LIMITED - Announcement regarding the acquisition of letting enterprises and properties

Release Date: 19/02/2013 16:45
Code(s): DLT
 
Wrap Text
Announcement regarding the acquisition of letting enterprises and properties

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")


ANNOUNCEMENT         REGARDING        THE    ACQUISITION      OF    LETTING      ENTERPRISES        AND
PROPERTIES
1.   Introduction

     Delta linked unit holders are advised that Delta ("the Purchaser"), has entered into various
     agreements for the acquisition of five properties ("the Properties") as detailed below ("the
     Acquisitions"):

         1. an agreement with PRB Properties Proprietary Limited for the purchase of the property
            and letting enterprise commonly known as "Damelin House", situated at 325 Anton
            Lembede Street, Durban, KwaZulu Natal for a purchase price of R49 823 600;

         2. an agreement with TiradeProps 115 Proprietary Limited for the purchase of the property
            and letting enterprise commonly known as "SARS Randburg", situated at the corner of
            Hill and Kent Street, Randburg, Gauteng for a purchase price of R93 000 000;

         3. an agreement with Strategic Property Partnership for the purchase of the property and
            letting enterprise commonly known as the "CMH Building", situated at 196-206 Pixley ka
            Seme Street and 119-123 Monty Naicker Street, Durban, KwaZulu Natal for a purchase
            price of R53 684 200;

         4. an agreement with MYK Family Trust for the purchase of the property and letting
            enterprise commonly known as "Samora House", situated at 2 Samora Machel Street
            and Margaret Mncadi Avenue, Durban, KwaZulu Natal for a purchase price of R62 971
            428; and

         5. an agreement with Vukile Property Fund Limited for the purchase of the property and
            letting enterprise commonly known as the "Embassy Building", situated at the corner of
            Anton Lembede and Samora Machel Streets, Durban, KwaZulu Natal for a purchase
            price of R238 000 000.

     The effective date of the Acquisitions will be the date of fulfilment of the conditions precedent as
     set out in paragraph 5 below, which are expected to be on or about 1 May 2013.

2.   Rationale for the Acquisitions

     In line with Delta’s strategy of actively pursuing investment opportunities that will enhance the
     overall quality and value of its portfolio, the Acquisitions represent attractive investments and
     extend Delta’s diversification to SARS, non-government and industrial tenants. The Acquisitions
     have potential strategic opportunities to enhance the yield going forward.


3.   Consideration for the Acquisitions

     The total purchase consideration for the Acquisitions is R500 100 331 (five hundred million one
     hundred thousand and three hundred and thirty one Rand) which includes costs in the amount
     of R2 621 103 (two million six hundred and twenty one thousand, one hundred and three Rand)
     in respect of the Acquisitions ("the Purchase Price"), in addition the Purchaser will be liable for
     the transfer duty.

     The Purchase Price will be settled in cash upon registration of transfer of the Properties into the
     name of Delta, and will be financed through a combination of debt financing and new equity
     raised from new and/or existing linked unitholders. The new equity will form part of the
     fundraising referred to in the announcement released on SENS on 07 February 2013.

4.   Conditions precedent

     The Acquisitions are subject to, inter alia, the fulfilment or waiver of the following suspensive
     conditions:

     4.1       The completion by Delta of a due diligence investigation of the Properties, to the
               extent required;

     4.2       The boards of directors and shareholders of the Vendors approving the Acquisitions,
               to the extent required;

     4.3       The counter-parties to the lease agreements in respect of the Properties consenting in
               writing to the assignment of all of the respective vendors’ rights and obligations under
               the leases to Delta;

     4.4       Competition Commission approval (to the extent required);

     4.5       Delta providing written confirmation of a letter of finance and or confirmation that it has
               arranged for sufficient equity on such terms and conditions as are acceptable to the respective
               vendors; and

     4.6       Approval of the Acquisitions by Delta’s board of directors.

5.   Unaudited pro forma financial effects of the Acquisitions

     The unaudited pro forma financial effects of the Acquisitions on net asset value and net tangible
     asset value per unit have not been disclosed as they are not significant.

6.   Forecast information on the Properties

     The forecasts have been prepared on the assumption that the Acquisitions will be implemented
     on 1 May 2013 and include forecast results for the 10 months ending 28 February 2014 and the
     year ending 28 February 2015.

     The forecasts, including the assumptions on which they are based and the financial information
     from which they are prepared, are the responsibility of the board of directors of Delta. The
     forecasts have not been reviewed or reported on by the independent reporting accountants.

     The forecasts presented in the tables below have been prepared in accordance with Delta’s
     accounting policies and in compliance with IFRS.

     Summarised forecast in respect of Damelin House:
                                                                      Forecast      Forecast
                                                                     10 months     12 months
                                                                        ending        ending
                                                                   28 February            28
                                                                          2014      February
                                                                         R’000          2015
                                                                                       R’000
    Rental income                                                        4,385         5,710
    Straight-line rental income accrual                                    936           719
    Total revenue                                                        5,322         6,429
    Net operating profit                                                 3,002         3,591
    Net profit after tax                                                   689           539
    Distributable earnings attributable to linked unitholders            2,045         2,843


Contracted revenue is based on existing lease agreements. 100% of the revenue for this
property is contracted.

Summarised forecast in respect of the SARS Randburg Building:

                                                                      Forecast      Forecast
                                                                     10 months     12 months
                                                                        ending        ending
                                                                   28 February            28
                                                                          2014      February
                                                                         R’000          2015
                                                                                       R’000
    Rental income                                                        8,737        11,133
    Straight-line rental income accrual                                      -             -
    Total revenue                                                        8,737        11,133
    Net operating profit                                                 4,392         5,798
    Net profit after tax                                                    32            42
    Distributable earnings attributable to linked unitholders            4,349         5,740


Contracted revenue is based on existing lease agreements. Uncontracted revenue in respect of
this portfolio amounts to 10% and 100% for the years ending 28 February 2014 and 2015,
respectively.

Summarised forecast in respect of the CMH Building:

                                                                      Forecast      Forecast
                                                                     10 months     12 months
                                                                        ending        ending
                                                                   28 February            28
                                                                          2014      February
                                                                         R’000          2015
                                                                                      R’000
    Rental income                                                        4,781         6,099
    Straight-line rental income accrual                                    638           468
    Total revenue                                                        5,419         6,567
    Net operating profit                                                 2,801         3,351
    Net profit after tax                                                   475           358
    Distributable earnings attributable to linked unitholders            2,141         2,854
     Contracted revenue is based on existing lease agreements. 100% of the revenue for this
     property is contracted.

     Summarised forecast in respect of the Samora House:

                                                                           Forecast      Forecast
                                                                          10 months     12 months
                                                                             ending        ending
                                                                        28 February            28
                                                                               2014      February
                                                                              R’000          2015
                                                                                            R’000
         Rental income                                                        6,896         8,882
         Straight-line rental income accrual                                    288         (261)
         Total revenue                                                        7,184         8,621
         Net operating profit                                                 3,760         4,391
         Net profit after tax                                                   232         (155)
         Distributable earnings attributable to linked unitholders            3,437         4,606


     Contracted revenue is based on existing lease agreements. 100% of the revenue for this
     portfolio is contracted.

     Summarised forecast in respect of the Embassy Building:

                                                                           Forecast      Forecast
                                                                          10 months     12 months
                                                                             ending        ending
                                                                        28 February            28
                                                                               2014      February
                                                                              R’000          2015
                                                                                            R’000
         Rental income                                                       30,753        41,448
         Straight-line rental income accrual                                    279          (94)
         Total revenue                                                       31,032        41,353
         Net operating profit                                                10,570        15,438
         Net profit after tax                                                   275            44
         Distributable earnings attributable to linked unitholders           10,189        15,377


     Contracted revenue is based on existing lease agreements. Uncontracted revenue in respect of
     this property amounts to 24% and 83% for the years ending 28 February 2014 and 2015,
     respectively.




7.   Specific information relating to the Properties

     Details regarding the Properties are set out below:
Properties      Property                     Sector      Gross     Single or   Weighted      Annualised      Purchase       Value(2) (3)
                description/                           lettable       multi      average       property        price R
                                                                                                                                      R
                location                                   area   tenanted         gross          yield
                                                            m2                 rental per
                                                                                    m² (1)
                                                                                        R
Damelin         Durban,
House           KwaZulu Natal       Office              3,933     Single         103.25           9.50%    50,061,363     50,061,363
SARS            Johannesburg,
Randburg        Gauteng             Office              8,496     Single         103.60           9.70%    93,552,767     93,552,767
CMH             Durban,
Durban          KwaZulu Natal       Industrial         10,974     Single           38.73          9.50%    53,935,982     53,935,982
Samora          Durban,             Office
House           KwaZulu Natal       (Government)        6,920     Single         100.32           9.10%    63,411,832     63,411,832
Embassy         Durban,             Office
Building        KwaZulu Natal       (Government)       32,369     Multi            73.04          8.90%   239,138,387    239,138,387


Total                                                                                                     500,100,331    500,100,331


          Notes:
     1.      Based on net rental income for the 12 month period from the anticipated date of transfer, assuming the Properties
             are fully let.
     2.      No independent valuation has been carried out and the value of the Properties of R500 100 331 was arrived at by the
             management company, MPI Property Asset Management Proprietary Limited.
     3.      After taking into account transfer fees, commission and other costs of R2 621 103.
     4.      The annualised property yield on the Embassy Building of 8.90% has assumed zero rental on the current vacant
             space which amounts to 21% of the total GLA.


8.        Categorisation

          The Acquisitions are regarded as a Category 2 transaction in terms of the JSE Limited Listings
          Requirements.




19 February 2013

Johannesburg


Investment bank and sponsor
Nedbank Capital

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