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Proposed Acquisitions of 174 Visagie, Pretoria and The Island Centre, Cape Town
Ascension Properties Lomited
(Incorporated in the Republic of South Africa on 23 August 2006)
(Registration number 2006/026141/06)
A-Linked Units: JSE code: AIA ISIN: ZAE000161881
B-Linked Units: JSE code: AIB ISIN: ZAE000161899
("Ascension” or “the company”)
PROPOSED ACQUISITIONS OF 174 VISAGIE STREET, PRETORIA AND THE ISLAND CENTRE, CAPE TOWN
INTRODUCTION
Ascension has concluded agreements for:
- the acquisition of a rental enterprise in respect of and including the office building known as 174 Visagie
Street, Pretoria (“174 Visagie Street”), for an amount of R82.8 million (“the 174 Visagie Street
acquisition”). The seller of 174 Visagie Street is Growthpoint Properties Limited (“Growthpoint”); and
- the acquisition of a rental enterprise in respect of and including the office building known as the Island
Centre, Cape Town (“Island Centre”), for an amount of R55 million (“the Island Centre acquisition”).
The seller of the Island Centre is the Belulu Trust.
1. THE 174 VISAGIE STREET ACQUISITION
1.1. RATIONALE
The 174 Visagie Street acquisition is consistent with Ascension’s growth strategy and meets its
investment criteria in terms of its location and its tenant, lease and net income profile. It provides the
company the opportunity to acquire a well located asset with a stable tenant and lease profile at a very
attractive property yield.
1.2. DETAILS OF 174 VISAGIE STREET
174 Visagie Street (Erf 2901, Pretoria in Gauteng) is a fully let B-grade office block with 13 536 square
metres of office space and 105 parking bays. The weighted average rental per square metre of 174
Visagie Street is currently R95 per square metre. There is one lease in place. The sole tenant, being the
City of Tshwane, occupies 13 536 square metres which lease expires on 31 May 2016.
The board is satisfied that the value of 174 Visagie Street is in line with the acquisition price being paid
for it by 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.
1.3. TERMS AND CONDITIONS PRECEDENT
The purchase price is payable in cash against transfer of ownership of 174 Visagie Street into
Ascension’s name, on which date the 174 Visagie Street acquisition will become effective.
Should the date of transfer be later than 90 calendar days after the date on which all suspensive
conditions have been fulfilled or waived (“fulfilment date”), then interest will accrue on the purchase
price at the nominal annual, compounded monthly prime rate for the period commencing from the 91st
day after the fulfilment date till the date of transfer.
The purchase agreement provides for warranties and indemnities that are standard for acquisitions of
this nature.
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The 174 Visagie Street acquisition is subject to the following suspensive conditions:
- by no later than the 50th calendar day after signature of the 174 Visagie Street acquisition
agreement, Ascension completing a due diligence investigation and advising Growthpoint
in writing that it is satisfied with the outcome of that due diligence investigation;
- by no later than the 21st calendar day following fulfilment of the due diligence
investigation condition, Ascension obtaining a loan in an amount of not less than R60
million secured by a first mortgage bond over 174 Visagie Street; and
- by not later than the 90th calendar day after signature of the 174 Visagie Street acquisition
agreement and to the extent it may be required, receiving unconditional approval for the
174 Visagie Street acquisition from the Competition Authorities, or receiving approval on
such terms and conditions as are reasonable to Ascension,
which conditions are to be fulfilled or waived, as appropriate.
1.4. EN COMMONDITE PARTNERSHIP AND CAPITAL EXPENDITURE
Ascension has simultaneously concluded an en commondite partnership with Citybiz (Proprietary)
Limited (“Citybiz”) who, as landlord, currently holds a lease over 174 Visagie Street with the City of
Tshwane Metropolitan Municipality which lease expires in 3 years.
Ascension, as general partner, is entitled at its sole discretion and at any time to acquire the partnership
interest of Citybiz, the limited partner.
In the event that Ascension exercises its option to acquire the partnership interest held by Citybiz, the
consideration payable by Ascension will be:
- an amount of R2 million in the event that Citybiz has, to the satisfaction of Ascension,
lawfully procured the assignment of its rights and obligations as landlord under the lease
with the City of Tshwane Metropolitan Municipality, on substantially on the same terms
and conditions, so that Ascension will become the landlord; and
- an additional amount of R13 million, upon the conclusion of an agreement with the tenant
to extend the current lease term to 9 years and 11 months, provided that the agreement for
extension is concluded by no later than six months from the date of transfer of the
property; or
- an amount of R100 in the event that Ascension is not satisfied that Citybiz has procured
the assignment of its rights and obligations as landlord in terms of the lease with the City
of Tshwane Metropolitan Municipality.
In the event that Ascension has not exercised its option to acquire the partnership interest within six
months from the transfer of the property and Citybiz has procured the assignment of its rights and
obligations as landlord to Ascension and/or the extension of the lease, Citybiz will be entitled to acquire
its partnership interest for the same amounts and on the same bases set out above.
The en commandite partnership will dissolve upon Ascension acquiring the partnership interest of
Citybiz delivering its notice and payment of the purchase consideration as set out above.
In addition to the purchase price of R82.8 million, commission of R1.1 million and the maximum
partnership consideration of R15 million management anticipates that total capital expenditure on the
building will be R13.1 million, resulting in a total cost for the 174 Visagie Street acquisition of R112
million.
1.5. FORECAST FINANCIAL INFORMATION
Set out below are the forecast revenue, operating profit, net profit after taxation, distributable earnings
and net property income of 174 Visagie Street (“the 174 Visagie Street forecasts”) for the one month
ending 30 June 2013 and the year ending 30 June 2014. The 174 Visagie Street forecasts have been
prepared on the assumption that the 174 Visagie Street acquisition will be implemented on 1 June 2013.
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The 174 Visagie Street forecasts, including the assumptions on which they are based and the financial
information from which they are prepared, are the responsibility of the directors of Ascension. The 174
Visagie Street forecasts have not been reviewed or reported on by the independent reporting
accountants or external auditors.
The 174 Visagie Street forecasts presented in the table below have been prepared in accordance with
the company’s accounting policies and in compliance with IFRS.
One month ending Year ending
30 June 2013 30 June 2014
R’000 R’000
Contractual rental and tenant recoveries 1 754 21 408
Straight-line of lease income adjustment 153 1 705
Rental revenue 1 907 23 113
Operating profit* 1 381 16 068
Net profit after taxation*^ (18) (207)
Distributable earnings 936 10 864
Net property income 1 228 14 363
*Includes the effects of straight-lining rental income and asset management fees.
^ Includes the effects of finance costs and debenture interest.
The 174 Visagie Street forecasts incorporate, inter alia, the following material assumptions:
1. Contracted revenue is based on the existing lease agreement with the sole tenant.
2. All gross rental revenue for the one month ending 30 June 2013 and the year ending 30 June 2014
is contracted.
3. The existing lease agreement is valid and enforceable.
4. It has been assumed that, in terms of the en commandite partnership agreement, Citybiz assigns
the lease with the City of Tshwane Metropolitan Municipality to Ascension and successfully
concludes the extension of the lease to 9 years and 11 months, with the result that Ascension pays
Citybiz a total consideration of R15 million for Citybiz’s partnership interest.
5. R44.59 million of the purchase price for 174 Visagie Street and the consideration for Citybiz’
partnership interest (including acquisition costs and expected capital expenditure) is assumed to be
funded through third party interest-bearing borrowings. These interest-bearing borrowings are
assumed to incur interest at an effective melded fixed and variable rate of 7.75% p.a.
6. The balance of the purchase price for 174 Visagie Street and the consideration for Citybiz’
partnership interest and capital expenditure will be funded through existing cash resources.
7. No fair value adjustment has been provided for in respect of the one month ending 30 June 2013
or the year ending 30 June 2014.
8. In terms of the asset management agreement with Ascension Property Management Company
(Proprietary) Limited (“the manager”), Ascension will pay the manager:
a. a monthly fee equivalent to 1/12th of 0.25% of the aggregate of the market capitalisation
and the borrowings of Ascension till 30 June 2013; and
b. a monthly fee equivalent to 1/12th of 0.45% of the aggregate of the market capitalisation
and the borrowings of Ascension till 30 June 2014.
9. Ascension will pay the property manager for all property management services a monthly fee
equivalent to 2% of gross monthly income collected (including VAT).
10. Ascension will pay an agent’s commission of approximately R1.1 million.
11. Debenture interest will be paid to A- and B-linked unitholders in accordance with the provisions
of the debenture trust deed.
1.6. UNAUDITED PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the 174 Visagie Street acquisition on Ascension’s net asset
value and tangible net asset value per A-linked unit and per B-linked unit, based on the unaudited
consolidated statement of financial position as at 31 December 2012 as published on SENS on 8
February 2013, are not significant and have not been presented.
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1.7. CATEGORISATION
The 174 Visagie Street acquisition constitutes a category 2 transaction in terms of the JSE Listings
Requirements and accordingly does not require approval by linked unitholders.
2. THE ISLAND CENTRE ACQUISITION
2.1. RATIONALE
The Island Centre acquisition is consistent with Ascension’s growth strategy and meets its investment
criteria in terms of its location and its tenant, lease and net income profile.
2.2. DETAILS OF THE ISLAND CENTRE
The Island Centre (Erf 17960, Cape Town) is situated in Cumberland Street, Paarden Eiland and is a
fully let B-grade office and warehousing complex with 22 524 square metres of gross lettable area. The
weighted average rental per square metre of the Island Centre is currently R33.40 per square metre. The
property is multi-tenanted with the National Department of Public Works occupying 7 917 square
metres. Their lease has recently expired and management of the company are in advanced discussions
to renew the lease.
The board is satisfied that the value of the Island Centre is in line with the Island Centre acquisition
price being paid for it by 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.
2.3. TERMS AND CONDITIONS PRECEDENT
The purchase price is payable in cash against transfer of ownership of the Island Centre into
Ascension’s name, on which date the Island Centre acquisition will become effective.
The purchase agreement provides for warranties and indemnities that are standard for acquisitions of
this nature.
The Island Centre acquisition is subject to the following suspensive conditions:
- by no later than the 45th calendar day following the date on which the Belulu Trust furnishes
Ascension with copies of all documents and information regarding the rental enterprise and/or
the Island Centre as requested by Ascension, Ascension completing a due diligence investigation
and advising the Belulu Trust in writing that it is satisfied with the outcome of that due diligence
investigation;
- by no later than the 20th calendar day following fulfilment of the due diligence investigation
condition, Ascension obtaining a loan, in an amount and on terms acceptable to it, secured by a
first mortgage bond over the Island Centre;
- by no later than the 7th calendar day following fulfilment of the loan condition, Ascension
confirming in writing that it is satisfied that the Belulu Trust has lawfully assigned its rights and
obligations under the current leases to it and that Ascension will, with effect from the transfer
date of the Island Centre to Ascension, be entitled to all the rights and benefits of such lease; and
- by not later than the 90th calendar day after signature of the Island Centre acquisition agreement
and to the extent it may be required, receiving approval from all other regulatory authorities,
including the JSE,
which conditions are to be fulfilled or waived, as appropriate.
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2.4. FORECAST FINANCIAL INFORMATION
Set out below are the forecast revenue, operating profit, net profit after taxation, distributable earnings
and net property of the Island Centre (“the Island Centre forecasts”) for the one month ending 30
June 2013 and the year ending 30 June 2014. The Island Centre forecasts have been prepared on the
assumption that the Island Centre acquisition will be implemented on 1 June 2013.
The Island Centre forecasts, including the assumptions on which they are based and the financial
information from which they are prepared, are the responsibility of the directors of Ascension. The
Island Centre forecasts have not been reviewed or reported on by the independent reporting accountants
or external auditors.
The Island Centre forecasts presented in the table below have been prepared in accordance with the
company’s accounting policies and in compliance with IFRS.
One month ending Year ending
30 June 2013 30 June 2014
R’000 R’000
Contractual rental and tenant recoveries 836 10 532
Straight-line of lease income adjustment 4 25
Rental revenue 840 10 557
Operating profit* 575 7 080
Net profit after taxation*^ (2) (27)
Distributable earnings 419 5 234
Net property income 571 7 054
*Includes the effects of straight-lining rental income and asset management fees.
^ Includes the effects of finance costs and debenture interest.
The Island Centre forecasts incorporate, inter alia, the following material assumptions:
1. Contracted revenue is based on existing lease agreements.
2. Uncontracted revenue comprises 69.1% and 73.7% of gross rental revenue for the one month
ending 30 June 2013 and the year ending 30 June 2014 respectively.
3. All existing lease agreements are valid.
4. R23.20 million of the purchase price for the Island Centre (including acquisition costs and
expected capital expenditure) is assumed to be funded through third party interest-bearing
borrowings. These interest-bearing borrowings are assumed to incur interest at an effective
melded fixed and variable rate of 7.75% p.a.
5. The balance of the purchase price for the Island Centre and capital expenditure will be funded
through existing cash resources.
6. No fair value adjustment has been provided for in respect of the one month ending 30 June 2013
or the year ending 30 June 2014.
7. In terms of the asset management agreement with Ascension Property Management Company
(Proprietary) Limited (“the manager”), Ascension will pay the manager:
a. a monthly fee equivalent to 1/12th of 0.25% of the aggregate of the market capitalisation
and the borrowings of Ascension till 30 June 2013; and
b. a monthly fee equivalent to 1/12th of 0.45% of the aggregate of the market capitalisation
and the borrowings of Ascension till 30 June 2014.
8. Ascension will pay the property manager for all property management services a monthly fee
equivalent to 2% of gross monthly income collected (including VAT).
9. Debenture interest will be paid to A- and B-linked unitholders in accordance with the provisions
of the debenture trust deed.
2.5. UNAUDITED PRO FORMA FINANCIAL EFFECTS
The unaudited pro forma financial effects of the Island Centre acquisition on Ascension’s net asset
value and tangible net asset value per A-linked unit and per B-linked unit, based on the unaudited
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consolidated statement of financial position as at 31 December 2012 as published on SENS on 8
February 2013, are not significant and have not been presented.
2.6. CATEGORISATION
The Island Centre acquisition is not categorisable in terms of the JSE Listings Requirements and the
announcement of the Island Centre acquisition is made for information purposes only.
20 March 2013
Corporate advisor and sponsor
Javacapital
Date: 20/03/2013 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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