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TOWER PROPERTY FUND LIMITED - Abridged pre-listing statement regarding the listing of Tower Property Fund Limited on the Main Board of the JSE

Release Date: 12/07/2013 13:08
Code(s): TWR     PDF:  
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Abridged pre-listing statement regarding the listing of Tower Property Fund Limited on the Main Board of the JSE

Tower Property Fund Limited
(formerly Reftin 1004 Proprietary Limited)
(Registration number 2012/066457/06)
JSE share code: TWR ISIN number: ZAE000179040
(Approved as a REIT by the JSE)
(“Tower” or “the company”)


ABRIDGED PRE-LISTING STATEMENT REGARDING THE LISTING OF TOWER PROPERTY FUND LIMITED ON THE MAIN BOARD OF THE JSE


This abridged pre-listing statement relates to:

-    a capital raising by way of a private placement; and

-    the subsequent listing of all shares in the company on the “Diversified REITs” sector of the JSE.

The pre-listing statement provides for a capital raising of between R300 million and R600 million. However, based
on its engagements with those investors providing pre-commitments and an underwrite, the board considers an amount
of R300 million to be the optimal amount of capital to be raised in terms of the private placement. On this basis the
private placement is fully pre-committed or underwritten as set out in paragraphs 10 and 11 below.

This abridged pre-listing statement is not an invitation to the public to subscribe for shares in the company, but is
issued in compliance with the JSE Listings Requirements for the purposes of giving information to the public in
relation to Tower and to invited investors in relation to the private placement.

This announcement contains the salient information in respect of Tower, which is more fully described in the pre-
listing statement which is to be issued to invited investors (the “pre-listing statement”). For a full appreciation of
Tower, the private placement and the listing, the pre-listing statement should be read in its entirety.

Terms defined in the pre-listing statement shall bear the same meaning in this abridged pre-listing statement.

1.   Introduction

     The JSE has granted Tower a listing of all of its issued ordinary shares in the “Diversified REITs” sector of the
     JSE lists under the abbreviated name “Tower”, JSE Share Code “TWR” and ISIN Code “ZAE000179040” with
     effect from the commencement of trade on Friday, 19 July 2013 (the “Listing Date”).

2.   Overview of Tower

     Tower was incorporated in South Africa as a private company on 11 April 2012. On 19 October 2012, the name
     of the company was changed from Reftin 1004 Proprietary Limited to Tower Property Fund Proprietary
     Limited. The company was converted to a public company on 22 February 2013.

     Tower is a property investment fund that is structured as a REIT. The business of the Tower group is long-term
     investment in property, and the Tower group owns a diversified portfolio of office and retail properties based
     predominantly in Gauteng and the Western Cape, with some exposure in KwaZulu-Natal.

     Tower currently owns the existing portfolio of 14 properties in the retail and office sectors, valued at
     approximately R956 050 000, comprising the Cape Quarter portfolio (3 properties), the Lucky Bean portfolio (7
     properties) and the City Square portfolio (4 properties).

     Tower has entered into transactions to acquire a further 13 properties in the retail and office sectors, valued at
     R693 800 000.
  
     The company aims to provide investors with strong investment returns, comprising a growing income stream
     and capital value. This will be achieved, firstly, by adding value through active property asset management,
     and secondly, through the cost-effective ‘greening’ of properties in the portfolio which will result in reduced
     occupation costs for tenants and increased investment performance.

3.   Investment Strategy

     Tower will target acquisitions of medium-sized (R30 million to R200 million) properties, diversified across the
     retail, office and industrial sectors, and geographically across the major metropolitan areas. Competition for
     medium-sized properties is less intense, and well-located, good-quality, medium-sized properties provide a
     diversified earnings base, better yields, and frequently, the opportunity to improve performance. Larger
     properties will not be excluded where suitable opportunities arise.

     Properties acquired and to be acquired by Tower were and will be selected for their potential to generate and
     sustain strong rental income streams. Diversification is a key component of the company’s investment strategy,
     and is achieved through:

     -     A geographic spread of properties across major urban centres, providing diversification across regional
           economies. As a Cape-based fund, and recognising the relative stability of property performance in the
           region, we will seek to maintain a substantial exposure to the Western Cape, although the greatest
           concentration is likely to be in Gauteng. The company has a smaller exposure to Kwa-Zulu Natal.

     -     A mix of property types. Retail, office and industrial properties will be targeted, with a long-term bias
           towards retail (±50%) followed by office (±30%) and industrial (±20%).

     -     A staggered lease expiry profile, in order to ‘smooth’ the rental income stream.

     Tower will adopt an active strategy of ‘greening’ properties over time. The initial focus will be on improving
     energy efficiency, which will result in significant savings in electricity costs, thus making buildings more
     competitive and helping to “future-proof” them against future rises in tariffs. Basic cost effective energy and
     water savings measures that can be implemented at low or no cost will be applied immediately, while additional
     measures will be implemented over time as opportunities arise. Buildings will be benchmarked against the
     Green Building Council of South Africa’s ‘Energy and Water Benchmarking tool’ and their improvement in
     performance will be monitored and reported on. These measures will increase the competitiveness and values of
     buildings in Tower’s portfolio over time.

4.   Management of the property portfolio

     The asset management function of the company is undertaken by Tower Asset Managers Proprietary Limited
     (the “asset manager”).

     The asset manager is owned by Spire Property Group Proprietary Limited (“Spire”) and partners. Spire is an
     experienced, highly-regarded property group which has successfully assembled and managed listed property
     funds before, has demonstrated an ability to add value to the assets it manages, and is one of the leaders in the
     green building field.

     Property management is contracted to Spire Property Management Proprietary Limited.

5.   Overview of the Property Portfolio

     The Tower group, via its subsidiaries, holds the existing portfolio comprising 14 properties valued at
     approximately R956 050 000, with a gross rentable area of approximately 43 469 m2. The Tower group
     acquired control over the existing portfolio with effect from 1 June 2013.
    
     The existing portfolio is made up of:

     -     the Cape Quarter portfolio which comprises 3 properties known as “Cape Quarter Square”, “Cape
           Quarter Piazza” and “32 Napier Street”;

     -     the Lucky Bean portfolio which comprises 7 properties known as “Coachman’s Crossing”, “St Andrews”,
           “Viscount Road”, “Waterfall”, “Waterford”, “Woodlands” and “7 Stirrup Lane”; and

     -     the City Square portfolio which comprises 4 properties known as “Block B Upper Grayston”, “Block D
           Upper Grayston”, “Block E Upper Grayston” and “Block F Upper Grayston”.

     The acquisition portfolio comprises:

     -     the Capital transaction portfolio, which comprises 7 properties known as “3 River Road”, “31 Beacon
           Road”, “382 Jan Smuts Avenue”, “Constantia View”, “Musgrave Road”, “The Braides” and "Willovale”;

     -     the Fortess transaction portfolio, which comprises 5 properties known as “6-8 Sturdee Avenue”, “308
           Kent Avenue”, “Wedgefield”, “Hanover Square” and “73 Hertzog Boulevard”; and

     -     the Turquoise Moon portfolio, which comprises 1 property known as “Clearview Motor Village”.

     Assuming that the acquisition of all of the properties comprising the acquisition portfolio set out above are
     implemented, Tower will hold 27 properties valued at R1.65 billion, with a gross rentable area of approximately
     104 284 m2.

6.   Share capital

     Immediately prior to the private placement and the listing –

     -     the authorised share capital of Tower will comprise 500 000 000 ordinary shares of no par value; and

     -     the issued share capital of Tower will comprise 42 876 430 ordinary shares of no par value.

     Assuming 34 482 759 Tower shares are issued in terms of the private placement, and upon the implementation
     of the acquisition of the acquisition portfolio referred to above, immediately after the private placement and the
     listing –

     -     the authorised share capital of Tower will comprise 500 000 000 ordinary shares of no par value; and

     -     the issued share capital of Tower will comprise 111 942 578 ordinary shares of no par value; and

     -     there will be no shares held in treasury.

7.   Distribution policy

     The company intends making six-monthly dividend distributions, which are expected to be declared for the
     periods ended November and May each year, and paid within 4 months of the end of each such period.

     The dividend will comprise 100% of the distributable income in respect of each such period, subject to the
     directors being satisfied that the requirements of the solvency and liquidity test have been met.

8.   Details of the private placement

     The company is undertaking a capital raising by way of a private placement to invited investors to subscribe for
     between 34 482 759 and 68 965 517 placement shares at an issue price of R8.70 per share.

     Applications must be for a minimum subscription of R1 000 000 per investor acting as principal.

     The private placement is conditional on the minimum subscription of R300 million being raised.

     There are no convertibility or redemption provisions relating to the placement shares offered in terms of the
     private placement. Placement shares will be issued in dematerialised form only. There are no fractions of
     placement shares being issued pursuant to the private placement.

9.   Purpose of the Private Placement

     The main purposes of the private placement and the listing are to:

     -     raise capital to reduce debt used to fund the acquisitions;

     -     provide investors, both institutional and private, with an opportunity to participate over the long term in
           the income streams and future capital growth of the company;

     -     obtain a spread of investors in order to enhance the liquidity and tradability of the shares;

     -     provide the company with access to a central trading facility thereby providing liquidity to shareholders;

     -     provide the company with a platform to raise funding to pursue growth and investment opportunities in
           the future; and

     -     enhance the public profile and general public awareness of Tower.

10.  Subscription commitments

     As at the date of this abridged pre-listing statement, Tower has received binding subscription undertakings in an
     aggregate amount of R178 042 542 equating to 20 464 660 shares at R8.70 per share.

     The subscription commitments have been received from the following investors and in the following amounts:

     -     Stanlib Asset Management Limited: R73 042 537 (8 395 694 shares);

     -     Grindrod Asset Management Proprietary Limited: R49 999 996 (5 747 126 shares);

     -     Prescient Investment Management Proprietary Limited (“Prescient”): R 50 000 004 (5 747 127 shares);
           and

     -     3PM Investments Proprietary Limited (“3PM”): R5 000 003 (574 713 shares).

     In terms of the subscription undertakings, the relevant investors have each undertaken to subscribe for the
     number of shares set out above and Tower has undertaken to allocate each of these investors that number of
     shares.

     A commitment fee equal to 5% of the subscription commitment provided is payable to each of these investors
     by Tower.

11.  Underwriting

     In addition to the subscription commitments set out above, in terms of an underwriting agreement entered into
     between Tower and Fortress 2, the private placement has been underwritten by Fortress 2 in an amount of up to
     R150 million. In terms of the underwriting agreement Fortress 2 has undertaken to:

     -     subscribe and pay, or to procure subscribers (on the terms and conditions of the private placement
           including, inter alia, the requirement that subscriptions in terms of the offer may only be made for a
           minimum amount of R1 000 000 per single addressee acting as principal) and secure payment, in cash (in
           South African Rand) for up to 17 241 380 shares to be issued by the company which will form part of the
           subject matter of the offer and which are not subscribed for or taken up pursuant to the offer at the offer
           price thereof of R8.70 per share; and
    
     -     pay the amount due or procure payment of the amount due to Tower within 48 hours of being advised in
           writing of the number of shares it is obliged to subscribe for and take up pursuant to the offer (which
           Tower will do within 72 hours after the close of the private placement).

     Tower shall pay Fortress 2 an underwriting fee in the aggregate amount of R7 500 000 (exclusive of VAT),
     which shall only become payable once Fortress 2 has complied with its obligations in terms of the underwriting
     agreement entered into between Tower and Fortress 2.

     The directors of Tower have made due and careful enquiry of Fortress 2 and hereby confirm that Fortress 2 can
     meet its commitments in terms of the private placement.

     The directors of Fortress 2 are Mark Stevens, Wiko Serfontein and Nicolaas Hanekom.

     None of the directors, promoters or prescribed officers of Tower hold any beneficial interest, direct or indirect,
     in Fortress 2.

12.  Anticipated application of proceeds of private placement

     R300 million raised under the private placement will be applied as follows:

     -     R292.1 million will be used to partly finance the acquisitions and settle interest-bearing debt originating
           from the acquisitions; and

     -     approximately R7.9 million will be used to defray the preliminary and issue expenses incurred pursuant
           to the private placement and listing.

13.  Salient dates and times

                                                                                                                2013
     Opening date of the private placement (09:00)                                                   Friday, 12 July

     Closing date of the private placement (12:00) by which date invited investors are              Tuesday, 16 July
     required to submit their application form to Java Capital in order to qualify for
     participation in the private placement

     Results of the private placement released on SENS on                                         Wednesday, 17 July

     Notification of allotments                                                                    Thursday, 18 July

     Results of the private placement published in the press on                                    Thursday, 18 July

     Shares listed on the JSE (09:00)                                                                Friday, 19 July

     Accounts at CSDP or broker updated and debited in respect of dematerialised                     Friday, 19 July
     shareholders
   
     Notes:
     1. These dates and times are South African dates and times and are subject to amendment. Any such
        amendment will be released on SENS and published in the press.

     2. Invited investors may only receive shares in dematerialised form and must advise their CSDP or broker of
        their acceptance of the private placement in the manner and cut-off time stipulated by their CSDP or broker.

     3. CSDP’s effect payment on a delivery-vs-payment basis.

     Applicants should consult their broker or CSDP to ascertain the timing for submission of applications as this
     may vary depending on the broker or CSDP in question.

14.  Directorate

     The full names, ages, business address, occupations and capacities of the directors of Tower are outlined below:

       Names, age and          Business address                      Qualification             Function
       nationality
      
       Andrew Dalling          123 Main Road, Greyton, 7233          Dip Law                   Chairman,
        69                                                                                     independent non-
       South African                                                                           executive director
      
       Marc Edwards            2nd Floor, Spire House, Tannery       NQF5 Real Estate          Chief Executive
       39                      Park, 23 Belmont Road,                                          Officer
       South African           Rondebosch, 7700

       Fred Jenkings           2nd Floor, Spire House, Tannery       CA (SA)                   Chief Financial
       65                      Park, 23 Belmont Road,                                          Officer
       South African           Rondebosch, 7700

        Bruce Kerswill         2nd Floor, Spire House, Tannery       BSc (Town and             Executive director
        57                     Park, 23 Belmont Road,                Regional Planning)
       South African           Rondebosch, 7700                      MBA

       Keith Craddock          2nd Floor, Spire House, Tannery       BSc (Civil Eng), MBA      Executive director
       57                      Park, 23 Belmont Road,
       South African           Rondebosch, 7700

       Martin Evans            Block A, Unit 6, Coachman’s           BSc (Town and             Non-executive
       56                      Crossing Office park, 4 Brian         Regional Planning),       director
       South African           Street, Lyme Park, Bryanston          MBA

       John Bester             Personal Trust House                  CA(SA); B.Com             Independent non-
       65                      Belmont Park                          (Hons) (UCT); CTA         executive director
       South African           Belmont Road                          (Wits); CMS (Oxon);
                               Rondebosch 7700                       AMP (UCT); AMP
                                                                     (Oxford)

       Nicola Milne            13 Thistle Street, Fernwood, 7700     BCom CA (SA)              Independent non-
       38                                                                                      executive director
       South African

       Athi Magwentshu         30C French Lane, Morningside,         BTech (QS), MBA           Independent non-
       35                      Sandton, 2196                                                   executive director
       South African

       Raven Naidoo            5th Floor, Buitengracht Centre, 125 BSc (Hons), MSc             Independent non-
       48                      Buitengracht Street, Cape Town      (Nuclear Physics) –         executive director
       South African                                               PhD (Micro
                                                                   Electronics), MSc
                                                                   (Tech Innovation
                                                                   Management) Univ
                                                                   Sussex

15.  The pre-listing statement

The pre-listing statement is only available in English. Copies of the pre-listing statement may be obtained from the
registered office of the company, Java Capital or the transfer secretary from Friday, 12 July 2013 to Monday, 29 July
2013.


12 July 2013


Corporate advisor and bookrunner: Java Capital                               

Independent transaction sponsor: Deloitte 

Independent reporting accountant and auditor: Cliffe Dekker Hofmeyr                               

Independent valuer: Mazars

Attorneys: Mills Fitchet Magnus Penny

Date: 12/07/2013 01:08:00 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
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
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.

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