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JOINT ANNOUNCEMENT IN REGARD TO THE ACQUISITION OF A PROPERTY
Vukile Property Fund Limited Fairvest Property Holdings Limited
(Incorporated in the Republic of (Incorporated in the Republic of
South Africa) South Africa)
(Registration number 2002/027194/06) (Registration number:
ISIN: ZAE000056370 1998/005011/06)
JSE Share code: VKE Linked unit code: FVT
NSX Share code: VKN ISIN: ZAE000034658
("Vukile") (“Fairvest”)
JOINT ANNOUNCEMENT IN REGARD TO THE ACQUISITION OF A PROPERTY PORTFOLIO BY
FAIRVEST FROM VUKILE AND THE BASIS OF A STRATEGIC RELATIONSHIP BETWEEN THE
COMPANIES
1. AGREEMENT FOR PURCHASE AND SALE OF PROPERTY PORTFOLIO BUSINESS
1.1. Fairvest, Vukile and Vukile’s subsidiary, MICC Properties
Proprietary Limited (“MICC”) (Vukile and MICC being hereafter
referred to as the “Sellers”) have entered into an agreement (“the
Agreement”) in terms of which Fairvest acquires from the Sellers a
portfolio of retail properties, as detailed in paragraph 4 below
(“Subject Portfolio”), including the associated rental enterprise
conducted in respect of the Subject Portfolio (“the Transaction”).
1.2. The effective date of the Transaction shall occur on fulfilment of
the conditions precedent to the Agreement or on 1 December 2013,
whichever is the later date (“Effective Date”).
2. STRATEGIC ALIGNMENT BETWEEN VUKILE AND FAIRVEST
The Transaction has been entered into in the context of Fairvest and
Vukile having agreed to a strategic relationship and following
implementation of the Transaction Vukile will hold, directly and
through MICC, 31.7% of Fairvest’s issued linked units.
For Vukile the disposal of the Subject Portfolio to Fairvest is in
line with its strategy to focus on larger retail properties in the
lower LSM sector, whilst the resultant holding in Fairvest provides
Vukile with ongoing indirect exposure to smaller retail centres in
this sector, consistent with Vukile’s stated strategy of increasing
its exposure to lower LSM retail.
Vukile is backing Fairvest’s management team to drive above market
growth through their active hands on management approach, which in a
smaller fund like Fairvest can make a significant impact on growth in
distributions.
From Fairvest’s perspective the relationship will provide the
opportunity to access Vukile’s deal flow in regard to retail assets
that fall outside of Vukile’s strategic focus, but within Fairvest’s,
which is expected to add substantially to Fairvest’s pipeline, and,
more broadly, will provide the opportunity for Fairvest to benefit
from the experience and expertise of Vukile as a strategic investor.
In addition, settling the full Purchase Price through the issue of
Fairvest linked units will reduce Fairvest’s loan to value levels to
approximately 20%, thereby allowing Fairvest headroom to make
significant further yield-enhancing acquisitions through debt funding.
3. PURCHASE CONSIDERATION
3.1. The purchase consideration due under the Agreement for the Subject
Portfolio (“Purchase Consideration”) includes a base purchase
consideration of R231 597 000 (“Base Purchase Consideration”), which
Base Purchase Consideration shall increase at the rate of 0.02% per
day, compounded for every day from and including 1 October 2013 up
to, but excluding, the Effective Date (“Purchase Consideration
Increase”).
3.2. The estimated aggregate Purchase Consideration for the Subject
Portfolio is R233.9 million, based on an anticipated Effective Date
of 1 December 2013, and which includes VAT at the rate of 0%.
3.3. In terms of the Agreement, Fairvest is to settle the Purchase
Consideration by issuing new ordinary linked units (“Acquisition
Linked Units”) to the Sellers at an issue price of R1.40 per
ordinary linked unit (“Acquisition Issue”). Based on the estimated
aggregate Purchase Consideration of R233.9 million, it is
anticipated that 167 045 236 Acquisition Linked Units will be issued
by Fairvest to the Sellers.
4. THE SUBJECT PORTFOLIO
4.1. In terms of the Agreement, Fairvest will purchase the Kimberley Kim
Park property from Vukile (“Vukile Property”) and all remaining
properties from MICC (“MICC Properties”).
4.2. Details of the Subject Portfolio
4.2.1. MICC Properties
Property Geographical Sector Gross Average Independent
Name and Location lettable Gross valuation
Address area Rental per (R’m)
(“GLA”) m2
(m2) (R/m2)
Durban KwaZulu Retail 4,777 136.6 67.2
Qualbert Natal
Centre
Malamulele Limpopo Retail 6,193 97.5 69.5
Plaza
Giyani Spar Limpopo Retail 5,485 76.1 47.0
Centre
Total 16,455 183.7
4.2.2. Vukile Property
Property Geograph Sector Estimated Gross Estimated Average Independent
Name and ical Purchase lettable Purchase Gross valuation
Address Location considera area considera Rental (R’m)
tion (“GLA”) tion per per m2
(R’m) (m2) GLA (R/m2)
(R/m2)
Kimberley Northern Retail 52.8 10,498 5,025 66.4 49.5
Kim Park Cape
Notes:
i. The estimated total Purchase Consideration of R233.9 million
comprises the Base Purchase Consideration of R231.6 million and
Purchase Consideration Increase of R2.3 million (assuming an
Effective Date of 1 December 2013). The calculation of the
estimated Purchase Consideration is dealt with in paragraphs 3.1
and 3.2 above.
ii. The estimated combined Purchase Consideration for the MICC
Properties is R181.1 million, while the estimated Purchase
Consideration per GLA (R/m2) for the MICC Properties, taken as a
whole, is R11,005.
iii. The properties were independently valued as at 1 November 2013
by Brian van Vuuren of JHI Properties Proprietary Limited, an
external registered professional valuer in terms of the Property
Valuers Profession Act, 2000.
5. CONDITIONS PRECEDENT
The Transaction is subject to the fulfilment of the following
conditions precedent (“Conditions Precedent”) –
5.1. that the boards of directors of the Sellers approve the Agreement by
not later than 24 October 2013;
5.2. that the board of directors of Fairvest approves the Agreement by
not later than 24 October 2013;
5.3. that the mortgagees in respect of the Subject Portfolio consent,
within 30 (thirty) days after the Conditions Precedent in paragraphs
5.1 and 5.2 above have been fulfilled, to the release of the Subject
Portfolio from the operation of the existing mortgage bonds;
5.4. that all approvals required by law or regulation or the JSE in order
to give effect to the Agreement, are obtained, by not later than
17h00 on 31 January 2014; and
5.5. that the sale of the Subject Portfolio in terms of the Agreement is
unconditionally approved by the Competition Authorities in terms of
the Competition Act, No. 89 of 1998 (as amended) or is conditionally
approved on terms and conditions which each of the parties to the
Agreement confirms in writing to the others by not later than 17h00
on 31 January 2014.
6. ADDITIONAL MATERIAL TERMS
6.1. The Agreement provides for warranties that are normal for a
transaction of this nature.
6.2. The Sellers and Fairvest shall use their respective best endeavours
to procure the simultaneous transfer of the properties forming part
of the Subject Portfolio to Fairvest, to the extent that it is
practically possible to do so without permitting undue delays after
the Effective Date, with the date of registration of transfer to
Fairvest in the relevant title deeds registry of a property
comprising part of the Subject Portfolio, being referred to as the
“Transfer Date”.
6.3. In terms of the Agreement, should any distribution which is payable
by Fairvest at any time in respect of the Acquisition Linked Units
include any income which is attributable to any period prior to the
Transfer Date (the “Relevant Distribution”), then the Sellers
antecedently waive their right to such portion of the Relevant
Distribution amount payable in respect of each Acquisition Linked
Unit which relates to such pre Transfer Date period, the amount so
waived being referred to as the “Waived Amount”. The Waived Amount
shall be an amount per Acquisition Linked Unit equivalent to the
portion of the Relevant Distribution which is attributed to each
Acquisition Linked Unit in respect of any period prior to the
Transfer Date (on the assumption that the Relevant Distribution per
Linked Unit accrued in an equal amount per day over the six month
distribution reporting period to which the Relevant Distribution
relates).
6.4. Fairvest shall be liable for interest to the Sellers, calculated at
a rate of 9.8% NACM (net annual compounded monthly in arrears), on
the outstanding balance of the Purchase Consideration from time to
time, from and including the Effective Date up to but excluding the
Transfer Date.
7. PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION ON FAIRVEST
The pro forma financial effects of the Transaction on Fairvest will be
published by Fairvest in a follow-up announcement.
8. FORECAST FINANCIAL INFORMATION OF THE SUBJECT PORTFOLIO REQUIRED TO BE
SHOWN BY FAIRVEST
The forecast financial information of the Subject Portfolio will be
published by Fairvest in a follow-up announcement.
9. CATEGORISATION FROM VUKILE’S PERSPECTIVE
The Transaction does not constitute either a Category 1 or Category 2
transaction for Vukile and accordingly does not require linked
unitholder approval and/or the release of a detailed terms
announcement. As such, this announcement is made by Vukile on a
voluntary basis.
10. CATEGORISATION AND FURTHER DOCUMENTATION FROM FAIRVEST’S PERSPECTIVE
10.1. The Transaction constitutes a Category 1 acquisition for Fairvest
and, as such, will require the approval of Fairvest linked
unitholders.
10.2. Furthermore, the Acquisition Issue involves the issuing by Fairvest
of the Acquisition Linked Units, which together will hold more than
30% of the voting power of all linked units in the issued linked
unit capital of Fairvest, and therefore requires the approval of
Fairvest linked unitholders by way of a special resolution in terms
of section 41(3) of the Companies Act, No 71 of 2008 (as amended).
10.3. Should the Transaction and the Acquisition Issue be approved by
Fairvest linked unitholders, the Acquisition Linked Units to be
issued in terms of the Acquisition Issue will increase the issued
linked unit capital of Fairvest by more than 25%. Accordingly,
Fairvest is required, in terms of the JSE Listings Requirements, to
issue revised listing particulars.
10.4. A circular, incorporating revised listing particulars, detailing the
terms of the Transaction and containing a notice convening a general
meeting, will be posted to Fairvest linked unitholders in due
course.
11. RENEWAL OF FAIRVEST CAUTIONARY ANNOUNCEMENT
Further to Fairvest’s cautionary announcement dated 29 August 2013,
Fairvest linked unitholders are advised to continue exercising caution
when dealing in Fairvest’s securities until a follow-up announcement
by Fairvest, containing the pro forma financial effects and the
forecast financial information in relation to the Transaction, is
made.
10 October 2013
Cape Town
PSG Capital: Sponsor and corporate adviser to Fairvest
Java Capital: Sponsor and corporate adviser to Vukile, transaction adviser
to Fairvest
Date: 10/10/2013 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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