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SYCOM PROPERTY FUND - SYC - Acquisition of a 50% individed share in Greenacres Shopping Centre, Port Elizabeth

Release Date: 21/10/2013 14:00
Code(s): SYC     PDF:  
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SYC - Acquisition of a 50% individed share in Greenacres Shopping Centre, Port Elizabeth

Sycom Property Fund
A Collective Investment Scheme in property registered in terms of the
Collective Investment Schemes Control Act, No. 45 of 2002 and managed by
Sycom Property Fund Managers Limited (“Sycom Property Fund Managers”)
(Registration number 1986/002756/06)
JSE Share code: SYC
ISIN: ZAE000019303
(“Sycom” or “the Fund”)
(Granted REIT status by the JSE, effective 1 April 2013)

ANNOUNCEMENT REGARDING THE ACQUISITION OF A 50% UNDIVIDED SHARE IN
GREENACRES SHOPPING CENTRE, PORT ELIZABETH

1.   Introduction

     Sycom unitholders are advised that FirstRand Bank Limited, acting as trustee for the Fund, has
     entered into an agreement with Liberty Group Limited (“Liberty” or “the Seller”) to acquire a 50%
     undivided share in the property in Port Elizabeth on which Greenacres Shopping Centre (“the
     Property” and “Greenacres” respectively) is located from the Seller (“the Acquisition”). Acucap
     Properties Limited (“Acucap”), which performs Sycom’s asset management functions and which
     owns 33.5% of Sycom has entered into an agreement with Liberty to acquire the other undivided
     50% share in the Property.
     
     The Acquisition will be effective upon the date of transfer of the Property, the expected transfer
     date being 1 January 2014 (“the Transfer Date”).

2.   Rationale for the Acquisition

     Given the objective of growing the size of the portfolio with individually large, low risk
     acquisitions, particularly in the retail segment, the acquisition of 50% of Greenacres supports
     Sycom’s strategy of seeking opportunities that will enhance shareholder value and contribute to
     sustainable income growth. Acucap is a 27.5% co-owner of the adjoining retail centre known as
     The Bridge at Greenacres (”The Bridge”), Acucap already has a meaningful investment in this
     node, and an intimate understanding of its performance.
     
     Greenacres and The Bridge together comprise an 88,000m² combined regional shopping mall
     which is one of the major retail offerings in the Eastern Cape. Situated at the corner of Cape
     Road and Langenhoven Drive, Greenacres is ideally positioned at the intersection of Port
     Elizabeth’s two primary arterial roads to draw from the city’s major residential areas. There is a
     complete representation of the major South African national tenants across all retail segments,
     making Greenacres the mall of choice for approximately one million shoppers per month.
     
     With high foot counts and trading densities, there is strong interest from many of the national
     tenants at Greenacres to expand their trading platforms. Greenacres has unutilised bulk
     available for expansion, and with an experienced retail team managing the asset, Sycom is
     confident that it will be able to fulfil the expansion needs of Greenacres’ national tenant base,
     within the context of a general modernisation and upgrade of the mall.
     
     Acucap’s co-ownership of The Bridge not only gives it an intimate understanding of the retail
     dynamics of this important node, but also creates the opportunity for value adding operational
     and redevelopment activities between Greenacres and The Bridge, to the advantage of tenants,
     owners and shoppers.

3.   Consideration for the Acquisition

     The purchase consideration for the Acquisition is R508 million ("the Purchase Price"), payable in
     cash on the Transfer Date.

4.   Conditions precedent

     The Acquisition is subject to:
     4.1     Competition Authorities approval; and
                                                                                                     
     4.2     obtaining of any other regulatory approvals, to the extent required.

5.   Pro forma financial effects of the Acquisition

     The Acquisition has no material impact on either the earnings, distribution or net asset value per
     Sycom unit as a result of the Acquisition and, as such, no pro forma financial effects are
     required to be disclosed.

6.   Forecast information on the Property

     The summarised forecast financial information relating to the Property for the 3 months ending
     31 March 2014 and for the twelve months ending 31 March 2015, which is the responsibility of
     Sycom Property Fund Managers’ directors, is set out below. The forecast financial information
     has not been reviewed and reported on by the Fund’s auditors.

                                                                     Forecast               Forecast
                                                              3 months ending       12 months ending
                                                                31 March 2014          31 March 2015
                                                                        R’000                  R’000

     Gross rentals                                                     10 636                 43 559
     Contracted revenue                                                 8 371                 24 589
     Uncontracted revenue                                               2 265                 18 970
     Net rental income before interest                                  9 842                 40 312
     Net rental income after interest and taxation                      1 396                  3 365
     Distributable income                                               1 396                  3 365

     Notes:
     1. The forecast information for the 3 months ending 31 March 2014 has been calculated from the
        expected date of transfer.
     2. The forecast has been prepared in compliance with the Fund’s IFRS accounting policies.
     3. Uncontracted revenue represents 21.3% of gross rental for the period ended 31 March 2014
        and 43.55% for the year ended 31 March 2015.
     4. The assumptions for uncontracted revenue are that rentals on new leases and / or renewals
        will be at market related rates

7.   Specific information relating to the Property

     Details regarding the Property are set out below:

      Property                                        Erf 3238 Mount Road, Port Elizabeth
      Location                                        Ring Road, Greenacres, Port Elizabeth
      Sector                                          Retail
      GLA (m2)                                        40 767 square meters
      Single or multi tenanted                        multi
      Weighted average rental per m2                  R174.94
      Vacancy by rentable area (m2)                   0 (2)
      Annualised property yield (%)                   7.8%
      Purchase price                                  R508,000,000
      Value (1)                                       R517,500,000

     Notes:
     1. The value of 50% of the Property of R517.5m as at 31 December 2013 was arrived at by the
        independent external property valuer, HHMP Property Developers (Proprietary) Limited
        (trading as Quadrant), registered with the South African Institute of Valuers.
     2. Represents 100% of the Property area.

8.    Categorisation

      In terms of section 9 the Listings Requirements of the JSE Limited, the Acquisition is
      categorised as a category 2 transaction.

21 October 2013
Cape Town

Sponsor
Absa Bank Limited (acting through its Corporate and Investment Banking division)

Vani Chetty
Competition Law Advisor

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