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Acquisition of Surrey House at Rissik Street for R104.2 million
ASCENSION PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2006/026141/06)
JSE share code for A-linked units: AIA ISIN: ZAE000161881
JSE share code for B-linked units: AIB ISIN: ZAE000161899
(Approved as a REIT by the JSE)
(“Ascension” or “the company”)
ACQUISITION OF SURREY HOUSE AT 35 RISSIK STREET FOR R146.2 MILLION
1. INTRODUCTION
Ascension has concluded agreements for the acquisition of a rental enterprise conducted in respect of and including
the property and building situated at 35 Rissik Street (Erf 1263 Marshalls Town, City of Johannesburg, Registration
Division I. R, Gauteng, held by deed of transfer no T9827/1993) known as Surrey House (“Surrey House” or “the
property”) (“the acquisition”). The property was acquired through the acquisition of all the shares in and claims
against Main Street 1119 Proprietary Limited (“Main Street”) (“the Main Street Acquisition agreement”), which
in turn acquired the property in terms of a sale of property agreement.
2. RATIONALE FOR THE ACQUISITION
The acquisition is in line with the company’s strategy of focusing on larger, centrally located commercial office
buildings in Pretoria, Johannesburg, Cape Town and Nelspruit and provides an ideal opportunity to acquire a well
located government-tenanted building with a long lease expiry profile at an attractive yield.
3. SALE OF PROPERTY AGREEMENT
3.1. In terms of the sale of property agreement entered into between Main Street, Thebe Property Asset
Management Proprietary Limited (“Thebe”) and O Property Holdings Proprietary Limited (“O Property”),
Main Street has agreed to acquire the property for a purchase consideration of R104 104 043 (“the property
purchase consideration”). The property has a total gross lettable area of 11 738m2 of which 830m2 is retail
(“the retail space”) and 10 908m2 is office (“the office space”). The weighted average net rental per square
metre of the property is currently R105 per square metre.
3.2. The property purchase consideration plus any VAT payable thereon will be paid in cash to O Property on the
date of registration of transfer of ownership of the property into the name of Main Street. Main Street has
undertaken within 21 days of fulfilment of all suspensive conditions to furnish the conveyancers with an
unconditional bank guarantee for the property purchase consideration, plus the VAT thereon.
3.3. The retail space comprises the ground floor of the building set aside for retail purposes and leased in
accordance with existing leases. Main Street has concluded a five year lease agreement on 29 May 2013 in
respect of the office space with the Gauteng Provincial Government through its Department of Infrastructure
Development.
3.4. The sale of property agreement provides for warranties and indemnities that are standard for acquisitions of
this nature.
4. MAIN STREET ACQUISITION AGREEMENT
4.1. In terms of the Main Street Acquisition agreement, Ascension has agreed to acquire all of the issued shares
in Main Street from Battlebay Infrastructure Proprietary Limited, Mayborn Investments 139 Proprietary
Limited and Thebe. Mayborn and Thebe each own 35% of the issued share capital of Main Street with the
remaining 30% owned by Battlebay.
4.2. The purchase price for all of the shares in and shareholder claims against Main Street is R42 117 299 and
will be payable in cash once the Gauteng Provincial Government takes occupation of the office space
expected to be on or about 1 November 2013.
4.3. The Main Street Acquisition agreement provides for warranties and indemnities that are standard for
acquisitions of this nature.
5. CONDITIONS PRECEDENT
The sale of property agreement is conditional on approval from the competition authorities and the Main Street
Acquisition agreement is conditional on the sale of property agreement becoming unconditional.
6. VALUATION
The board is satisfied that the total acquisition cost of the property, being R146.2 million, reflects the value of the
property. 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.
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7. CATEGORISATION
The acquisition of the property constitutes a category 2 transaction in terms of the JSE Listings Requirements and
accordingly does not require approval by linked unitholders.
8. FORECAST FINANCIAL INFORMATION
Set out below are the forecast rental revenue, operating profit, net profit after taxation and distributable earnings of
Surrey House (“the Surrey House forecasts”) for the 6 months ending 30 June 2014 and the year ending
30 June 2015. The Surrey House forecasts have been prepared on the assumption that the acquisition will be
implemented on 1 January 2014.
The Surrey House 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 Surrey House forecasts have not
been reviewed or reported on by independent reporting accountants or the company’s external auditors.
The Surrey House forecasts presented in the table below have been prepared in accordance with the company’s
accounting policies and in compliance with IFRS.
6 months ending Year ending
30 June 2014 30 June 2015
R’000 R’000
Contractual rentals and tenant recoveries 12 852 27 511
Straight-line of lease income adjustment 2 390 3 738
Rental revenue 15 242 31 249
Operating profit* 10 219 20 166
Net profit after taxation*^ (25) (50)
Distributable earnings 6 071 12 913
Net property income 7 828 16 428
*Includes the effects of straight-lining rental income and asset management fees.
^ Includes the effects of finance costs and debenture interest.
The Surrey House forecasts incorporate, inter alia, the following material assumptions:
1. Contracted revenue is based on existing lease agreements.
2. Uncontracted revenue comprises 0.0% and 0.8% of gross rental revenue for the 6 months ending 30 June 2014
and the year ending 30 June 2015 respectively.
3. All existing lease agreements are valid.
4. R49.7 million of the purchase price (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 fixed rate of 7.0% p.a.
5. The balance of the purchase price and capital expenditure of R100 million will be funded through the proceeds
raised from a placement of 22 988 506 A-linked units which completed on Monday, 21 October 2013.
6. No fair value adjustment has been provided for in respect of the 6 months ending 30 June 2014 or the year
ending 30 June 2015.
7. In terms of the asset management agreement with Ascension Property Management Company (Proprietary)
Limited (“the manager”), Ascension will pay the manager a monthly fee equivalent to 1/12th of 0.45% of the
aggregate of the market capitalisation and the borrowings of Ascension.
8. Ascension will pay the property manager, Broll Property Group (Proprietary) Limited, for all property
management services a monthly fee equivalent to 2.0% 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.
9. PRO FORMA FINANCIAL EFFECTS
The pro forma financial effects of the acquisition on Ascension’s net asset value and tangible net asset value per A-
linked unit and per B-linked unit, based on the condensed audited consolidated statement of financial position as at
30 June 2013, are not significant and have not been presented.
24 October 2013
Corporate advisor and sponsor
Java Capital
Date: 24/10/2013 05:25:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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