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DELTA PROPERTY FUND LIMITED - Announcement regarding the acquisition of various letting enterprises and properties

Release Date: 08/11/2013 15:00
Code(s): DLT     PDF:  
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Announcement regarding the acquisition of various letting enterprises and properties

            Delta Property Fund Limited
            (formerly Tuffsan 89 Investment Holdings Proprietary Limited)
            (Incorporated in the Republic of South Africa)
            (Registration number 2002/005129/06)
            Share code: DLT ISIN: ZAE000172052
            ("Delta" or “the Company”)
            REIT status approved

            ANNOUNCEMENT REGARDING THE ACQUISITION OF VARIOUS LETTING ENTERPRISES AND PROPERTIES

           
            1.    Introduction

                  Holders of Delta linked units (“Delta Linked Unitholders”) are advised that Delta has
                  concluded agreements for the acquisition of the following letting enterprises and
                  properties (“the Properties”) from the vendors listed below:

                                                                                                   Purchase Consideration
Portfolio                Property Name               Vendor Name                                   R'000 (excl. transaction
                                                                                                   costs)
“Capital Portfolio”      15 Simba Road               iFour Properties S.A. Proprietary Limited                        33,030
                         Leeuwkop                    Capital Property Trust                                          184,020
                         5 Simba Road                Realty Dynamix 73 Proprietary Limited                            82,950


“Rob Alexander
                         Sleepy Hollow               Ziningi Properties Proprietary Limited                          110,000
Portfolio”
                                                     Rymer Trading CC and Square Peg
                         Capital Towers                                                                              124,000
                                                     Properties Prop
                         Mayors Walk                 174 Mayors Walk CC                                               53,225


“Trifecta Portfolio”     Erf 29755 Kimberley         Trifecta Holdings Proprietary Limited                            47,700
                         Erf 2380 Kimberley          Albasync Proprietary Limited                                     53,800

                         Erf 184 Nelspruit - Bell    Karimu 2005 Investments Proprietary

“Karimu Portfolio”                                                                                                     6,150
                         Street 7                    Limited (“Karimu”)
                         Erf 76 Nelspruit - 30
                                                     Karimu                                                           40,255
                         Louis Trichardt Street
                         Erf 171 and Erf 113
                         Nelspruit - 21 Bell         Karimu                                                           28,720
                         Street
                         Erf 1327 Nelspruit - 08
                                                     Karimu                                                           19,635
                         Spruit Street
                         Erf 5 & 6 Vintonia - 15 -
                                                     Karimu                                                           16,985
                         17 Cruse Circle
                         Erf 29 & 30 Vintonia Ext
                                                     Karimu                                                           13,325
                         2 - 4- 6 Davie Street
                         Erf 115 Nelspruit - 11
                                                     Karimu                                                           19,970
                         Louis Trichardt Street
                         Erf 4294 & Erf 248
                         Nelspruit - 4 Ehmke
                                                     Karimu                                                           86,755
                         Street and 9 Ferreira
                         Street
                         Erf 1770 West Acres -
                                                     Karimu                                                           16,640
                         16 Old Pretoria Road
                         Erf 240 Nelspruit - 1
                                                     Karimu                                                           14,600
                         Ferreira Street
                         Erf 241 Nelspruit - 3
                                                     Karimu                                                           39,520
                         Ferreira Street


                                                                
                         Erf 175 Witrivier - 19
                                                     Karimu                                                           12,745
                         Danie Joubert Street


                         Total Purchase Consideration                                                               1,004,025



                 (collectively the “Acquisitions”).

                 The effective dates of the Acquisitions shall be 01 January 2014 for the Karimu
                 Portfolio and 01 December 2013 for the Capital Portfolio, Rob Alexander Portfolio and
                 Trifecta Portfolio (“the Effective Date”). The Effective Date will be subject to the
                 fulfilment of the conditions precedent as detailed in paragraph 4 below.

         2.      Rationale for the Acquisitions

                 The Acquisitions are in line with Delta’s strategy of actively pursuing investment
                 opportunities that will enhance the overall quality and value of its portfolio.
                 The Acquisitions represent an attractive investment to Delta Linked Unitholders as it
                 introduces well-established properties with low risk tenants. Based on GLA, 86% of
                 the Acquisitions represent single tenanted properties. Furthermore, the Karimu
                 Portfolio provides an opportunity to further diversify Delta’s geographic spread into
                 Mpumalanga and offers redevelopment opportunities which may lead to further value
                 extraction for Delta Linked Unitholders. The property manager who will be responsible
                 for the Karimu Portfolio has significant representation in Mpumalanga. Through the
                 acquisition of the Capital Portfolio, the Rob Alexander Portfolio and the Trifecta
                 Portfolio, Delta is bulking up in regions in which it has existing asset management and
                 property management representation.


         3.      Consideration for the Acquisitions

                 The aggregate purchase consideration for the Acquisitions is R1 004 025 000 (one
                 billion four million and twenty five thousand Rand) (the “Purchase Consideration”).

                 The Purchase Consideration excludes ancillary costs related to the Acquisitions in the
                 amount of R8 390 663 (eight million three hundred and ninety thousand six hundred
                 and sixty three Rand) (“the Acquisition Costs”).

                 Where rentals were considered to be above market, specifically on the Karimu
                 Portfolio, a top slice approach was applied on the valuations.

                 All capital expenditure requirements identified through the due diligence process have
                 been negotiated into the purchase price.

                 The Purchase Consideration will be settled through a combination of debt funding and
                 the issue of additional Delta linked units.

                 Details of each Property, including inter alia the location, sector, weighted average
                 rental per square meter, the purchase prices as well as the valuations attributed to the
                 Properties, are set out below.




                                                           
                                                                Weighted
                                                     Single                  Annualise               Acquisitio
                                                                                          Purchas
                                            GLA      or multi   average      d cap rate                n costs     Value
Properties      Location     Sector                                              (2)       e price
                                            m2       tenanted    rental                              capitalised   R’000 (3)(4)
                                                                      (1)                  R'000
                                                                per sqm            %                      R'000
                                                                   R
Capital
Portfolio
                Sunninghi
15 Simba        ll,
Road            Gauteng      Office other    1,920   Single       115.13                    33,030          202         33,232
                Sunninghi
                ll,
Leeuwkop        Gauteng      Office other   11,747   Single         98.56                  184,020          716       184,736
                Sunninghi
5 Simba         ll,
Road            Gauteng      Office other    5,375   Single       103.61                    82,950          372        83,322

Sub total                                   19,042                101.66         8.55%     300,000        1,290       301,290

Rob
Alexander
Portfolio

                Pietermar
                itzburg,
Sleepy          Kwa-Zulu
Hollow          Natal        Office other    6,360   Multi          95.57                  110,000          985       110,985

                Pietermar
                itzburg,
Capital         Kwa-Zulu     Office
Towers          Natal        government     13,846   Single         88.80                  124,000          753       124,753

                Pietermar
                itzburg,
Mayors          Kwa-Zulu     Office
Walk            Natal        government      5,507   Multi        103.87                    53,225          406        53,631

Sub total                                   25,713                 93.70         9.95%     287,225        2,144       289,369

Trifecta
Portfolio
                Kimberley
Erf 29755       , Northern   Office
Kimberley       Cape         government      4,700   Single         91.36                   47,700          277         47,977
                Kimberley
Erf 2380        , Northern   Office
Kimberley       Cape         government      5,800   Single         93.66                   53,800          298        54,098

Sub total                                   10,500                  92.63       10.50%     101,500          575       102,075

Karimu
Portfolio
Erf 184
Nelspruit -     Nelspruit,   Office
Bell Street 7   Limpopo      government       738    Single         82.86                    6,150          111          6,261
Erf 76
Nelspruit -
30 Louis
Trichardt       Nelspruit,   Office
Street          Limpopo      government      2,910   Single       128.80                    40,255          227         40,482
Erf 171 and
Erf 113
Nelspruit -
21 Bell         Nelspruit,   Office
Street          Limpopo      government      3,000   Single         91.03                   28,720          188         28,908
Erf 1327
Nelspruit -
08 Spruit       Nelspruit,   Office
Street          Limpopo      government      2,174   Single         79.99                   19,635          157         19,792
Erf 5 & 6
Vintonia -
15 - 17         Nelspruit,   Office
Cruse Circle    Limpopo      government      2,430   Single         12.39                   16,985          148         17,133
Erf 29 & 30
Vintonia Ext
2 - 4- 6        Nelspruit,   Office
Davie Street    Limpopo      government       841    Single         24.71                   13,325          135         13,460
Erf 115
Nelspruit -
11 Louis
Trichardt       Nelspruit,   Office
Street          Limpopo      government      3,102   Single         68.47                   19,970          158         20,128
Erf 4294 &
Erf 248         Nelspruit,   Office
Nelspruit - 4   Limpopo      government      4,637   Single       152.21                    86,755          385         87,140                                                                
Ehmke
Street and 9
Ferreira
Street
Erf 1770
West Acres
- 16 Old
Pretoria         Nelspruit,   Office
Road             Limpopo      government         2,504    Single         15.74                      16,640       147        16,787
Erf 240
Nelspruit - 1
Ferreira         Nelspruit,
Street           Limpopo      Office other         956    Single        129.24                      14,600       140        14,740
Erf 241
Nelspruit - 3
Ferreira         Nelspruit,
Street           Limpopo      Office other       2,224    Single        142.61                      39,520       224        39,744
Erf 175
Witrivier -
19 Danie         White
Joubert          River,       Office
Street           Limpopo      government         1,125    Single         88.38                      12,745        133       12,878
Sub total                                       26,641                   91.27         9.52%       315,300      2,153      317,453
Totals
                                                                                                         1
                                                81,896                   94.46         9.49%       004,025      6,162    1,010,187



                     Notes:

                1.    Based on the net rental income, excluding parking, storage and/or recoveries, for the 12 month period
                      from the anticipated date of transfer, assuming the property is fully let.
                2.    Annualised cap rate is based on property income and variable property expenses (which include property
                      management fees but exclude asset management fees and finance charges) over the purchase price.
                3.    No independent valuation has been performed on the Acquisitions. The value attributed to the Acquisitions
                      of R 1 010 186 899 (one billion ten million one hundred and eighty six thousand eight hundred and ninety
                      nine Rand) (“the Portfolio Value”) was derived at by Delta’s asset management company, MPI Property
                      Asset Management Proprietary Limited.
                4.    The Portfolio Value was derived after taking into account costs related to the Acquisitions to the amount of
                      R6 161 899 (six million one hundred and sixty one thousand eight hundred and ninety nine Rand), which
                      has been capitalised to the Acquisitions.

          4.         Conditions precedent

                     The Acquisitions are subject to, inter alia, the fulfilment or waiver of the following
                     suspensive conditions:

                     4.1         the satisfactory outcome of a due diligence exercise to be performed by
                                 Delta on the Acquisitions, to the extent required;

                     4.2         approval by the boards of directors and shareholders, respectively, of the
                                 vendors of the Acquisitions (“the Vendors”), to the extent required;

                     4.3         written consent by the counter-parties to the lease agreements, relating to
                                 the Acquisitions, consenting to the assignment of all of the respective
                                 Vendors’ rights and obligations in terms of the leases to Delta;

                     4.4         approval by the Competition Commission, to the extent required; and

                     4.5         written confirmation from Delta confirming that Delta has the required
                                 funding available and/or confirmation that Delta has arranged for sufficient
                                 equity on such terms and conditions as are acceptable to the respective
                                 Vendors.




                                                                        
5.   Unaudited pro forma financial effects of the Acquisitions

     The unaudited pro forma financial effects of the Acquisitions on the net asset value
     and net tangible asset value per Delta linked unit have not been disclosed as they are
     not significant.

6.   Forecast information on the Properties (“Forecasts”)

     The Forecasts, including the assumptions on which they are based and the financial
     information from which they are prepared, are the responsibility of the board of
     directors of Delta. The Forecasts have not been reviewed or reported on by the
     independent reporting accountants.

     The Forecasts presented in the tables below have been prepared in accordance with
     Delta’s accounting policies and in compliance with International Financial Reporting
     Standards.

     The Forecasts for the Capital Portfolio, Rob Alexander Portfolio and Trifecta Portfolio
     have been prepared from the Effective Date and include forecast results for the 3
     month period ending 28 February 2014 and the year ending 28 February 2015. The
     Forecasts for the Karimu Portfolio have been prepared from the Effective Date and
     include forecast results for the 2 month period ending 28 February 2014 and the year
     ending 28 February 2015.




     Summarised Forecast in respect of the Capital Portfolio:

                                                                                                Forecast           Forecast
                                                                                                3 months          12 months
                                                                                                  ending             ending
                                                                                             28 February                 28
                                                                                                    2014           February
                                                                                                     R’000             2015
                                                                                                                      R’000
           Rental income                                                                                  7,604       32,337
           Straight line rental income accrual                                                              718        1,276
           Total revenue                                                                                  8,322       33,613
           Net operating profit before finance charges                                                    6,232       26,384
           Net operating profit after finance charges                                                     3,888       17,010
           Net profit after tax                                                                             540        1,032
           Distributable earnings attributable to linked unitholders                                      3,138       15,576


     Notes:

      1.      Contracted revenue is based on existing lease agreements. Uncontracted revenue in respect of this
              portfolio amounts to 0% for both the years ending 28 February 2014 and 2015.

      2.      Net operating profit after finance charges includes asset management fees, property management
              fees and transaction costs.

      3.      Distributable income excludes any antecedent interest from the issue of new linked units.

     Summarised Forecast in respect of the Rob Alexander Portfolio:




                                                       
                                                                                           Forecast           Forecast
                                                                                           3 months          12 months
                                                                                             ending             ending
                                                                                        28 February                 28
                                                                                               2014           February
                                                                                                R’000             2015
                                                                                                                 R’000
      Rental income                                                                                  8,145       34,136
      Straight line rental income accrual                                                              529        1,279
      Total revenue                                                                                  8,674       35,415
      Net operating profit before finance charges                                                    6,879       29,415
      Net operating profit after finance charges                                                     4,261       18,946
      Net profit after tax                                                                             408        1,048
      Distributable earnings attributable to linked unitholders                                      3,695       17,490


Notes:

 1.      Contracted revenue is based on existing lease agreements. Uncontracted revenue in respect of this
         portfolio amounts to 22% and 30% for the years ending 28 February 2014 and 2015, respectively.

 2.      Net operating profit after finance charges includes asset management fees, property management
         fees and transaction costs.

 3.      Distributable income excludes any antecedent interest from the issue of new linked units.




Summarised Forecast in respect of the Trifecta Portfolio:

                                                                                           Forecast           Forecast
                                                                                           3 months          12 months
                                                                                             ending             ending
                                                                                        28 February                 28
                                                                                               2014           February
                                                                                                R’000             2015
                                                                                                                 R’000
      Rental income                                                                                  3,088       12,912
      Straight line rental income accrual                                                              670        2,121
      Total revenue                                                                                  3,758       15,033
      Net operating profit before finance charges                                                    2,971       12,619
      Net operating profit after finance charges                                                     2,168        9,409
      Net profit after tax                                                                             493        1,580
      Distributable earnings attributable to linked unitholders                                      1,483        7,215


Notes:

 1.      Contracted revenue is based on existing lease agreements. Uncontracted revenue in respect of this
         portfolio amounts to 17% and 15% for the years ending 28 February 2014 and 2015, respectively.

 2.      Net operating profit after finance charges includes asset management fees, property management
         fees and transaction costs.

 3.      Distributable income excludes any antecedent interest from the issue of new linked units.




Summarised Forecast in respect of the Karimu Portfolio:



                                                  6
                                                                                                Forecast           Forecast
                                                                                                2 months          12 months
                                                                                                  ending             ending
                                                                                             28 February                 28
                                                                                                    2014           February
                                                                                                     R’000             2015
                                                                                                                      R’000
            Rental income                                                                                 5,671       35,610
            Straight line rental income accrual                                                              17           46
            Total revenue                                                                                 5,688       35,656
            Net operating profit before finance charges                                                   4,416       30,416
            Net operating profit after finance charges                                                    2,952       21,635
            Net profit after tax                                                                             33          189
            Distributable earnings attributable to linked unitholders                                     2,906       21,373


     Notes:

       1.     Contracted revenue is based on existing lease agreements. Uncontracted revenue in respect of this
              portfolio amounts to 93% and 94% for the years ending 28 February 2014 and 2015 respectively.

       2.     Net operating profit after finance charges includes asset management fees, property management
              fees and transaction costs.

       3.     Distributable income excludes any antecedent interest from the issue of new linked units.




7.   Categorisation

     The Acquisitions are categorised as Category 2 transactions in terms of the JSE
     Limited Listings Requirements and accordingly do not require approval by Delta
     Linked Unitholders.



08 November 2013
Johannesburg




Investment bank and sponsor
Nedbank Capital




                                                       

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