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FOUNTAINHEAD PROPERTY TRUST - Disposal of 41% interest in Westgate Shopping Centre to Pareto Limited and renewal of cautionary

Release Date: 18/11/2013 17:42
Code(s): FPT     PDF:  
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Disposal of 41% interest in Westgate Shopping Centre to Pareto Limited and renewal of cautionary

FOUNTAINHEAD PROPERTY TRUST
(A Collective Investment Scheme in property
registered in terms of the Collective Investment
Schemes Control Act, No.45 of 2002 and
managed by Fountainhead Property Trust Management Limited)
(Registration number 1983/003324/06)
JSE share code: FPT       ISIN: ZAE000097416
(Approved as a REIT by the JSE)
(“Fountainhead”)


DISPOSAL OF 41% INTEREST IN WESTGATE SHOPPING CENTRE TO PARETO LIMITED AND RENEWAL OF CAUTIONARY

1.   INTRODUCTION AND RATIONALE

     Fountainhead unitholders are advised that Fountainhead has accepted an offer to dispose of its 41.3176%
     undivided ownership interest in Westgate Shopping Centre (the “disposal”) to Pareto Limited (“Pareto”).

     The disposal is in line with Fountainhead’s strategy to reconsider its investment in certain co-owned
     assets and to use the proceeds of such disposals to reduce borrowings in the short-term, and in the
     medium term, apply the capital towards Fountainhead’s development pipeline, which exceeds R1 billion.

2.   TERMS OF THE DISPOSAL

     Fountainhead has, subject to the fulfilment of the conditions set out below, accepted a binding offer to
     dispose of its undivided ownership interest in Westgate Shopping Centre together with an undivided share
     in the related immovable property (the “property”) for an amount of R700 000 000 (the “purchase
     price”) with effect from the date of registration of transfer of the property into Pareto’s name (the
     “transfer date”).

     The purchase price shall be discharged in cash on the transfer date.

     In terms of the existing co-owners agreement in respect of Westgate Shopping Centre, Fountainhead’s
     fellow co-owners (being Pareto in respect of 56.1824% and a minority co-owner in respect of 2.5%) in
     respect of the Westgate Shopping Centre have a pre-emptive right to acquire their proportionate share of
     the 41.3176% undivided ownership interest from Fountainhead. The sum of the purchase price will have
     a corresponding downwards adjustment in the event that the minority co-owner wishes to follow its pre-
     emptive rights under the relevant co-owners agreement, and acquire its proportionate share of the
     41.3176% undivided ownership interest (namely 1.76% of Fountainhead’s undivided ownership interest
     with Pareto being entitled to the balance) from Fountainhead on the same terms and conditions as the
     disposal.

     In the event that the transfer date occurs after 1 January 2014, the purchase price will escalate at a rate of
     4% per annum, calculated from 1 January 2014 to the transfer date.

     The purchase price will be used by Fountainhead to reduce borrowings in the short-term, and in the
     medium term, apply the capital towards Fountainhead’s development pipeline.

     The disposal remains subject to the following conditions precedent:

     -     the conclusion of a definitive sale agreement; and

     -     the disposal being approved by the board of directors of Pareto on or before 29 November 2013;

     -     the disposal being approved by the trustee of the Fountainhead on or before 29 November 2013; and

     -     the disposal being approved by the Competition Authorities.

     Fountainhead has irrevocably undertaken to only enter into negotiations and conclude an agreement of
     sale in respect of the disposal exclusively with Pareto unless and until the earlier of:

     -     the failure by either of the parties to receive any of the approvals contemplated above; and

     -     the conditions to the definitive sale agreement not being fulfilled or not being waived, as the case
           may be.

3.   THE SOUTHGATE DISPOSALS

     On 7 August 2013, Fountainhead accepted an offer and is in the process of entering into an agreement
     with Pareto to dispose of its 19.0143331% undivided ownership interest in Southgate Value Mart together
     with its 15.973124% undivided ownership interest in Southgate Mall to Pareto for a purchase
     consideration of R244 740 000 (the “Southgate disposals”). The Southgate disposals being less than 5%
     of Fountainhead’s market capitalisation at the relevant time was not regarded as a categorisable
     transaction under the JSE Listings Requirements and accordingly, no announcement was required to be
     published.

     As the Southgate disposals was a transaction entered into by Fountainhead with the same party applicable
     to the disposal, namely Pareto, the Southgate disposals require to be aggregated with the disposal in terms
     of the JSE Listings Requirements, such aggregation however has no effect on the categorisation of the
     disposal as a whole, which remains a Category 2 transaction under the JSE Listings Requirements.

4.   PROPERTY SPECIFIC INFORMATION

     The property specific information required in terms of the JSE Listings Requirements in relation to the
     disposal (including the Southgate disposals) including property name and address, geographical location,
     rentable area, and weighted average rental per square metre is set out below.

     Westgate Shopping Centre

         Property name and address           Westgate Shopping Centre, 120 Ontdekkers Road, Roodepoort
         Geographical location               Gauteng
         Rental Area (m2)                    108 996
         Weighted Average rental (per m2)    R147
         Sector                              Retail

     Southgate Mall

         Property name and address           Southgate Mall, corner Columbine Avenue and Rifle Range Road,
                                             Mondeor, Johannesburg
         Geographical location               Gauteng
         Rental Area (m2)                    69 750
         Weighted Average rental (per m2)    R167
         Sector                              Retail

     Southgate Value Mart

         Property name and address           Southgate Value Mart, corner Columbine Avenue and Rifle Range
                                             Road, Mondeor, Johannesburg
         Geographical location               Gauteng
         Rental Area (m2)                    19 206
         Weighted Average rental (per m2)    R88
         Sector                              Retail

     No independent valuation has been carried out in respect of the property and the board of Fountainhead is
     of the view that the purchase price of R700 million represents the value of Fountainhead’s interest in the
     property.

     Additionally, no independent valuations have been carried out in respect of Fountainhead’s interests in
     each of Southgate Mall and Southgate Value Mart and the board of Fountainhead is of the view that the
     purchase price of R217 930 000 attributable to Fountainhead’s interest in Southgate Mall and the
     purchase price of R26 810 000 attributable to Fountainhead’s interest in Southgate Value Mart represent
     the value of Fountainhead’s interest in such properties.

5.   CATEGORISATION OF THE DISPOSAL

     The disposal, aggregated with the Southgate disposals, is classified as a Category 2 transaction in terms of
     the JSE Listings Requirements. Accordingly it is not subject to approval by Fountainhead unitholders.

6.   FINANCIAL EFFECTS AND RENEWAL OF CAUTIONARY

     The financial effects of the disposal, aggregated with the Southgate disposals, are still in the process of
     being finalised and will be published in due course. Fountainhead unitholders are advised to continue to
     exercise caution when dealing in their linked units until the financial effects of the disposal, aggregated
     with the Southgate disposals, are announced.


18 November 2013

Sponsor

Java Capital

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