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DELTA PROPERTY FUND LIMITED - The acquisition of OMC Durban and the Marine and Cautionary Announcement

Release Date: 22/04/2014 10:00
Code(s): DLT     PDF:  
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The acquisition of OMC Durban and the Marine and Cautionary Announcement

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 OMC DURBAN AND THE
MARINE AND CAUTIONARY ANNOUNCEMENT

1.   Introduction

     Holders   of    Delta   linked    units (“Delta   Linked
     Unitholders”) are advised that Delta has concluded an
     agreement for the acquisition of the letting enterprises
     and properties commonly known as:
     -   OMC Durban, comprising Old Mutual Centre, Westguard
         House, 300 Smith Street, and the 400 bay carpark
         situated on the former Gardiner House/Mutual Building
         Sites (“OMC Durban”); and
     -   The Marine and The Marine Parking (“The Marine”);
     (collectively, “the Properties”) from Old Mutual Life
     Assurance Company (South Africa) Limited (“the Seller” or
     “OMLACSA”) (collectively, “the Acquisitions”).

2.   Rationale for the Acquisitions

     The    Acquisitions    present    attractive    investment
     opportunities to Delta Linked Unitholders as:
     -   the Properties are well-established and tenanted with
         low-risk tenants;
     -   OMC Durban is underpinned by a rental guarantee from
         the Seller for a period of two years (“Rental
         Guarantee”);
     -   vacancies have been excluded in determining the
         purchase consideration and will accordingly provide
         further upside on re-letting; and
     -   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.

3.   Effective date of the Acquisitions

     The effective date of the Acquisitions will be the date
     of registration of transfer of the Properties into the
     name of Delta, which is expected to be during September
     2014 (“the Effective Date”).
4.   Purchase Consideration

     Pursuant to the due diligence investigations process,
     Delta has identified vacancies within the Properties,
     which have been quantified as follows:
     -    R10 000 000   (ten   million   Rand) in respect of   OMC
          Durban; and
     -    R18 600 000 (eighteen million six hundred thousand
          Rand) in respect of The Marine;
     (collectively, “the Vacancy Adjustment”).
     The aggregate purchase consideration for the Acquisitions
     (net of the Vacancy Adjustment) is R487 200 000 (four
     hundred and eighty seven million two hundred thousand
     Rand) (“the Purchase Consideration”) comprising:
     ?    R291 000 000 (two hundred and ninety one million Rand)
          in respect of OMC Durban; and
     ?    R196 200 000 (one hundred and ninety six million two
          hundred thousand Rand) in respect of The Marine.
     The Purchase Consideration excludes ancillary costs
     related to the Acquisitions in the amount of R3 350
     000(three million three hundred and fifty thousand Rand).
     The Purchase Consideration will be settled in cash upon
     registration of transfer of the Properties into the name
     of Delta.

5.   Rental Guarantee

     The Seller guarantees Delta gross rental income in the
     sum of R10 000 000 (ten million Rand) for the mothballed
     premises in the building known as 300 Smith Street, for
     the period from the transfer date until 31 December 2016,
     payable upon transfer into Delta’s name.

6.   Conditions precedent

     The Acquisitions are subject to, inter alia, the
     fulfilment  or  waiver of  the  following suspensive
     conditions:
     a.     Delta obtaining all regulatory approval required, by
            no later than 30 May 2014;
     b.     Delta providing written confirmation that adequate
            funding   has  been   secured  on   such  terms and
            conditions as are acceptable to the Seller;
                    c.   the board of Delta providing written unconditional
                         approval of the Acquisitions, by no later than 30
                         May 2014; and
                    d.   the relevant Competition authorities unconditionally
                         approving the Acquisitions or subject to such
                         conditions acceptable to the Seller and Delta.

          7.        Specific information on the Properties

                    Details of the Acquisitions, including inter alia, the
                    location, sector, weighted average rental per square
                    meter, the Purchase Consideration as well as the
                    valuation attributed to the Acquisitions, are set out
                    below.

Vendor     Property        Sector     Gross      Single     Weighted   Annualised   Purchase   Value
                                                                                               (3) (4)
           description                lettable   or multi   average    property     price Rm
           / location                 area m2    tenanted   gross      yield (2)                Rm
                                                            rental     %
                                                            R/m²(1)

OMLACSA    OMC /            Offices     44 668    Multi       Retail       11            291       305
           KwaZulu                                              – 68
           Natal                                              Office
                                                                –290
OMLACSA    OMC /            Offices     24 517    Multi          163       11            196       225
           KwaZulu
           Natal
TOTAL                                                                                    487       530

          Notes:
               1)        Based on the net rental income, including parking,
                         storage and/or recoveries, for the 12 month period
                         from the anticipated date of transfer excluding all
                         vacant areas.
               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
                         Consideration.
               3)        No independent valuation has been performed on the
                         Acquisitions. The valuations attributed to the
                         Acquisitions of R530 000 000 000 (five hundred and
                         thirty million Rand) (“the Value”) was derived at by
                         Delta’s asset management company, MPI Property Asset
                         Management Proprietary Limited.
               4)        The Value was derived after taking into account
                         costs related to the Acquisitions in the amount of
                         R3 350 000(three million three hundred and fifty
                thousand Rand   which   has   been   capitalised   to   the
                Acquisitions.

    8.    Categorisation of the Acquisitions

          The Acquisitions constitute a Category 2 transaction in
          terms of the JSE Listings Requirements and accordingly do
          not require the approval of Delta Linked Unitholders.

    9.    Financial effects

          The financial effects of the Acquisitions, as required in
          terms of the JSE Listings Requirements, are in the
          process of being finalised and will be announced in due
          course.


    10.   Cautionary

          Delta Linked Unitholders are advised to exercise caution
          in dealing in their linked units until the financial
          effects of the Acquisitions are announced.



22 April 2014

Johannesburg

Investment bank and sponsor
Nedbank Capital

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