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VUNANI PROPERTY INVESTMENT FUND LTD - Related party acquisition by VPIF of 2 properties from PDNA property investments proprietary limited, notice of a pr

Release Date: 05/05/2014 15:42
Code(s): VPF     PDF:  
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Related party acquisition by VPIF of 2 properties from PDNA property investments proprietary limited, notice of a pr

VUNANI PROPERTY INVESTMENT FUND LIMITED
Granted REIT status by the JSE
(Incorporated in the Republic of South Africa)
(Registration number 2005/019302/06)
JSE code: VPF
ISIN: ZAE000185872
(“VPIF” or “the Company”)


RELATED PARTY ACQUISITION BY VPIF OF 2 PROPERTIES FROM PDNA PROPERTY
INVESTMENTS PROPRIETARY LIMITED, NOTICE OF A PROPOSED CHANGE OF NAME AND
FEEDBACK ON RECENT ACQUISITIONS


RELATED PARTY ACQUISITION:


1.    INTRODUCTION
      Shareholders are advised that VPIF has entered into Sale of Rental Enterprise
      Agreements, dated 13 March 2014, and a re-instatement agreement dated 30 April
      2014 which were subject to the completion of a due diligence investigation as
      follows:
      •     between PDNA Property Investments Proprietary Limited (“PDNA”), the
            Company and the trustees of Vunani Property Investment Trust in terms of
            which the Company will acquire the rental enterprise conducted on the
            property known as 25 Scott Street, Waverley, Johannesburg (“Scott Street
            Property”)
      •     between PDNA and the Company in terms of which the Company will acquire
            the rental enterprise conducted on the property known as 5 St George’s Mall,
            Cape Town (“St George’s Mall Property”),
      collectively known as the “Naidoo Properties” or the “transaction”.


      The agreements contain warranties normal for acquisitions of this nature.


2.    INFORMATION RELATING TO THE NAIDOO PROPERTY


                                     Scott Street Property        St George’s Mall Property
      Description of the property:   A 4-storey building (two     Comprises 2 sectional
                                     of which are basement        title units located on the
                                     parking) consisting of two   1st and 2nd floors in the
                                     rectangular office wings     scheme known as 5 St
                                     joined by a central          George’s Mall.
                                    atrium.


     Tenant:                        Mott Macdonald PDNA          Mott Macdonald PDNA
                                    triple net 4 year lease      triple net 4 year lease


     Location:                      Gauteng                      Cape Town


     GLA:                           4 329 square metres          1 236 square metres


     Weighted average rental
     per square metre (triple
     net):                          R177.40                      R148.80


     Purchase price:                R107 804 895                 R21 130 434


     Independent valuation:         R107 800 000                 R21 800 000


     Valued by Mr. MRB Gibbons, an authorised Professional Valuer, registered without
     restriction in terms of section 19 of the Property Valuers Professional Act, 2000 (Act
     17 of 2000), of Mills Fitchet Magnus Penny Proprietary Limited.


     The expenses relating to the transaction are estimated to be R570 000. These
     expenses includes documentation and listing fees to the JSE, independent reporting
     accountant fees, valuer fees, legal fees, corporate advisor fees, sponsor fees,
     printing and publication fees and fees directly related to the transfer of the property
     of approximately R140 000.
     No agent’s commission is payable.


3.   RATIONALE FOR THE TRANSACTION
     VPIF was listed on the JSE Limited (“JSE”) on 11 August 2011. The main purpose of
     the listing was to provide VPIF with a platform for acquisitive growth and this
     transaction is a step towards VPIF’s stated intention to grow the portfolio by the
     acquisition of high quality properties. The acquisition will give an initial blended
     yield of 9.6%.


     The management and board of VPIF are committed to the transformation and
     empowerment objectives of South Africa and have expended considerable effort in
     addressing VPIF’s objective of having a meaningful, sustainable and commercially
     driven black economic empowerment shareholding at the listed level. This purchase
     is in part fulfilment of our strategy to have approximately 25% of VPIF shares in black
     ownership. On conclusion of the transaction, approximately 6.5% of VPIF’s shares will
     be held by a BEE shareholder. A further BEE share transaction is at an advanced stage
     and will be implemented shortly after our year-end once all relevant details and
     investors have been identified and finalised.


4.   PURCHASE CONSIDERATION
     •     Scott Street Property - R107 804 895 which will be settled via the issue of 8
           911 917 treasury shares at R9.65 (R86 million) and the allotment and issue of
           new shares in the Company to the value of R21 804 895 (“the consideration
           shares”) for the balance of the purchase price. The consideration shares will
           be issued at a price equal to the VWAP as at the last trading day of the 30-day
           period ending on the day immediately prior to the transfer date of the
           property.
     •     St George’s Mall Property - R21 130 434 which will be settled in cash via the
           Company’s debt facilities.


     The above amounts include VAT levied at the rate of 0% in terms of section 11(1)(e)
     of the VAT Act. No commission is payable.


5.   EFFECTIVE DATE
     The effective date of the transaction will be the date of registration of transfer of
     ownership of the Naidoo properties, which is expected to be early in July 2014.


6.   CONDITIONS PRECEDENT
     The transaction is conditional upon, inter alia, the following:
     •     approval by the Competition Authorities;
     •     the requisite approval of VPIF shareholders in general meeting; and
     •     the transfer of the Naidoo Properties.


7.   PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION
     The pro forma financial effects of the transaction on net asset value and net tangible
     asset value per linked unit are not significant (i.e. less than 3%) and have therefore
     not been disclosed.


8.   FORECAST INFORMATION RELATING TO THE NAIDOO PROPERTIES
     The forecast financial information relating to the Naidoo Properties for the financial
     year ending 30 June 2015 is set out below. Forecast financial information for the
     financial year ending 30 June 2014 has not been included as the Naidoo Properties
     are not expected to transfer until early July 2014. The forecast financial information
     has not been reviewed or reported on by a reporting accountant in terms of section 8
     of the Listings Requirements of the JSE and is the responsibility of the Company’s
     directors.


                                                                       Forecast for the 12
                                                                        months ending 30
                                                                                June 2015
                                                                                    R’000


     Investment Property Income                                                    16 885
     Straight-line rental adjustment                                                1 187
     Revenue                                                                       18 072
     Property expenses                                                             (4 444)
     Net operating income                                                          13 628
     Asset management fees                                                           (645)
     Operating profit                                                              12 983
     Finance costs                                                                 (8 088)
     Net profit before income tax                                                   4 895
     Income tax                                                                          -
     Net profit for the year                                                        4 895
     Distributable earnings:                                                        3 708


     Notes:
     1.    Gross income includes rental income and all tenant recoveries while Property
           expenditure includes all consumption expenditure as well as property
           management fees.
     2.    Other operating expenditure consists of asset management fees.
     3.    VPIF will raise debt to fund the transaction and therefore 100% of the debt for
           the transaction has been attributed to this transaction.


9.   CLASSIFICATION OF THE TRANSACTION
     The transaction constitutes a category 2 related party transaction in terms of
     paragraph 10.1(b)(ii) of the JSE Listings Requirements as Mr PD Naidoo, who is
     currently the independent non-executive chairman of the Company is a director and
     shareholder of the vendor, PDNA.


PROPOSED CHANGE OF NAME:
Consequent to the Sale of Business Agreement, dated 9 November 2013, entered into
between Vunani Property Asset Management Proprietary Limited and Texton Property
Investments Proprietary Limited (“Texton”) in terms of which the Asset Management
Agreement was ceded and assigned to Texton, the board has proposed to change the name
of the Company from Vunani Property Investment Fund Limited to Texton Property Fund
Limited. The proposed name of Texton Property Fund Limited has been reserved with CIPC
and approved by the JSE Limited. Further details relating to the proposed change of name
will be provided in due course.


CIRCULAR TO SHAREHOLDERS:
A circular prepared in terms of the Listings Requirements of the JSE, containing a notice of
general meeting of shareholders, will be dispatched to shareholders on or about 21 May
2014.


FEEDBACK ON RECENT ACQUISITIONS
On 17 March 2014 VPIF took transfer of a property situated at Wellington Road in Parktown
at an initial purchase yield of 10.5% and the Bryanston Gate property on 1 April 2014 at an
initial yield of 10.83%. Furthermore, the fund has concluded agreements and is awaiting the
transfer of a property valued at R53m and situated in Selby, Gauteng with a 7 year triple
net lease, tenanted by Toolquip.


SANDTON
5 May 2014


Corporate Adviser
Vunani Corporate Finance


Sponsor
Grindrod Bank Limited

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