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FORTRESS INCOME FUND LIMITED - Acquisitions of shares in Rockcastle Global Estate Company Limited

Release Date: 29/05/2014 10:00
Code(s): FFB FFA     PDF:  
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Acquisitions of shares in Rockcastle Global Estate Company Limited

FORTRESS INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2009/016487/06)
JSE share codes:       FFA      ISIN: ZAE000141313
                       FFB      ISIN: ZAE000141321
(Approved as a REIT by the JSE)
(“Fortress”)


ACQUISITIONS OF SHARES IN ROCKCASTLE GLOBAL REAL ESTATE COMPANY LIMITED


1.     THE ACQUISITIONS

       Linked unitholders are referred to the announcement released on SENS on Wednesday, 4 December 2013 (“December 2013
       announcement”), in which Fortress detailed its acquisition of shares in Rockcastle Global Real Estate Company Limited (Incorporated in the
       Republic of Mauritius with registration number 108869 C1/GBL) (“Rockcastle”). Subsequent to the December 2013 announcement, Fortress
       has acquired 13 000 000 Rockcastle shares in the open market for an aggregate purchase price of R180.6 million (the “additional share
       acquisition”) and has agreed to subscribe for 34 244 284 shares in Rockcastle in terms of a placement of 175 500 000 new shares undertaken
       by Rockcastle (the “subscription”) which placement closed on Wednesday, 21 May 2014 (the “placement”).

       Under the placement, Fortress is subscribing for the new shares through Rockcastle’s South African share register at a subscription price of
       R14.60 per share, equating to an aggregate subscription price of R500 million. The new Rockcastle shares are expected to be issued, listed
       and traded on the Alternative Exchange of the JSE Limited (“JSE”) and the Stock Exchange of Mauritius Limited (“SEM”) from Friday, 30
       May 2014. The Rockcastle shares will rank for dividends in respect of the period 1 January 2014 to 30 June 2014.

       The additional share acquisition was funded through Fortress’ available debt facilities and the subscription will be funded in the same
       manner.

       Following the subscription, Fortress will hold 154 745 000 shares in Rockcastle, being 21.93% of Rockcastle’s shares in issue.

2.     CATEGORISATION

       The additional share acquisition of R180.6 million, together with the subscription of R500 million constitutes a category 2 transaction in
       terms of the JSE Listings Requirements and accordingly does not require approval by linked unitholders.

3.     RATIONALE FOR THE ACQUISITIONS

       The additional investment in Rockcastle is in line with Fortress’ strategy to increase its offshore indirect property exposure.

       Rockcastle has a primary listing on the SEM and a secondary listing on the JSE. The additional capital raised by Rockcastle through the
       placement will be used by it to invest in listed real estate securities and/or direct property in selected jurisdictions. Further information on
       Rockcastle and its activities is available at www.rockcastleglobalre.mu.

4.     FINANCIAL EFFECTS

       The pro forma financial effects, set out in the table below, have been prepared for illustrative purposes only, to provide information on how
       the additional share acquisition and the subscription may have impacted on the historical financial results of Fortress, based on the pro forma
       financial information for the six month period ended 31 December 2013 as disclosed in the rights offer circular issued by Fortress on
       Tuesday, 20 May 2014. Due to its nature, the pro forma financial effects may not fairly present Fortress’ financial position, changes in equity,
       results of operations or cash flows after the subscription. The pro forma financial effects are the responsibility of the directors of Fortress and
       have not been reviewed or reported on by Fortress’ auditors or reporting accountants.

       The pro forma financial effects have been prepared in accordance with Fortress’ accounting policies and in compliance with IFRS.

       The pro forma financial effects of the additional share acquisition and the subscription on Fortress’ basic and headline earnings per A share/A
       linked unit and per B share/B linked unit, distribution per A linked unit and net asset value per A linked unit and per B linked unit, based on
       the pro forma financial information disclosed in the rights offer circular issued by Fortress on Tuesday, 20 May 2014 (the “rights offer
       circular”), are not significant and accordingly have not been disclosed.

                                                                                                                      Pro forma          Percentage
                                                                                                        Before             after            change
                                                                                                        (cents)          (cents)               (%)
         Distribution per B linked unit                                                                  20.45            18.96               (7.3)

       Notes and assumptions:
       1.   The amount set out in the “Before” column has been extracted, without adjustment, from the pro forma financial information for the six
            month period ended 31 December 2013 as disclosed in the rights offer circular issued by Fortress on Tuesday, 20 May 2014.
       2.   Fortress acquired 13 000 000 Rockcastle shares for an aggregate purchase price of R180.6 million in terms of the additional share
            acquisition referred to above, and subscribed for 34 244 284 Rockcastle shares for an aggregate subscription price of R500 million, in
            terms of the subscription referred to above.
       3.   The additional share acquisition and the subscription are assumed to have been implemented on 1 July 2013 for the statement of
            comprehensive income purposes.
       4.   The aggregate investment of R680.6 million is assumed to have been funded through third party interest-bearing debt at a historic
            weighted average cost of debt of 8.07% in respect of the six months ended 31 December 2013.
       5.   A dividend receivable of R21.48 million was recognised based on Rockcastle’s dividend for the six months ended 31 December 2013
            of 45.4619 cents per share.
       6.   All statement of comprehensive income adjustments have a continuing effect.
       7.   Fortress does not have any dilutionary instruments in issue.

29 May 2014


Corporate advisor and sponsor
Java Capital

Date: 29/05/2014 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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