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Acquisition of the Macsteel property portfolio and update on 90 Grayston drive
REDEFINE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1999/018591/06)
JSE share code: RDF ISIN: ZAE000143178
(Approved as a REIT by the JSE)
(“Redefine” or the “company”)
ACQUISITION OF THE MACSTEEL PROPERTY PORTFOLIO AND UPDATE ON 90 GRAYSTON DRIVE
A. ACQUISITION OF THE MACSTEEL PROPERTY PORTFOLIO
1. INTRODUCTION
Redefine has concluded an agreement (the “portfolio sale agreement”) with Macsteel Coreprop
Proprietary Limited (“Macsteel Coreprop”), Macsteel Genprop Proprietary Limited (“Macsteel
Genprop”) (collectively, the “sellers” or “Macsteel”) and Macsteel Service Centres SA Proprietary
Limited (“MSCSA”) for the acquisition of the rental enterprises conducted in respect of and including
the properties and buildings of the property portfolio of the sellers (collectively, the “Macsteel
property portfolio”) (the “Macsteel acquisition” or “acquisition”).
2. RATIONALE
The Macsteel acquisition will transform Redefine’s industrial property portfolio, increasing it from
approximately R5 billion to R7.7 billion, lifting the weighted average lease period from 2.5 years to
5.5 years and will bolster the defensive component of Redefine’s property portfolio. In addition, cost
ratios will similarly benefit from this significant single tenant triple net lease.
3. DETAILS OF THE MACSTEEL PROPERTY PORTFOLIO
Details of the properties in the Macsteel property portfolio, including property name and address,
geographical location, sector, gross lettable area (“GLA”), weighted average rental per square metre
and the purchase considerations attributed to the properties, are as follows:
GLA (m2)
Rental Purchase
per m2 consideration
Property name Physical address Province Office Industrial Other Total and valuation
1 Macsteel Lilianton facility 12 209 60 452 410 73 071 R 46.98 R 473 305 051
Macsteel Tube & Pipe Esson Road Lilianton Gauteng 2 468 41 462 410 44 340
7 Brook Road Lilianton
Macsteel Head Office Boksburg Gauteng 9 741 8 990 18 731
Macsteel Tube & Pipe Gild Road Lilianton Gauteng
Macsteel Tube & Pipe Gild Road Lilianton Gauteng 10000 10 000
Macsteel Tube & Pipe Brook Road Gauteng
2 Macsteel Cape Town
3 929 34 411 0 38 340 R 34.07 R 180 096 242
Macsteel Trading Cape Steelpark, Modderdam
Western Cape
Town Road, Bellville 2729 25411 28140
Macsteel VRN Cape Steelpark, Modderdam
Western Cape
Town Road, Bellville 1200 9000 10200
GLA (m2)
Rental Purchase
per m2 consideration
Property name Physical address Province Office Industrial Other Total and valuation
3 Macsteel Coil Processing
6 906 45 067 913 52 886 R 36.37 R 265 221 926
Macsteel Coil Processing 243 Dyson Road
Wadeville Gauteng 5046 28144 193 33383
Macsteel Coil Processing 243 Dyson Road
Wadeville Gauteng 300 2500 2800
Macsteel Coil Processing 250 Dyson Road
Wadeville Gauteng 8216 301 8517
Macsteel Coil Processing
Truck Staging (MCP) Gauteng 0
Macsteel Exports 252 Dyson Road,
Wadeville Gauteng 1560 6207 419 8186
4 Macsteel VRN Roodekop
5579 52052 14 57645 R 35.18 R 279 621 572
Macsteel VRN
17 Berry Road, Roodekop Gauteng 3449 30096 33545
Macsteel VRN Stainless 10 Berry Road,
Roodekop, Germiston Gauteng 1000 13272 14 14286
Macsteel Flanges (VRN Berry Road, Roodekop,
Reef) Germiston Gauteng 580 4400 4980
Macsteel VRN Reef Berry Road, Roodekop,
Germiston Gauteng 550 4284 4834
5 Macsteel Trading Germiston South
3779 51669 1047 56495 R 30.49 R 237 499 185
Macsteel Trading Cnr Crompton & Simon
Germiston South Bekker Str. Germiston
South Gauteng 2177 37407 258 39842
Macsteel Trading Cnr Simon Bekker &
Germiston South Crompton Streets,
Germiston South Gauteng 862 5 990 789 7 641
Macsteel Trading Tielman Roos Property
Germiston South (Next to Trading H/O) Gauteng 370 4 136 4 506
Macsteel Trading No 1 Tielman Roos
Germiston South Corner Property Gauteng 370 4 136 4 506
6 Macsteel Roofing Tedstone Avenue,
Wadeville Gauteng 1 504 21 418 807 23 729 R 33.96 R 111 097 954
7 Macsteel Roofing Cnr Helium and Molecule
Roads, Vulcania Gauteng 1 658 12 475 0 14 133 R 33.00 R 64 298 747
8 Macsteel Trading Wadeville Road
Wadeville Wadeville Gauteng 2 602 19 041 2 485 24 128 R 34.35 R 114 268 520
9 Macsteel Special Steels Seymour Road, Industrial
Sites, Meyerton Gauteng 1 323 10 316 54 11 693 R 21.75 R 35 062 919
10 Macsteel Special Steels
Lea Road, Dunswart Gauteng 1 700 17 613 21 19 334 R 34.43 R 91 783 646
11 Macsteel Trading 6 Gutsche Street,
Bloemfontein Hamilton, Bloemfontein Free State 505 4269 173 4947 R 54.51 R 37 176 518
12 Macsteel Trading 46 Jeffels Road, Kwa-Zulu
Durban Prospecton Natal 1 890 19 542 108 21 540 R 40.96 R 121 641 693
13 Macsteel VRN 10 Wiltshire Rd, Mariann Kwa-Zulu
Pinetown Ind. Estates, Pinetown Natal 523 6994 0 7517 R 43.70 R 45 289 855
14 Macsteel Trading 3 Teak Avenue,
Klerksdorp Klerkindustria, North West
Klerksdorp Province 5 667 4 860 4 736 15 263 R 33.57 R 70 641 977
15 Macsteel Trading
Nelspruit 5 Bosch Street, Nelspruit Mpumalanga 850 2355 2057 5262 R 54.15 R 39 282 413
16 Macsteel Trading Cnr Rene & Daan de Wet
Pretoria Nel Drives, Wintersnest,
Arcadia Gauteng 393 7293 12 7698 R 24.33 R 25 819 712
17 Macsteel Trading 9 Brons Street Zanniaville North West
Rustenburg Rustenburg Province 1 380 6 480 0 7 860 R 43.75 R 47 407 972
18 Macsteel Trading 4 Van der Bijl Street,
Witbank Meyersbank, Witbank Mpumalanga 476 4208 334 5018 R 86.31 R 59 709 722
19 Macsteel Tube & Pipe -
Usufruct Commet ERPM Gauteng 7052 40270 21500 68822 R 26.83 R 254 581 629
20 Macsteel Roofing - 28 Stevenson Road,
Queenstown Queendustria,
Queenstown Eastern Cape 462 4212 0 4674 R 20.01 R 12 897 568
21 Macsteel Trading 2-4 Hendrik van Eck
Kimberley Road, Kimdustria,
Kimberley Northern Cape 999 5823 0 6822 R 27.58 R 25 944 637
22 Macsteel Trading 13A Edison Street,
Newcastle Riverside Industrial Kwa-Zulu
Township, Newcastle Natal 157 1903 0 2060 R 15.28 R 4 340 132
23 Macsteel Trading 12 2nd Street,
Welkom Voorspoed, Welkom Free State 717 4527 306 5550 R 14.99 R 11 468 754
24 Macsteel VRN 16 Chromium Road, North West
Klerksdorp Uraniaville, Klerksdorp Province 275 2045 50 2370 R 28.62 R 9 352 182
25 Macsteel VRN Richards 23, 25 Brass Link, Alton, Kwa-Zulu
Bay Richards Bay Natal 436 3516 165 4117 R 58.03 R 32 941 569
26 Macsteel VRN
90 Dawes Street, North West 427 3068 1229 4724 R 31.53 R 20 535 962
GLA (m2)
Rental Purchase
per m2 consideration
Property name Physical address Province Office Industrial Other Total and valuation
Rustenburg Rustenburg Industries, Province
Rustenburg
27 Macsteel VRN Vaal 66 Michelin Street, NW7,
Vanderbijlpark Gauteng 1131 5655 157 6943 R 21.18 R 20 273 264
28 Macsteel VRN Welkom 9th Street, Industrial Area,
Welkom Free State 656 5379 0 6035 R 10.14 R 8 438 679
Total 65 185 456 913 36 578 558 676 R35.05 R2 700 000 000
4. TERMS OF THE ACQUISITION
4.1. In terms of the portfolio sale agreement, Redefine will purchase the Macsteel property
portfolio from the sellers for a purchase consideration of R2.7 billion (the “purchase
consideration”).
4.2. The purchase consideration will be paid in cash to the sellers on the first day of the month
following the month during which the last of the conditions precedent is fulfilled or waived (the
“effective date”).
4.3. From the effective date the holding company of the sellers, MSCSA, will lease the Macsteel
property portfolio from Redefine and Redefine will bear all the risks and reward and receive
all rentals paid in respect of the Macsteel property portfolio.
4.4. The salient terms of the lease agreement between Redefine and MSCSA (the “lease”) are as
follows:
4.4.1. The lease will continue for a period of 12 years after the effective date (the “initial
lease period”).
4.4.2. MSCSA will have the right to extend the lease for a further period of five years
commencing on the expiry of the initial lease period.
4.4.3. The rental payable in respect of each property in the Macsteel property portfolio
will escalate annually at a rate of 8%.
4.4.4. The lease will be a fully repairing, operating, maintaining and insuring lease.
4.4.5. MSCSA will have the right to repurchase the Macsteel property portfolio from
Redefine and terminate the lease with effect from the expiry of the initial lease
period.
4.5. The portfolio sale agreement provides for warranties and indemnities that are normal for an
acquisition of this nature, and for Macsteel to undertake certain remedial work in relation to
the Macsteel property portfolio, at its cost.
5. CONDITIONS PRECEDENT
The portfolio sale agreement is subject to the fulfilment of the following conditions precedent:
5.1. by not later than 17h00 seven business days after the signature date (being Friday, 8 August
2014) (the “signature date”), Redefine confirming in writing that it is satisfied with its due
diligence investigation in respect of the Macsteel property portfolio and the sellers, in its sole
discretion;
5.2. by not later than 17h00 seven business days after the signature date, the sellers and MSCSA
furnishing Redefine with the requisite written third-party confirmations and consents in
relation to the cancellation of existing mortgage bonds in respect of the Macsteel property
portfolio, in a form acceptable to Redefine;
5.3. by not later than 17h00 seven business days after the signature date, the sellers signing and
delivering to the company such special powers of attorney and other documents which the
company or the appointed conveyancers may require the sellers to sign in order to register
transfer of all the properties in the Macsteel property portfolio and to register certain mortgage
bonds in favour of Redefine, all in a form acceptable to Redefine;
5.4. by no later than 17h00 on the 30 August 2014, Redefine and MSCSA agreeing in writing, to
the satisfaction of Redefine, on measures to mitigate the anticipated risks to Redefine relating
to the fact that, as at the effective date, Macsteel Genprop is not expected to be the registered
owner of, or the holder of a registered usufruct in respect of, the "ERPM property", which
forms part of the Macsteel property portfolio;
5.5. by not later than 17h00 on the 30 August 2014, Redefine and MSCSA finally reviewing the
contents of the Macsteel property portfolio schedule attached to the portfolio sale agreement
for accuracy and completeness, and have either confirmed to each other in writing that they are
satisfied therewith or have by written agreement substituted such annexure;
5.6. by not later than 17h00 on 30 August 2014, the board of directors of MSCSA approving the
acquisition and the acquisition documents comprising, inter alia, the portfolio sale agreement
and the lease (the “acquisition documents”);
5.7. by not later than 17h00 30 days after the signature date, MSCSA, as the sole shareholder of
each seller passing various shareholder resolutions as required under the acquisition documents
and the Companies Act, in connection with the acquisition and the acquisition documents;
5.8. by not later than 17h00 30 days after the signature date, Redefine and MSCSA entering into
the lease and that the lease has become unconditional in accordance with its terms;
5.9. by not later than 17h00 45 days after the signature date, various security documents and other
acquisition documents envisaged in the portfolio sale agreement, and which are ancillary to the
portfolio sale agreement, being entered into or adopted, as the case may be, and becoming
unconditional in accordance with their terms;
5.10. by not later than 17h00 45 days after the signature date, any third parties who have any leases,
rights of occupation, options, rights of first refusal or similar rights in respect of any of the
properties forming part of the Macsteel property portfolio providing in writing such consents
or waivers as may be required in connection with the implementation of all the transactions
contemplated in the portfolio sale agreement; and
5.11. by not later than 17h00 120 days after the signature date, the acquisition being approved by the
Competition Authorities in terms of the Competition Act, No 89 of 1998, as evidenced by the
issue of a merger clearance certificate.
6. VALUATION
The board of directors of Redefine is satisfied that the aggregate value attributed to the Macsteel
property portfolio is in line with the aggregate purchase consideration being paid by the company and
the individual values attributed to each property in the Macsteel property portfolio are in line with the
individual purchase considerations. The directors of the company are not independent and are not
registered as professional valuers or as professional associate valuers in terms of the Property Valuers
Profession Act, No 47 of 2000.
7. FINANCIAL EFFECTS
Set out below are the forecast revenue, operating profit, net profit after taxation and distributable
earnings of the Macsteel property portfolio (“the Macsteel forecasts”) for the 10 months ending 31
August 2015 and the year ending 31 August 2016 (the “forecast periods”). The Macsteel forecasts
have been prepared on the assumption that the acquisition will be implemented on 1 November 2014.
The Macsteel forecasts, including the assumptions on which they are based and the financial
information from which they are prepared, are the responsibility of the directors of Redefine. The
Macsteel forecasts have not been reviewed or reported on by the independent reporting accountants or
external auditors.
The Macsteel forecasts presented in the table below have been prepared in accordance with the
company’s accounting policies and in compliance with IFRS.
10 months ending Year ending
31 August 2015 31 August 2016
R’000 R’000
Contractual rental and tenant recoveries 195 833 250 666
Straight-line of lease income adjustment 113 863 120 969
Rental revenue 309 696 371 635
Net operating income* 309 696 371 635
Net profit after taxation* nil nil
Distributable earnings 195 833 250 666
*Includes the effects of straight-lining rental income.
The Macsteel forecasts incorporate, inter alia, the following material assumptions:
1. Contracted revenue is based on a valid lease agreement.
2. Currently there is no vacant space in the Macsteel property portfolio and no vacant space is
assumed to arise during the forecast periods.
3. The entire purchase consideration is assumed to be funded through the proceeds from an equity
capital raise.
4. No fair value adjustment has been provided for in respect of the 10 months ending 31 August
2015 or the year ending 31 August 2016.
8. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
The unaudited pro forma financial effects of the acquisition on Redefine’s net asset value and tangible
net asset value per share, based on the unaudited consolidated statement of financial position as at 28
February 2014 as published on SENS on 8 May 2014, are not significant and have not been presented.
9. CATEGORISATION
The Macsteel acquisition is a category 2 transaction in terms of the JSE Listings Requirements and
accordingly does not require approval by linked unitholders.
B. UPDATE ON 90 GRAYSTON DRIVE
Redefine has significantly de-risked its office development at 90 Grayston Drive through the
conclusion of a 10 year lease with IBM South Africa for approximately 10 300 m 2 and the letting of a
further 1 500 m2 to various tenants taking the confirmed occupancy level to approximately 66%.
The conclusion of the leases are not categorisable in terms of the JSE Listings Requirements. The
information provided in this paragraph is for information purposes only.
12 August 2014
Corporate advisor and sponsor to Redefine
Java Capital
Legal advisor to Redefine
Cliffe Dekker Hofmeyr
Date: 12/08/2014 02:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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