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Nondwengu Shopping Centre Acquisition expanded to include additional property
Fairvest Property Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/005011/06)
Linked unit code: FVT
ISIN: ZAE000034658
(“Fairvest” or “the Company”)
NONDWENGU SHOPPING CENTRE ACQUISITION EXPANDED TO INCLUDE
ADDITIONAL PROPERTY
1. INTRODUCTION
1.1. Linked unitholders are referred to the Company’s SENS
announcement on 26 June 2014, advising them that the Company
had entered into an agreement (“Sale Agreement”) with
Sporting Affair Investment 40 Proprietary Limited (“the
Seller”) to acquire, as a going concern, the rental
enterprise operated by the Seller in respect of properties
situated at Erf 475 Ulundi BA, Ulundi, KwaZulu-Natal (“the
First Property”), commonly known as Nondwengu Shopping
Centre, by means the cession and delegation of the notarial
lease held by the Seller (“Notarial Lease”) over the First
Property.
1.2. Linked unitholders are advised that the Company and the
Seller have concluded an addendum to the Sale Agreement
(“Addendum”), in terms of which the sale is expanded to
include a further property, in addition to the First
Property referred to above. Further particulars regarding
this additional property, known as the Ezulwini Royal
Shopping Centre, (“the Second Property”) appear in paragraph
5 below.
1.3. The First Property and the Second Property are hereafter
collectively referred to as “the Properties”, while the
acquisition of the Properties is referred to as “the
Acquisition” and the “Rental Enterprise” refers to the
rental enterprise conducted in respect of both of the
Properties.
2. RATIONALE FOR THE ACQUISITION
The Acquisition is consistent with the Company’s growth
strategy whereby the Company will focus on acquiring retail
assets with a weighting in favour of non-metropolitan areas
and lower LSM sectors.
3. EFFECTIVE DATE
The effective date for the Acquisition shall be the date of
registration of the deed of assignment for the First Property
and of the registration of the transfer of the Second Property
at the relevant Deeds Office, which, subject to fulfilment of
the conditions precedent, is expected to occur on or about 1
November 2014.
4. PURCHASE CONSIDERATION
4.1. The purchase consideration for the Acquisition amounts to
R72 500 000 (seventy-two million five hundred thousand
Rand), which includes VAT at the rate of 0%, payable in cash
against registration, at the applicable Deeds Office, of the
deed of assignment for the First Property and of the
transfer of the Second Property (“Purchase Consideration”).
4.2. The Purchase Consideration is allocated in total to the
Second Property and to the Notarial Lease over the First
Property and as a portfolio purchase price.
4.3. The Company will fund the Purchase Consideration through
debt and/or equity funding.
5. THE PROPERTIES
The details of the Properties are as follows:
Property Name Geographical Sector GLA Average
and Address Location (m2) Gross
Rental/
m2
(R/m2)
Erf 475 Nondwengu Retail 3,966 90.0
Ulundi BA, Shopping Centre,
Ulundi Princess Magogo
Entity, Street, Ulundi
Kwazulu-Natal BA, Kwazulu-Natal
Erfs 458, Eluzwini Royal Retail 4,543 69.44
459, 460 and Shopping Centre,
461, Ulundi Princess Magogo
BA, Ulundi Street,Ulundi BA,
Entity, Kwazulu-Natal
Kwazulu-Natal
Notes:
a) The Purchase Consideration for the Properties is R72.5 million,
while the approximate Purchase Consideration per GLA (R/m2) is
R8,520.
6. PROPERTY SPECIFIC INFORMATION
Details regarding the Acquisition, as at the expected
effective date, are set out below:
Property Name and Address Average Lease Vacancy
Escalation Duration % by
(years) GLA
Erf 475 Ulundi BA, Ulundi 7.0% 4.8 0%
Entity, Kwazulu-Natal
Erfs 458, 459, 460 and 461, 7.0% 4.9 0%
Ulundi BA, Ulundi Entity,
Kwazulu-Natal
Notes:
a) The purchase yield attributable to Linked Unitholders is
10.2%
b) The costs associated with the acquisition of the
Properties are estimated at R1,087,500.
c) The costs of the Properties are considered to be their
fair market value, as determined by the directors of the
Company. 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. CONDITIONS PRECEDENT
The Acquisition is subject the following conditions precedent,
as amended by the Addendum:
7.1. by no later than 21 (twenty-one) days from the date on
which the Seller has provided Fairvest with access to or
copies of the due diligence information requested by
Fairvest, Fairvest has concluded its due diligence
investigation in terms of the agreement, to its entire
satisfaction and has given written notice thereof to the
Seller, the date of Fairvest giving the said written
notice to the Seller being hereinafter referred to as
the “Due Diligence Approval Date”. Fairvest has
concluded its due diligence review in respect of the
First Property and only the due diligence review in
respect of the Second Property remains outstanding;
7.2. within 10 (ten) business days from the Due Diligence
Approval Date, any third parties holding any pre-emptive
right(s) or similar rights over the Notarial Lease or
the Rental Enterprise, that have been disclosed by the
Seller to Fairvest, have waived such pre-emptive rights
or similar rights;
7.3. by no later than 10 (ten) business days from the Due
Diligence Approval Date, the Seller procures the written
unconditional consent of the owner, as landlord, of the
First Property to this transaction, as well as consent
to the registration of the deed of assignment, such
consent to be in the form required by the Seller’s
attorneys;
7.4. within 10 (ten) business days from the Due Diligence
Approval Date, the investment committee of Fairvest
approves the purchase of the Rental Enterprise and
Fairvest delivers a copy of such resolution to the
Seller;
7.5. by no later than 10 (ten) business days from the Due
Diligence Approval Date, and to the extent that such
consent is required, the written unconditional consent
of the owner of the First Property is procured to the
registration in favour of Standard Bank of South Africa
Limited (“SBSA”) of a first continuing covering mortgage
bond (in form and substance to the SBSA’s satisfaction)
over the Notarial Lease, which mortgage bond will
hypothecate the right, title and interest of the
Purchaser in and to the Second Property and the Notarial
Lease;
7.6. by no later than 10 (ten) business days from the Due
Diligence Approval Date, the owner of the First Property
concludes in writing a tripartite agreement (in the form
and substance to the SBSA’s satisfaction) with Fairvest
and SBSA in terms of which SBSA (or its nominee) has the
option to lease the First Property, on the same terms
and conditions as the Notarial Lease and for the balance
of the Notarial Lease duration, in the event that the
Notarial Lease is cancelled or terminated during the
currency of its term.
The parties are jointly entitled to waive the condition
precedent set out in 7.3 and Fairvest is entitled to waive the
conditions precedent set out in 7.1, 7.2, 7.4, 7.5, and 7.6
above.
8. WARRANTIES
The Seller has provided warranties to the Company that are
standard for a transaction of this nature. The warranties
originally contained in the Sale Agreement have been expanded
under the Addendum in respect of the Second Property.
9. PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITION
The pro forma financial effects of the Acquisition on net
asset value and net tangible asset value per linked unit are
not significant and have therefore not been disclosed. This is
not altered by the inclusion of the Second Property in the
Acquisition.
10. FORECAST FINANCIAL INFORMATION OF THE ACQUISITION
The forecast financial information relating to the Acquisition
for the financial periods ended 30 June 2015 and 30 June 2016
are set out below. 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
Limited (“JSE Listings Requirements”) and is the
responsibility of the Company’s directors.
Forecast for Forecast for
the 8 month the 12 month
period ended period ended
30 June 2015 30 June 2016
Rental income 5,484,694 8,687,991
Straight-line rental accrual 737,034 405,304
Gross revenue 6,221,728 9,093,295
Property expenses (607,315) (969,996)
Net property income 5,614,413 8,123,299
Asset management fee (246,110) (369,165)
Operating profit 5,368,303 7,754,134
Fair value adjustment to (737,034) (405,304)
debentures
Finance cost (4,247,858) (6,371,788)
Profit before debenture interest 383,411 977,043
Debenture interest (383,411) (977,043)
Profit before taxation - -
Taxation - -
Total comprehensive income - -
attributable to linked
unitholders
Notes:
a) Rental income includes gross rentals and other recoveries
but excludes any adjustment applicable to the straight
lining of leases.
b) Property expenses include all utility and council charges
applicable to the Property.
c) The forecast information for the 8 month period ended 30
June 2015 has been calculated from the anticipated
effective date of the Acquisition, being 1 November 2014.
d) Un-contracted Revenue constitutes 3.5% of the revenue for
the 8 month period ended 30 June 2015.
e) Un-contracted Revenue constitutes 8.2% of the revenue for
the 12 month period ended 30 June 2016.
f) Leases expiring during the forecast period have been
assumed to renew at the future value of current market
related rates.
g) This forecast has been prepared on the assumption that the
Acquisition is funded through existing debt facilities at
the average cost of debt of 8.6%. The Company could elect
to partially or fully utilise its existing debt
facilities.
h) Distributions to linked unitholders occur through the
payment of debenture interest.
11. CATEGORISATION
The Acquisition qualifies as a Category 2 acquisition for the
Company in terms of the JSE Listings Requirements.
3 September 2014
Cape Town
Sponsor
PSG Capital
Date: 03/09/2014 05:40:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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