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Acquisition of Crossroads and Attyard
EQUITES PROPERTY FUND LIMITED
(formerly VB Transport (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
(“Equites”)
ACQUISITION OF CROSSROADS AND ATTYARD
1. INTRODUCTION
Equites has concluded agreements (“acquisition agreements”) for:
- the acquisition of all of the issued shares and claims in Nascispan Proprietary Limited (“Nascispan”) from Skymax
Trust (of which Giancarlo Lanfranchi is a beneficiary), Chiluan Holdings Proprietary Limited (in which Andrea
Taverna-Turisan has a beneficial interest) and Riaan Gous (“the Crossroads vendors”). The sole business of
Nascispan comprises ownership of the industrial distribution facility known as Crossroads (“Crossroads”) situated in
Milnerton, Cape Town (“the Crossroads acquisition”); and
- the acquisition of an industrial warehouse known as Attyard (“the Attyard acquisition”) situated in 160 Gunners
Circle, Epping Industria, Cape Town (“Attyard”) from Tradefirm 150 Proprietary Limited (in which Andrea Taverna-
Turisan has a beneficial interest) (“the Attyard vendor”),
(collectively, “the acquisitions”).
The effective date of both acquisitions is 1 September 2014 (“the effective date”).
2. RATIONALE FOR THE ACQUISITIONS
2.1. The Crossroads acquisition:
2.1.1. The property was constructed during 2013 and is a quality A-grade truck distribution centre. The
building is well built and meets Equites’ criteria of owning quality A-grade tenanted industrial
facilities. The tenant, Crossroads Distribution Proprietary Limited, is contracted to transport
petroleum from the Chevron refinery to the Cape Town International Airport. It is a stable,
sustainable business. Moreover there are a further 9 years left on the lease which makes it an
attractive acquisition.
2.1.2. Equites has been able to acquire Crossroads at an attractive price from the Crossroads vendors.
2.2. The Attyard acquisition:
2.2.1. As communicated at the time of listing, the acquisition of brownfields redevelopment properties
will form a significant part of the expansion strategy of Equites and the Attyard acquisition is in
line with this strategy. The property is located in an area which is ideal for distribution warehouses,
it is accessible and well-suited to redevelopment. The two current tenants, Servest Landscaping and
FAM Motor Dealers CC, are on leases with redevelopment clauses and it is the intention of Equites
to develop a modern A-grade distribution centre on the site.
2.2.2. Equites has been able to acquire Attyard at an attractive price from the Attyard vendor.
3. DETAILS OF CROSSROADS AND ATTYARD
Name of property Crossroads Attyard
Region Cape Town Cape Town
Sector Industrial Industrial
Monthly weighted average rental per m2 R107.2 m2 R31.0 m2
Rentable area GLA 2 888 m2 5 478 m2
4. TERMS OF THE ACQUISITIONS
4.1. The Crossroads acquisition
4.1.1. The purchase consideration payable for the shares and claims of Nascispan is an amount of
R10 083 938 (“Crossroads purchase consideration”) being the estimated net asset value of
Nascispan (“Nascispan NAV”) at the effective date, based on the agreed value of R42 029 000 in
respect of Crossroads less Nascispan’s outstanding obligations in terms of its debt funding in an
amount R31 945 062.
4.1.2. An effective date balance sheet will be prepared and the Crossroads purchase consideration will be
adjusted if the estimated Nascispan NAV differs from that as per the effective date balance sheet,
provided that the purchase consideration cannot be increased by more than 20%.
4.1.3. The Crossroads purchase consideration will be discharged by Equites against delivery of Nascispan
to Equites:
4.1.3.1. in cash in an amount equal to the face value of the respective claims of the
Crossroads vendors against Nascispan; and
4.1.3.2. the balance in Equites shares, to be issued at a price equal to the volume weighted
average trading price of Equites shares for the 30 days preceding the effective date.
90% of these shares will be issued on the effective date, with the balance to be
issued following finalisation of the effective date balance sheet, subject to any
adjustment thereof, and provided further that if there is a downward adjustment
greater than the outstanding portion of the purchase consideration, the difference
will be refunded to Equites in cash.
4.1.4. The agreement governing the Crossroads acquisition provides for warranties and indemnities that
are standard for acquisitions of this nature.
4.2. The Attyard acquisition
4.2.1. The purchase consideration (“Attyard purchase consideration”) of R18 100 000 will be payable
in cash against transfer of ownership (“transfer date”) of Attyard into Equites’ name.
4.2.2. Interest will accrue on the Attyard purchase consideration at the prime rate with effect from the
effective date until the transfer date.
4.2.3. The agreement governing the Attyard acquisition provides for warranties and indemnities that are
standard for acquisitions of this nature.
5. CONDITIONS PRECEDENT
All of the conditions precedent have been fulfilled and the acquisitions are unconditional.
6. SMALL RELATED PARTY CONSIDERATIONS
Giancarlo Lanfranchi, Andrea Taverna-Turisan and Riaan Gous are directors of Equites and therefore each of the
Crossroads acquisition and the Attyard acquisition constitute a small related party transaction in terms of the JSE’s Listings
Requirements.
In accordance with the JSE Listings Requirements, the board of Equites hereby confirms that it is of the opinion that the
acquisitions are fair insofar as shareholders are concerned, having had regard to the independent property valuation of
Attyard prepared by Michael Gibbons of Mills Fitchet, who is an independent external registered professional valuer in
terms of the Property Valuers Profession Act, No. 47 of 2000, and the fairness opinion on Nascispan prepared by BDO
Corporate Finance Pty Ltd. Copies of the independent property valuation and the fairness opinion will be open for
inspection at the registered office of the company (31 Brickfield Road, East Parking Level 4, Upper Eastside, Woodstock,
7925) for a period of 28 days from the date of this announcement.
On the basis of the aforegoing, neither of the transactions is subject to shareholder approval.
7. FORECAST FINANCIAL INFORMATION OF THE CROSSROADS ACQUISITION
Set out below are the forecast revenue, net property income, net profit and distributable earnings of Crossroads (“the
Crossroads forecasts”) for the six months ending 28 February 2015 and the year ending 29 February 2016 (“the
Crossroads forecast periods”). The Crossroads forecasts have been prepared on the assumption that the Crossroads
acquisition will be implemented on 1 September 2014 and on the basis that the Crossroads forecasts include forecast results
for the duration of the forecast periods.
The Crossroads 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 Equites. The Crossroads forecasts have not been reviewed or
reported on by independent reporting accountants.
The Crossroads forecasts presented in the table below have been prepared in accordance with the accounting policies of
Equites and in compliance with IFRS.
Forecast for the six Forecast for the
months ending year ending
28 February 2015 29 February 2016
R’000 R’000
Rental income 2 059 4 294
Straight-line rental income accrual 743 1 318
Revenue 2 802 5 612
Net property income* 2 691 5 378
Net profit#^ 4 303 2 217
Distributable earnings 672 2 826
* Includes the effects of straight-lining rental income
# Includes the effects of fair value adjustment to investment properties
^ Includes the effects of finance costs
7.1. The Crossroads forecasts incorporate the following material assumptions in respect of revenue and expenses that
can be influenced by the directors of Equites:
7.1.1. The Crossroads forecasts are based on Crossroads only.
7.1.2. Property operating expenditure has been forecast on a line-by-line basis based on management’s
review of historical expenditure, where available, and discussion with the existing property
manager.
7.1.3. Contracted revenue is based on existing lease agreements including stipulated increases, all of
which are valid and enforceable.
7.1.4. There is no uncontracted revenue for the duration of the Crossroads forecast periods.
7.1.5. No leases are due to expire during the Crossroads forecast periods.
7.1.6. The aggregate acquisition cost of R10.17 million (comprising the Crossroads purchase
consideration of R10.08 million and acquisition costs of R0.09 million) is assumed to be settled as
follows:
7.1.6.1. R8.75 million of the aggregate acquisition cost is assumed to be funded through the
issue of 0.84 million Equites shares at an issue price of R10.44 per Equites share,
the 30 day volume weighted price per Equites share at 1 September 2014; and
7.1.6.2. the balance of R1.42 million from existing interest-bearing borrowings which are
assumed to incur interest at an effective rate of 7.7% per annum.
7.1.7. The Crossroads acquisition is accounted for in terms of IAS 40: Investment Property. Investment
property is initially recognised at the acquisition consideration attributable to the underlying
investment (including acquisition costs of R0.09 million in aggregate). Subsequently at the
reporting period end the investment property is measured at fair value, the value attributed by the
independent valuer of R45.00 million, resulting in a fair value adjustment of R2.89 million for the
six months ending 28 February 2015.
7.2. The Crossroads forecasts incorporate the following material assumptions in respect of revenue and expenses that
cannot be influenced by the directors:
7.2.1. An effective date of acquisition of 1 September 2014.
7.2.2. Equites will pay Swish Property Administration CC for all property management services a
monthly fee equivalent to 1.5% of gross monthly income collected (including VAT).
7.2.3. There will be no unforeseen economic factors that will affect the lessees’ abilities to meet their
commitments in terms of existing lease agreements.
8. FORECAST FINANCIAL INFORMATION OF THE ATTYARD ACQUISITION
Set out below are the forecast revenue, net property income, net profit and distributable earnings of the Attyard property
(“the Attyard forecasts”) for the six months ending 28 February 2015 and the year ending 29 February 2016 (“the
Attyard forecast periods”). The Attyard forecasts have been prepared on the assumption that the Attyard acquisition will
be implemented on 1 September 2014 and on the basis that the Attyard forecasts include forecast results for the duration of
the forecast periods.
The Attyard 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 Equites. The Attyard forecasts have not been reviewed or reported on
by independent reporting accountants.
The Attyard forecasts presented in the table below have been prepared in accordance with the accounting policies of
Equites and in compliance with IFRS.
Forecast for the six Forecast for the
months ending year ending
28 February 2015 29 February 2016
R’000 R’000
Rental income 1 111 2 336
Straight-line rental income accrual 62 44
Revenue 1 173 2 380
Net property income* 1 045 2 110
Net profit#^ 1 898 722
Distributable earnings 289 678
* Includes the effects of straight-lining rental income
# Includes the effects of fair value adjustments to investment properties
^ Includes the effects of finance costs
8.1. The Attyard forecasts incorporate the following material assumptions in respect of revenue and expenses that can
be influenced by the directors of Equites:
8.1.1. The Attyard forecasts are based on Attyard only.
8.1.2. Property operating expenditure has been forecast on a line-by-line basis based on management’s
review of historical expenditure, where available, and discussion with the existing property
manager.
8.1.3. Contracted revenue is based on existing lease agreements including stipulated increases, all of
which are valid and enforceable.
8.1.4. Uncontracted revenue amounts to 0.0% for the six months ending 28 February 2015 and 14.5% for
the year ending 29 February 2016.
8.1.5. Leases expiring during the forecast periods have been forecast on a lease-by-lease basis, and have
been assumed to renew at current market rates unless the lessee has indicated its intention to
terminate the lease.
8.1.6. The aggregate acquisition cost of R18.15 million (comprising the Attyard purchase consideration
of R18.10 million and acquisition costs of R0.05 million) is assumed to be settled from existing
interest-bearing borrowings which are assumed to incur interest at an effective rate of 7.7% per
annum.
8.1.7. The Attyard acquisition is accounted for in terms of IAS 40: Investment Property. Investment
property is initially recognised at the acquisition consideration attributable to the underlying
investment (including acquisition costs of R0.05 million in aggregate). Subsequently at the
reporting period-end the investment property is measured at fair value, the value attributed by the
independent valuer of R19.70 million, resulting in a fair value adjustment of R1.55 million for the
six months ending 28 February 2015.
8.2. The Attyard forecasts incorporate the following material assumptions in respect of revenue and expenses that
cannot be influenced by the directors:
8.2.1. An effective date of acquisition of 1 September 2014.
8.2.2. Equites will pay Swish Property Administration CC for all property management services a
monthly fee equivalent to 1.5% of gross monthly income collected (including VAT).
8.2.3. There will be no unforeseen economic factors that will affect the lessees’ abilities to meet their
commitments in terms of existing lease agreements.
9. UNAUDITED PRO FORMA FINANCIAL EFFECTS OF THE ACQUISITIONS
The unaudited pro forma financial effects of the acquisitions are based on the unaudited consolidated pro forma statement
of financial position of Equites at 28 February 2014 as presented in the pre-listing statement issued on 6 June 2014 (which
in turn was based on the audited statement of financial position of Equites as at 28 February 2014).
The unaudited pro forma financial effects of both the Attyard acquisition and the Crossroads acquisition on Equites’ net
asset value and tangible net asset value per share are not significant and have not been presented.
30 September 2014
Corporate advisor and sponsor
Java Capital
Attorneys to Equites
DLA Cliffe Dekker Hofmeyr
Independent expert
BDO
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