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Acquisition of a new property and update on the Richmond Shopping Centre Acquisition
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”)
ACQUISITION OF A NEW PROPERTY AND UPDATE ON THE RICHMOND SHOPPING
CENTRE ACQUISITION
ACQUISITION OF A NEW PROPERTY
1. COSMOS SHOPPING CENTRE ACQUISITION
Linked unitholders of the Company are hereby advised that the
Company has entered into an agreement (“Sale Agreement”) with
Mobe Investments Proprietary Limited (“the Seller”) to
acquire, as a going concern, the rental enterprise operated by
the Seller (“the Rental Enterprise”), including the property
situated at Erf 4861, Bethal, Mpumalanga (“the Property”),
commonly known as Bethal Cosmos Centre (“Cosmos Shopping
Centre Acquisition”).
The effective date of the Cosmos Shopping Centre Acquisition
shall occur on the date of registration of transfer of
ownership of the Property (“Effective Date”), which is
expected to occur on or about 1 December 2014.
2. RATIONALE FOR THE ACQUISITION
The Cosmos Shopping Centre 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. PURCHASE CONSIDERATION
The purchase consideration applicable to the Cosmos Shopping
Centre Acquisition is R59 000 000 (fifty-nine million Rand),
which includes VAT at the rate of 0%, payable in cash on the
Effective Date against registration of transfer of ownership
of the Property into the name of the Company.
The Company will fund the purchase consideration through debt
and/or equity funding.
4. THE PROPERTY
Details of the Property are as follows:
Property Geographical Sector Cost/ GLA Cost Average
Name and Location Value (m2) per Gross
Address (R’m) GLA Rental/
(R/m2) m2
(R/m2)
Erf 4861, 41 Du Plooy Retail 59.00 4,677 12,615 86.62
Bethal, Street,
Mpumalanga Bethal,
Mpumalanga,
2310
5. PROPERTY SPECIFIC INFORMATION
Details regarding the Cosmos Shopping Centre Acquisition, as
at the expected Effective Date, are set out below:
Property Name Purchase Yield Average Lease Vacancy
and Address attributable Escalation Duration % by GLA
to Linked (years)
Unitholders
Erf 4861, 9.60% 7.0% 2.6 0%
Bethal,
Mpumalanga
Notes:
a) The costs associated with the acquisition of the Property
are estimated at R1.0325 million.
b) The cost of the Property is considered to be its 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.
6. CONDITIONS PRECEDENT
The Cosmos Shopping Centre Acquisition is subject to the
following conditions precedent, namely that:
6.1. by no later than twenty business days from the signature
date of the Sale Agreement, Fairvest has concluded its
due diligence investigation in terms of the Sale
Agreement, to its entire satisfaction and has given
written notice thereof to the Seller, with the date of
Fairvest giving the said written notice to the Seller
being hereinafter referred to as the “Due Diligence
Approval Date”;
6.2. within five 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;
6.3. within five business days from the date of the approval
in paragraph 6.2 above, the board of directors of
Fairvest approves the purchase of the Rental Enterprise
and Fairvest delivers a copy of such resolution to the
Seller;
6.4. by no later than the Due Diligence Approval Date,
Moolman Group Property Management (Pty) Ltd (“Moolman
Group”) and the Purchaser enter into a written
management agreement in terms of which Moolman Group is
appointed to manage the Property from the Effective Date
until the expiry of the Guarantee Periods (as defined in
paragraph 7 below);
6.5. to the extent necessary, within twenty business days
from the signature date of the Sale Agreement, the
approval of the shareholders of the Seller be obtained
in accordance with the provisions of sections 112 and
115 of the Companies Act 2008;
6.6. within twenty business days from the date of fulfilment
of the condition precedent in paragraph 6.2 above, the
Purchaser obtains all relevant approvals and completes
all relevant processes required under the Listings
Requirements of the JSE Limited (“JSE Listings
Requirements”).
Fairvest is entitled to waive the conditions precedent set out
in paragraphs 6.1, 6.2 and 6.3 above and the parties are
jointly entitled to waive the remaining conditions precedent.
7. GUARANTEES
The Seller has provided Fairvest with various guarantees
relating to the Rental Enterprise in respect of certain
guarantee periods following the Effective Date (the last of
which expires on 31 July 2017) (“Guarantee Periods”).
Specifically, these guarantees have been provided by the
Seller in respect of the gross rental receipts, gross
recoveries receipts, gross electricity recovery receipts and
gross turnover receipts.
8. WARRANTIES
The Seller has provided warranties to the Company that are
standard for a transaction of this nature.
9. FORECAST FINANCIAL INFORMATION OF THE COSMOS SHOPPING CENTRE
ACQUISITION
The forecast financial information relating to the Cosmos
Shopping Centre 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 JSE
Listings Requirements and is the responsibility of the
Company’s directors.
Forecast for Forecast for
the 7 month the 12 month
period ended period ended
30 June 2015 30 June 2016
Rental income 4,782,676 8,651,964
Straight-line rental accrual 204,640 73,736
Gross revenue 4,987,316 8,752,018
Property expenses (1,533,727) (295,000)
Net property income 3,453,589 5,931,768
Asset management fee (172,083) (295,000)
Operating profit 3,281,506 5,636,768
Fair value adjustment to (204,640) (73,736)
debentures
Finance cost (3,022,136) (5,180,805)
Profit before debenture interest 54,730 382,227
Debenture interest (54,730) (382,227)
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 7 month period ended 30
June 2015 has been calculated from the anticipated
Effective Date of the Cosmos Shopping Centre Acquisition,
being 1 December 2014.
d) Uncontracted revenue constitutes 1.39% of the revenue for
the 7 month period ended 30 June 2015.
e) Uncontracted revenue constitutes 6.66% 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
Cosmos Shopping Centre Acquisition is funded through
existing debt facilities at the average cost of debt of
8.63%. 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.
10. CATEGORISATION
The Cosmos Shopping Centre Acquisition qualifies as a Category
2 acquisition for the Company in terms of the JSE Listings
Requirements.
UPDATE ON THE RICHMOND SHOPPING CENTRE ACQUISITION
Linked unitholders of the Company are referred to the Company’s
SENS announcement dated 15 May 2014 (“the Initial Announcement”),
in which linked unitholders were advised that the Company had
entered into an agreement (“Richmond Sale Agreement”) with
Magnificent Four Properties Proprietary Limited (“Magnificent
Four”) to acquire, as a going concern, the rental enterprise
operated by Magnificent Four, including the cession and delegation
of the notarial lease (“Notarial Lease”) held by Magnificent Four
over the property commonly known as Richmond Shopping Centre,
situated in Richmond, KwaZulu-Natal (“Richmond Shopping Centre
Acquisition”).
Linked unitholders are also referred to the Company’s SENS
announcements dated, respectively, 21 July 2014 and 3 October
2014, in which they were advised that the Company had entered into
subsequent addendums for the extension of the fulfilment dates of
the conditions precedent in the Richmond Sale Agreement.
As indicated in the abovementioned SENS announcement on 3 October
2014, the only remaining conditions precedent to be fulfilled, are
those referred to in paragraphs 6.2, 6.3 and 6.4 of the Initial
Announcement and in paragraph 1.3.2 of the 3 October 2014
announcement (collectively, the “Remaining Conditions Precedent”).
Linked unitholders are advised that the Company has entered into a
further addendum to the Richmond Sale Agreement (“Addendum”), in
which it is agreed that:
- the date for the fulfilment of Remaining Conditions Precedent
be extended to 31 March 2015 (“Fulfilment Date”), provided
that the Company may call for those Remaining Conditions
Precedent detailed in paragraph 6.2 of the Initial
Announcement and in paragraph 1.3.2 of the 3 October 2014
announcement to be fulfilled prior to the Fulfilment Date by
giving Magnificent Four 10 business days’ written notice to
that effect; and
- the Company shall be entitled to waive fulfilment of the
Remaining Condition Precedent referred to in paragraph 1.3.2
of the 3 October 2014 announcement.
23 October 2014
Cape Town
Sponsor
PSG Capital
Date: 23/10/2014 04:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
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