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Acquisition of new properties
INVESTEC AUSTRALIA PROPERTY FUND
Incorporated and registered in Australia in terms of ASIC (ARSN 162 067 736)
Registered in terms of the Collective Investment Schemes Control Act No.45 of 2003
Operated by Investec Property Limited (ACN 071 514 246; AFSL 290 909) (“Responsible Entity”)
Share code: IAP
ISIN: AU60INL00018
(“IAPF” or the “Fund”)
ACQUISITION OF NEW PROPERTIES
1. ACQUISITION OF NEW PROPERTIES
1.1. Acquisition
Unitholders are advised that the Fund has entered into the following agreements:
(a) a contract for sale with Wetherill Park Holdings Pty Limited (ACN 109 150 594) to acquire the
property located at 165 Newton Road, Wetherill Park NSW 2164 (“Wetherill Park Property”); and
(b) a contract for sale with Hunter River Holdings Pty Limited (ACN 115 411 491) to acquire the
property located at 24 Spit Island Close, Newcastle NSW 2304 (“Newcastle Property”),
together, the “Acquisition”.
The acquisitions of the Wetherill Park Property and the Newcastle Property are inter-conditional.
The effective date of the Acquisition is the settlement date under the respective contracts for sale, which
is scheduled for 10 December 2014.
There are no conditions precedent to the Acquisition.
1.2. Purchase consideration
The aggregate purchase consideration is AUD 26,850,000 which represents an annualised property yield
of 7.92% (7.48% post all transaction costs) based on the net passing income as at the date of the first
rental payment following the Acquisition. The purchase consideration is allocated as follows:
Wetherill Park Property Newcastle Property
Purchase consideration (AUD) 18,500,000 8,350,000
Transaction costs (AUD) 1,090,184 492,056
Total consideration (AUD) 19,590,184 8,842,056
Purchase yield (pre-transaction costs) 7.86% 8.04%
Purchase yield (post-transaction costs) 7.43% 7.59%
The aggregate purchase consideration and all transaction costs will be funded through the existing debt
facility with Westpac Banking Corporation.
1.3. Rationale for the Acquisition
The Acquisition is consistent with the Fund’s strategy of investing in well located, high quality assets. The
Responsible Entity is actively seeking opportunities to grow and diversify the Fund’s asset base, enhance
unitholder value and contribute to sustainable income growth. The Acquisition represents an attractive
investment for the Fund as:
(a) it is accretive based on the positive spread between the property yields and funding costs;
(b) the income is underpinned by leases to Horan Steel Holdings Pty Limited, a privately owned steel
distribution company that focuses on high margin, just in time business servicing the New South
Wales market, and which was founded in 1921;
(c) all outgoings are fully recoverable under the leases;
(d) the average contracted annual growth is approximately 3.00% in respect of the Wetherill Park
Property and a minimum of 3.75% in respect of the Newcastle Property;
(e) the Wetherill Park Property is located in one of Sydney’s most established industrial areas 34
kilometers from the Sydney CBD and benefits from a lease expiring in January 2026 with one
option for a further five years;
(f) the Newcastle Property is strategically located 5 kilometers from the Port of Newcastle and 10
kilometers from the Newcastle CBD and benefits from a lease expiring in January 2021 with one
option for a further ten years;
(g) the weighted average lease expiry is 9.6 years; and
(h) there are depreciation allowances which will provide a tax shield on distributions payable to
unitholders.
1.4. Specific information relating to the properties
Details relating to the Wetherill Park Property are set out below:
Registered description Lot 54 in Deposited Plan 224417
Title Freehold
Sector Industrial (warehouse)
Location 34 km west of the Sydney CBD
Year built 1995
Site area 20,230m2
GLA 12,529m²
Car parks 36
Rent per m2 AUD 116 per annum (net of outgoings)
Vacancy 0%
The Property has been valued at AUD 18,500,000 as at 19 November 2014 by CBRE Valuations Pty
Limited (ACN 008 912 641). The valuer, Robert Anderson, is an independent valuer and is a Certified
Practicing Valuer (Registered Valuer No. 6725).
Details relating to the Newcastle Property are set out below:
Registered description Lot 39 in Deposited Plan 270249
Title Freehold
Sector Industrial (warehouse)
Location 10 km from the Newcastle CBD and 5 km from the Port of Newcastle
Year built 2006
Site area 8,871 m²
GLA 5,257m²
Car parks 29
Rent per m2 AUD 128 per annum (net of outgoings)
Vacancy 0%
The Property has been valued at AUD 8,350,000 as at 18 November 2014 by Newcastle Corporate Real
Estate Services Pty Limited (ACN 962 509 406), trading as Knight Frank Newcastle. The valuer, Matt
Shaw, is an independent valuer and is a Certified Practicing Valuer (Registered Valuer No. 032440).
1.5. Forecast information on the Acquisition
The forecasts have been prepared with effect from 1 December 2014 and include forecast results for the
period ending 31 March 2015 and the year ending 31 March 2016.
The forecasts, including the assumptions on which they are based and the financial information from
which they are prepared, are the responsibility of the board of directors of the Responsible Entity. The
forecasts have not been reviewed or reported on by the independent reporting accountants.
The forecasts presented in the table below have been prepared in accordance with the Fund’s accounting
policies and in compliance with IFRS.
Forecast 4 Forecast 12
months ending months ending
31 March 2015 31 March 2016
AUD'000 AUD'000
Revenue, including straight line adjustment 890 2,676
Total property expenses (85) (260)
Net property income 805 2,416
Fund management fees (54) (161)
Fund operating costs (18) (54)
Net operating income before finance charges 733 2,201
Finance costs (444) (1,333)
Net profit attributable to equity holders 289 868
Less: straight line revenue adjustment (99) (283)
Distributable income pre-withholding tax 190 585
Distributable income post-withholding tax 190 571
Notes:
1. All revenue for the reporting periods shown is contracted and is based on the leases in place on settlement.
2. The lease at the Wetherill Park Property has an irregular escalation profile, with no escalations until 1 July 2017
when it escalates by 1.40%, followed on 1 July 2018 by 10.10% and thereafter escalating by the greater of CPI
and 3.00% annually. Whilst this affects growth in the first two years of the lease, the average escalations over
the life of the lease are in excess of 3.00%. The lease at the Newcastle Property has minimum annual
escalations of 3.75%. After the Acquisition the portfolio will have average annual escalations of approximately
3.50%.
3. Distributions payable to unitholders attributable to the Acquisition are shielded from withholding tax in Australia
as a result of interest expense on debt funding and depreciation allowances on the properties.
4. Material expenditure items relate to the fund management fees (approximately 34% of total expenses).
5. No material expenditure items have been increased in the forecast period ending 31 March 2016 by more than
15% over the previous financial period.
6. The finance costs reflect an all in cost of funds of 4.7%.
1.6. Categorisation
The Acquisition is a category 2 transaction in terms of the JSE Listings Requirements and accordingly
does not require approval by unitholders.
Johannesburg
4 December 2014
Investment Bank and Sponsor
Investec Bank Limited
Date: 04/12/2014 08:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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