Wrap Text
Acquisition of Shoprite Brits, Shoprite Ennerdale and Shoprite Modimolle
TOWER PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2012/066457/06)
JSE share code: TWR ISIN: ZAE000179040
(Approved as a REIT by the JSE)
(“Tower” or the “company”)
ACQUISITION OF SHOPRITE BRITS, SHOPRITE ENNERDALE AND SHOPRITE MODIMOLLE
Introduction
Shareholders are advised that Tower has concluded agreements for the acquisition of the entire issued share capital of
and claims against each of:
- Cross Atlantic Properties 162 Proprietary Limited (“Cross Atlantic”), which owns Shoprite Brits, from Milton
Weinberg, the Jonathan Levitt Family Trust, Lara Weinberg, Saul Sackstein and Daniel Sackstein (the “Brits
sellers”), for an aggregate purchase consideration of R48 815 627 (the “Brits acquisition”);
- Lexshell 492 Investments Proprietary Limited (“Lexshell”), which owns Shoprite Ennerdale, from Milton
Weinberg, the Jonathan Levitt Family Trust, Jon Chaitowitz and Brent Benjamin (the “Ennerdale sellers”), for
an aggregate purchase consideration of R38 036 711 (the “Ennerdale acquisition”); and
- Plenty Properties 118 Proprietary Limited (“Plenty Properties”), which owns Shoprite Modimolle, from
Milton Weinberg, the Jonathan Levitt Family Trust, Lara Weinberg, Saul Sackstein and Daniel Sackstein (the
“Modimolle sellers”), for an aggregate purchase consideration of R40 656 515 (the “Modimolle acquisition”),
(collectively the “acquisitions”).
The properties acquired by Tower are non-metropolitan shopping and community centres servicing the lower living
standards measurement markets, situated in high growth nodes, close to commuter networks, which have healthy lease
expiry profiles and strong national tenant profiles. The acquisitions will increase Tower’s exposure to the retail sector
in desirable trading locations which will provide Tower with a good quality source of income.
Terms of the Brits acquisition
The effective date of the Brits acquisition is 1 December 2014 (the “effective date”). The purchase consideration for
the Brits acquisition will be settled in cash as to R6 037 806 and the balance by the allotment and issue of 4 700 860
Tower shares (the “Brits consideration shares”). The issue price of the Brits consideration shares will be the greater
of R9.10 and the last available volume weighted average traded price per Tower share for the 30 day period
immediately preceding the closing date. The closing date is stipulated as being the later of:
- 1 December 2014;
- the date of registration by Tower of a new first mortgage bond over the relevant property;
- the first business day after the day on which the last of the conditions precedent referred to below is fulfilled or
waived.
The Brits consideration shares will not participate in Tower’s interim distribution for the six months ended 30
November 2014. Insofar as the Brits consideration shares are issued before the record date for receipt of such
distribution, the Brits sellers will repay the amount of such distribution to Tower.
Insofar as the current assets exceed the current liabilities of Cross Atlantic as at the effective date, Tower will pay the
Brits sellers the amount of such excess in cash. Conversely, if the current liabilities exceed the current assets of Cross
Atlantic as at the effective date, the Brits sellers will pay Tower the amount of such excess in cash.
The agreement includes undertakings, warranties and indemnities which are normal for an acquisition of this nature.
The Brits acquisition remains conditional upon:
- approval by the Takeover Regulation Panel, if applicable; and
- Tower providing the Brits sellers with guarantees for payment of:
- R36 740 016, owed by Cross Atlantic to Investec Bank Limited (“Investec”), plus interest thereon from 1
December 2014 to the date of payment under the guarantee; and
- the cash portion of the purchase consideration for the Brits acquisition, less any interest paid under the
guarantee to Investec above.
Terms of the Ennerdale acquisition
The effective date of the Ennerdale acquisition is 1 December 2014 (the “effective date”). The purchase
consideration for the Ennerdale acquisition will be settled in cash as to R2 348 668 and the balance by the allotment
and issue of 3 921 763 Tower shares (the “Ennerdale consideration shares”). The issue price of the Ennerdale
consideration shares will be the greater of R9.10 and the last available volume weighted average traded price per
Tower share for the 30 day period immediately preceding the closing date. The closing date is stipulated as being the
later of:
- 1 December 2014;
- the date of registration by Tower of a new first mortgage bond over the relevant property;
- the first business day after the day on which the last of the conditions precedent referred to below is fulfilled or
waived.
The Ennerdale consideration shares will not participate in Tower’s interim distribution for the six months ended
30 November 2014. Insofar as the Ennerdale consideration shares are issued before the record date for receipt of such
distribution, the Ennerdale sellers will repay the amount of such distribution to Tower.
Insofar as the current assets exceed the current liabilities of Lexshell as at the effective date, Tower will pay the
Ennerdale sellers the amount of such excess in cash. Conversely, if the current liabilities exceed the current assets of
Lexshell as at the effective date, the Ennerdale sellers will pay Tower the amount of such excess in cash.
The agreement includes undertakings, warranties and indemnities which are normal for an acquisition of this nature.
The Ennerdale acquisition remains conditional upon:
- approval by the Takeover Regulation Panel, if applicable; and
- Tower providing the Ennerdale sellers with guarantees for payment of:
- payment of R33 339 375, owed by Lexshell to Investec, plus interest thereon from 1 December 2014 until
the date of payment under the guarantee; and
- the cash portion of the purchase consideration for the Ennerdale acquisition less any interest paid under
the guarantee to Investec above.
Terms of the Modimolle acquisition
The effective date of the Modimolle acquisition is 1 December 2014 (the “effective date”). The purchase
consideration for the Modimolle acquisition will be settled by the allotment and issue of 4 467 749 Tower shares (the
“Modimolle consideration shares”). The issue price of the Modimolle consideration shares will be the greater of
R9.10 and the last available volume weighted average traded price per Tower share for the 30 day period immediately
preceding the closing date. The closing date is stipulated as being the later of:
- 1 December 2014;
- the date of registration by Tower of a new first mortgage bond over the relevant property;
- the first business day after the day on which the last of the conditions precedent referred to below is fulfilled or
waived.
The Modimolle consideration shares will not participate in Tower’s interim distribution for the six months ended
30 November 2014. Insofar as the Modimolle consideration shares are issued before the record date for receipt of
such distribution, the Modimolle sellers will repay the amount of such distribution to Tower.
Insofar as the current assets exceed the current liabilities of Plenty Properties as at the effective date, Tower will pay
the Modimolle sellers the amount of such excess in cash. Conversely, if the current liabilities exceed the current
assets of Plenty Properties as at the effective date, the Modimolle sellers will pay Tower the amount of such excess in
cash. Any interest paid to Investec under the guarantee referred to below shall be deducted as a current liability.
The Modimolle sellers have loaned R4 741 180 to Plenty Properties in cash, which amount will form part of the
claims against Plenty Properties acquired by Tower pursuant to the Modimolle acquisition.
The agreement includes undertakings, warranties and indemnities which are normal for an acquisition of this nature.
The Modimolle acquisition remains conditional upon:
- approval by the Takeover Regulation Panel, if applicable; and
- Tower providing the Modimolle sellers with a guarantee for payment of R45 397 694 owed by Plenty Properties
to Investec, plus interest thereon from 1 December 2014 until the date of payment under the guarantee.
Property specific information
The property specific information required in terms of the JSE Listings Requirements in relation to the properties
acquired by Tower including property name and address, geographical location, rentable area and weighted average
rental per square metre is set out below.
Property name and address Shoprite Brits, 50 Pienaar Street, Brits
Sector Retail
Geographical location North West Province
Rentable Area (m2) 8 278
Weighted Average rental per m2 R76.7/m2
Value attributed to the property R86 896 205
Property name and address Shoprite Ennerdale, Marais Close, Ennerdale Extension 9
Sector Retail
Geographical location Gauteng
Rentable Area (m2) 8 192
Weighted Average rental per m2 R74.0/m2
Value attributed to the property R72 511 039
Property name and address Shoprite Modimolle (Nylstroom), Nelson Mandela Drive, Modimolle
Sector Retail
Geographical location Limpopo
Rentable Area (m2) 7 798
Weighted Average rental per m2 R88.3/m2
Value attributed to the property R82 592 071
No independent valuations have been carried out and the board of directors of Tower is of the view that the values
attributed to the properties above represents the values of the properties acquired.
Categorisation of the acquisitions
As each of the acquisitions has been entered into by Tower with the same parties and their associates, the acquisitions
have been aggregated for the purposes of determining the categorisation of the acquisitions, in compliance with the
JSE Listings Requirements.
The acquisitions are classified as a Category 2 transaction in terms of the JSE Listings Requirements. Accordingly
they are not subject to approval by Tower shareholders.
Financial effects
Set out below are the forecast revenue, net property income, net operating profit and distributable earnings of the
acquisitions (“the forecasts”) for the six months ending 31 May 2015 and the year ending 31 May 2016
(“the forecast periods”). The forecasts have been prepared on the assumption that the acquisitions will be
implemented on 31 December 2014 and on the basis that the forecasts include forecast results for the duration of the
forecast periods.
The 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 Tower. The forecasts have not been reviewed or reported on by
independent reporting accountants.
The forecasts presented in the table below have been prepared in accordance with Tower’s accounting policies and in
compliance with IFRS.
Forecast for the Forecast for the
six months ending year ending
31 May 2015 31 May 2016
R’000 R’000
Contractual rental income 15 383 32 751
Straight-line rental income accrual 1 675 2 438
Revenue 17 058 35 189
Net property income* 12 316 24 896
Net operating profit# 11 720 23 704
Total comprehensive profit for the period^ 7 161 14 586
Distributable earnings 5 548 12 273
* Includes the effects of straight-lining rental income
# Includes the effects of asset management fees
^ Includes the effects of finance costs
The forecasts incorporate the following material assumptions in respect of revenue and expenses that can be
influenced by the directors of Tower:
- The forecasts are based on Shoprite Brits, Shoprite Ennerdale and Shoprite Modimolle only.
- 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.
- Contracted revenue is based on existing lease agreements and rental guarantees including stipulated increases,
all of which are valid and enforceable.
- Uncontracted revenue amounts to 8.8% of revenue for the six months ending 31 May 2015 and 24.2% of
revenue for the year ending 31 May 2016.
- 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.
- R119.1 million of the aggregate acquisition cost of R127.5 million is assumed to be settled by issuing
13.1 million Tower shares at an issue price of R9.10 per Tower share, with the balance of R8.4 million settled in
cash funded from interest-bearing borrowings which is assumed to incur interest at an effective rate of 7.55%
per annum. Acquisition costs of R3.8 million are assumed to be settled in cash.
- The fair value of the buildings are assumed to equate to R242.0 million, the cost of the acquisitions including
capitalised costs of acquisition. Accordingly, no fair value adjustment is recognised.
The forecasts incorporate the following material assumptions in respect of revenue and expenses that cannot be
influenced by the directors:
- An effective date of acquisition of 1 December 2014.
- In terms of the asset management agreement with Tower Asset Managers Proprietary Limited (the “asset
manager”), Tower will pay the asset manager a monthly fee equivalent to 1/12th of 0.5% of the aggregate of
the market capitalisation and the borrowings of Tower.
- Tower will pay Spire Property Management Proprietary Limited for all property management services a
monthly fee equivalent to 3.5% of gross monthly income collected (including VAT).
- There will be no unforeseen economic factors that will affect the lessees’ abilities to meet their commitments in
terms of existing lease agreements.
19 December 2014
Sponsor Legal advisor
Java Capital
Cliffe Dekker Hofmeyr
Date: 19/12/2014 02:40:00 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
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,
information disseminated through SENS.
Sharenet Sites 
