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Acquisition of a New Property Portfolio
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”)
(Approved as a REIT by the JSE)
ACQUISITION OF A NEW PROPERTY PORTFOLIO
1. ACQUISITION AGREEMENT CONCLUDED
Linked unitholders of the Company are hereby advised that the
Company has entered into an agreement(“Acquisition Agreement”)
with Redefine Properties Limited (“the Seller”) to acquire, as
a going concern, the retail enterprises conducted by the
Seller at, and the properties comprising, Erf 15942,
Bloemfontein, Free State, commonly known as Middestad Centre
(“First Property”) and the remaining extent of Erf 27819,
Bloemfontein Extension 54, Free State, commonly known as Mega
Park(“Second Property”).
The First and Second Properties are hereafter collectively
referred to as “the Properties”, while the acquisition of the
Properties is referred to as “the Acquisition”.
The effective date of the Acquisition shall be the date of
registration of transfer of the Properties into the name of
Fairvest at the relevant Deeds Office and is anticipated to
occur on or about 1 June 2015(“Transfer Date”).
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. PURCHASE CONSIDERATION
The Acquisition Agreement provides for a purchase
consideration of R229,000,000 (two hundred and twenty-nine
million Rand) (“Purchase Consideration”), which includes VAT
at the rate of 0%, payable in cash on the Transfer Date.
The Purchase Consideration is subject to escalation for the
period from 15 January 2015 up to and including the Transfer
Date at the rate of 0.583% per month (compounded monthly in
arrears)(“Final Purchase Consideration”). It is anticipated
that the Final Purchase Consideration will amount to
R236,439,863, based on the anticipated Transfer Date of 1 June
2015.
The Company will fund the purchase consideration through debt
and/or equity funding.
4. THE PROPERTIES
Details of the Properties are as follows:
Property Name Geographical Sector GLA Weighted
and Address Location (m2) Average
Gross
Rental/m2
(R/m2)
Erf 15942, Cnr. Wes Burger Retail 19,943 97.21
Bloemfontein, & Charles
Free State Streets,
Bloemfontein,
Free State
Remaining Curie Avenue, Retail 5,963 80.10
extent of Erf Hospital Park,
27819, Bloemfontein,
Bloemfontein Free State
Extension 54,
Free State
5. PROPERTY SPECIFIC INFORMATION
Details regarding the Acquisition, as at the expected Transfer
Date, are set out below:
Property Purchase Weighted Lease Vacancy
Name and Yield Average Duration % by GLA
Address attributable Escalation (years)
to Linked
Unitholders
Erf 10% 7.1% 2.06 3%
15942,
Bloemfont
ein, Free
State
Remaining 10% 8.1% 2.21 0.7%
extent of
Erf
27819,
Bloemfont
ein
Extension
54, Free
State
Notes:
a) The costs associated with the Acquisition are estimated at
R4,137,698.
b) 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.
6. CONDITIONS PRECEDENT
The Acquisition is subject to the following conditions
precedent, namely:
6.1. the completion by Fairvest of a comprehensive due
diligence investigation and confirmation by Fairvest to
the Seller in writing, by no later than 5 days from
signature date of the Acquisition Agreement that
Fairvest has completed such investigation and has
elected to proceed with the Acquisition (with the date
of fulfilment of this condition precedent being
hereafter referred to as the “Due Diligence Approval
Date”;
6.2. by no later than 7 business days from the Due Diligence
Approval Date, Fairvest shall furnish the Seller with
written notice of the securing of the approval of
Fairvest’s investment committee to the conclusion and
implementation of the Acquisition Agreement;
6.3. by no later than 10 business days from the Due Diligence
Approval Date, the Seller shall furnish Fairvest with
written notice of the securing of the approval of the
Seller’s investment committee to the conclusion and
implementation of the Acquisition Agreement;
6.4. by no later than 10 business days from the Due Diligence
Approval Date, the board of directors of Fairvest
approves the Acquisition and adopts all resolutions that
may be required in terms of the Company’s memorandum of
incorporation and delivers copies of such resolutions to
the Seller;
6.5. by no later than 30 April 2015 (“Finance Commitment
Date”), Fairvest shall provide the Seller with
confirmation in a form acceptable to the Seller, from
either its corporate sponsor or any third party that the
Seller may elect, that: i) the Company has raised
sufficient funds to discharge the Purchase Consideration
and ii) a detailed and indicative timetable setting out
the process as to when the aforesaid funds will be
available to discharge the Purchase Consideration in
totality;
6.6. by no later than 45 business days from the fulfilment of
the condition set out in paragraph 6.8 below, Fairvest
has obtained all shareholder, JSE and other regulatory
approvals that may be required for the Acquisition,
other than as described in paragraph 6.7 below;
6.7. by no later than 5 business days from the date that the
transfers of the Properties are lodged at the relevant
Deeds Office, the parties have obtained all JSE and
other regulatory approvals that may be required for the
issue and listing of the Linked Units, it being recorded
that such approvals will be conditional on the
registration of transfer of the Properties (with “Linked
Units” referring to such number of linked units to be
issued by Fairvest and traded on the JSE, that are
sufficient, at the issue price thereof, to discharge the
Purchase Consideration); and
6.8. by no later than 90 days from the signature date of the
Acquisition Agreement, the Acquisition is
unconditionally approved by the Competition Authorities
in terms of the Competition Act, Act 89 of 1998.
Fairvest is entitled to waive fulfilment of the condition
precedent set out in paragraph 6.1 above and the parties may
by agreement waive fulfilment of the conditions precedent set
out in paragraphs 6.2 to 6.4 above. The conditions precedent
set out in paragraphs 6.5 to 6.8 may not be waived.
7. GUARANTEES
The Seller shall, on the Transfer Date, provide Fairvest with
a rental guarantee, for a period of 24 months, in respect of
Shop 19, the lettable area of which measures 3,050m2, which
forms part of the First Property.
8. WARRANTIES
The Seller has provided warranties to the Company that are
standard for a transaction of this nature. Save for such
warranties, the Properties are sold voetstoots.
9. LONGSTOP DATE
Should transfer of the Properties not be effected within 240
days from the signature date of the Acquisition Agreement, for
any reason whatsoever, (other than by reason of delay
occasioned by the Seller due to negligence) save for non-
fulfilment of the conditions precedents) the Seller may elect
to cancel the Acquisition Agreement with immediate force and
effect or to proceed with 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 JSE Listings Requirements and is the
responsibility of the Company’s directors.
Forecast for Forecast for
the 1 month the 12 month
period ended period ended
30 June 2015 30 June 2016
Rental income 3,880,220 48,782,968
Straight-line rental accrual 149,327 1,138,726
Gross revenue 4,029,547 49,921,694
Property expenses (1,902,949) (24,761,683)
Net property income 2,126,598 25,160,011
Asset management fee (100,241) (1,202,888)
Operating profit 2,026,357 23,957,123
Fair value adjustment to (149,327) (1,138,726)
debentures
Finance cost (863,072) (10,356,864)
Profit before debenture interest 1,013,958 12,461,533
Debenture interest (1,013,958) (12,461,533)
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 Properties.
c) The forecast information for the 1 month period ended 30
June 2015 has been calculated from the anticipated
Transfer Date, being on or about 1 June 2015.
d) Uncontracted revenue constitutes 9.31% of the revenue for
the 1 month period ended 30 June 2015.
e) Uncontracted revenue constitutes 15.53% 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 50%
of the Acquisition is funded through existing debt
facilities at the average cost of debt of 8.61% and the
balance through new equity. 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.
17 March 2015
Cape Town
Sponsor
PSG Capital (Pty) Ltd
Date: 17/03/2015 04:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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