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SA Corporate Real Estate Fund/SA Corporate Real Estate Limited -Posting of Circular & abridged Pre-listing statement
SA CORPORATE REAL ESTATE FUND
(A portfolio forming part of SA Corporate Real Estate Trust Scheme (the “Scheme”), a Collective
Investment Scheme in property registered in terms of the Collective Investment Schemes Control Act,
No. 45 of 2002) (the “Act”)
(Approved as a REIT by the JSE Limited)
JSE share code: SAC ISIN: ZAE000083614
(“SA Corporate” or “the Fund”)
Managed by SA Corporate Real Estate Fund Managers Limited
(Registration number 1994/009895/06)
(Incorporated in the Republic of South Africa)
(“the Manager” or “Manco”)
SA CORPORATE REAL ESTATE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2015/015578/06)
JSE share code: SAC ISIN: ZAE000203238
(“Newco” or “the Company”)
POSTING OF CIRCULAR RELATING TO ESTABLISHMENT OF SA CORPORATE REAL
ESTATE FUND AS AN INTERNALLY MANAGED CORPORATE REIT AND AN ABRIDGED
PRE-LISTING STATEMENT FOR NEWCO
SA CORPORATE CONVERSION CIRCULAR
1. Introduction
SA Corporate unitholders (“Unitholders”) are referred to the previous SENS announcements on
31 October 2013 and 2 April 2014, regarding the economic internalisation of the management of
SA Corporate which had the effect of the Manager taking over from Old Mutual Property
Proprietary Limited (“OMP”) the asset management function in relation to the assets of the Fund
(the “Internalisation”).
This announcement sets out the proposed transaction whereby SA Corporate will be reconstituted
to an internally managed corporate Real Estate Investment Trust (“REIT”) and listed on the JSE
as Newco (the “Transaction”).
2. Background and rationale
2.1. In line with SA Corporate's four pillar strategy, which includes aligning investor and
management interests, the Fund concluded the Internalisation on 1 May 2014.
2.2. The existing service charge arrangement in respect of the Fund was changed from a monthly
charge based on a value of one twelfth of 0.4% of the aggregate market capitalisation of the
Fund plus borrowings, to a monthly charge equal to the actual operating costs incurred by the
Manager in administering the Fund as well as scrapping the initial charge of 5% on the value
of any new participatory interests (“Units”) issued. A lump sum of R185 million plus Value
Added Tax (“VAT”) was paid by the Fund to the Manager, which was settled through cash
resources.
2.3. The rationale for SA Corporate in executing the Internalisation was to align the interests of the
Manager with those of its Unitholders and eliminate any real and perceived conflicts. In order
to achieve a complete Internalisation, which results in Unitholders having control over
management and the board of directors of the Manager (“the Board”) as well as ownership of
the Manager, a two-phased approach was proposed, with the Internalisation comprising
phase I.
2.4. Phase II involves the conversion of the Scheme and the Fund from a collective investment
scheme in property (“CISIP”) to a corporate REIT, as soon as the appropriate regulatory
framework is in place to achieve this (“Phase II”).
2.5. On 28 March 2014 the Registrar of Collective Investment Schemes (“Registrar”) appointed in
terms of the Act, issued Board Notice 42 of 2014 (“Notice”), which sets out the framework for
converting the Scheme to a corporate REIT and the subsequent winding up of the CISIP
concerned. Subject to the approval of Unitholders, the Transaction will be given effect to in
accordance with the provisions of the Notice.
2.6. The Board believes that it is the appropriate time for SA Corporate to convert from a CISIP to
a corporate REIT, which will further align the interests of the Manager with Unitholders.
Furthermore, the introduction of the REIT regime has resulted in the alignment of the fiscal
consequences of investing in a CISIP and a property loan stock company, and thus the key
rationale for investing in a CISIP no longer exists. There is also an investor preference for
corporate REITs as a result of institutional investors having a better understanding of the
regulatory environment of corporate REITs when compared to a CISIP.
3. Mechanics of the transaction
3.1. Prior to the implementation of the Transaction, SA Corporate has undertaken an internal
restructure in terms of which SA Corporate has disposed of its directly held properties to one
of its wholly-owned fixed property companies, SA Retail Properties Proprietary Limited (“SA
Retail”). As a result SA Corporate will hold all of its immovable properties indirectly via wholly-
owned fixed property companies prior to implementation of the Transaction.
3.2. In terms of the Transaction and with effect from 30 June 2015, SA Corporate will dispose of
all its assets comprising its holdings in its wholly-owned fixed property companies to Newco in
consideration for:
3.2.1. the assumption by Newco of SA Corporate's liabilities; and
3.2.2. shares in Newco, which shares will be issued directly to Unitholders on behalf of SA
Corporate,
(“the Amalgamation”).
In addition, Newco has indemnified the Manager, SA Corporate and the SA Corporate trustee
– FirstRand Bank Limited (“Trustee”) against any claims which may be brought against any of
them in respect of any claim arising out of or in connection with any contractual or delictual
claim of any nature incurred by SA Corporate.
3.3. Unitholders recorded in the SA Corporate register on the record date, being Friday, 3 July
2015, will receive Newco shares on a pro rata basis in the ratio of one Newco share for every
one SA Corporate Unit held on the record date.
3.4. Current Unitholders in SA Corporate will become direct shareholders in Newco. They will
therefore continue to be invested in the same base of assets in which they are currently
invested via their holding of SA Corporate Units, namely all of the immovable properties held
directly by SA Corporate and shares in SA Corporate's wholly-owned fixed property
companies.
3.5. Newco has secured a listing by way of an introduction in the Real Estate, Diversified REITs,
sector of the Johannesburg Stock Exchange (“JSE”), in terms of the FTSE classification,
under the abbreviated name: "SA Corp", JSE share code: SAC and ISIN: ZAE000203238 with
effect from the commencement of trade on Monday, 29 June 2015. In this regard, SA
Corporate has posted a pre-listing statement dated 30 April 2015 (“Pre-listing Statement”) to
Unitholders which contains full details of Newco. An abridged version of the Pre-listing
Statement is set out below.
3.6. Following Unitholder approval of and subsequent implementation of the Transaction, SA
Corporate will no longer hold any assets and liabilities and will therefore no longer qualify for
a listing on the JSE in terms of the JSE Listings Requirements (“Listings Requirements”).
Accordingly, the listing of SA Corporate on the Main Board of the JSE will be terminated with
effect from Monday, 6 July 2015 and SA Corporate will be liquidated and wound-up.
3.7. The net effect of the above will be to transform SA Corporate from a CISIP to a corporate
REIT.
3.8. The Registrar and the Trustee have indicated that they have no objection to the Transaction,
subject to Unitholders approving the Transaction by passing a resolution at a general meeting
convened for that purpose.
4. Conditions precedent
The Transaction is subject to the fulfilment of the following conditions precedent by Friday, 26
June 2015:
4.1. the approval by Unitholders of the resolution proposed in the notice of general meeting;
4.2. the Competition Authorities having approved the Transaction to the extent required;
4.3. the approval by SA Corporate's lenders regarding a syndicated loan to SA Retail, secured by
guarantees by SA Corporate and some of its fixed property companies;
4.4. the Registrar having approved the Transaction (which is subject to the requisite majority of
Unitholders voting in favour of the Transaction at the general meeting); and
4.5. suitable rulings being obtained from the Advance Tax Ruling Unit of the South African
Revenue Service relating to certain aspects of the Transaction, including in respect of roll-
over relief in terms of sections 42 and 44 of the Income Tax Act. The Manager shall have the
discretion to waive the requirements in relation to the obtaining of such rulings or any part
thereof, should it determine that such ruling or part thereof is no longer required.
5. Financial information
5.1. At the time of implementing the Internalisation it was agreed that during Phase II, Newco will
purchase the shares of the Manager from Marriott Property Services Proprietary Limited
(“Marriott”) (a subsidiary of OMP) for R1.00 and the Manager will become a wholly-owned
subsidiary of Newco (“Manco Transaction”). The Internalisation was effective from 1 May
2014, therefore the Manco Transaction will have no further material financial effect on
Unitholders.
5.2. The Transaction will result in once-off costs being incurred by SA Corporate of approximately
R2 million, in addition to internal restructuring costs (relating to conveyancing and bond
registration fees) of approximately R3.76 million, which will be settled by Newco in cash. After
the effective date of the Transaction (being midnight on 30 June 2015) (“Effective Date”), the
capital adequacy reserves ("CAR") required to be held by the Manager in terms of CISCA as
a result of the reduced scope of the Manager's functions in relation to the Fund, namely the
winding-up of SA Corporate, will be reduced and a portion of the amount available will be
applied towards the discharge of the transaction costs. As the CAR was approximately R8.6
million as at the end of April 2015, and it is anticipated that the CAR after the Effective Date
will be approximately R600 000, the full amount of the Transaction costs will be funded from
the balance of approximately R8 million. Furthermore the Transaction is considered to be a
capital reorganisation in terms of International Financial Reporting Standards and the
Transaction costs will be netted off against the capital of Newco.
5.3. Accordingly, the net effect of the Transaction on SA Corporate's earnings per Unit, headline
earnings per Unit, net asset value per Unit and distribution per Unit for the twelve months
ended 31 December 2014 are insignificant, as defined in the Listings Requirements.
6. Notice of general meeting
6.1. SA Corporate unitholders are hereby advised that SA Corporate has posted a circular dated
30 April 2015 (the “Circular”) to Unitholders, containing full details of the Transaction and a
notice of general meeting to approve the Amalgamation, the de-listing of SA Corporate, the
winding-up of SA Corporate and the payment of the costs associated with the Transaction.
6.2. A general meeting of Unitholders will be held at the Johannesburg offices of Cliffe Dekker
Hofmeyr, being 1 Protea Place, Sandown, Sandton at 11:00 on Friday, 29 May 2015 for the
purpose of considering and, if deemed fit, passing with or without modification, the resolution
necessary to implement the Transaction.
6.3. A copy of the Pre-listing Statement has been posted to Unitholders together with a copy of the
Circular and should be read in conjunction with the Circular as it contains important
information for Unitholders about Newco, as required by the Listings Requirements.
7. Related party considerations
7.1. SA Corporate paid a lump sum of R185 million plus VAT to the Manager for the
Internalisation, and the parties to the Internalisation agreed that at the time of the Transaction,
being Phase II, Newco would purchase, for a nominal sum of R1.00 (“Manco
Consideration”) (pursuant to the provisions of a relationship agreement between Marriott,
OMP and the Manager, dated 31 October 2013), the Manager's shares from Marriott. The
R185 million less withholdings for taxation and the CAR, was distributed to the Manager’s
shareholders.
7.2. Accordingly, as the percentage ratio of the Manco Consideration to SA Corporate's market
capitalisation is less than 0.25%, the Manco Transaction in terms of paragraph 10.6 of the
Listings Requirements is not regarded as a related party transaction.
7.3. Manco will be excluded from voting at the general meeting in terms of the Notice.
8. Salient dates of the Transaction
The salient dates and times of the Transaction are set out below.
2015
i) Last day to trade to receive the Circular and the Pre-listing Friday, 17 April
Statement
ii) Record date to be entitled to receive the Circular and the Pre- Friday, 24 April
listing Statement
iii) Circular and Pre-listing Statement posted to Unitholders on Thursday, 30 April
iv) Announcement of posting of Circular, notice of General Meeting Thursday, 30 April
and abridged Pre-listing Statement on SENS on
v) Announcement of posting of Circular, notice of general meeting Monday, 4 May
and abridged Pre-listing Statement in the press on
vi) Last day to trade to be recorded in the SA Corporate register in Friday, 15 May
order to be eligible to vote at the general meeting
vii) Record date in order to be eligible to participate in and vote at Friday, 22 May
the general meeting
viii) Receipt of forms of proxy in respect of the general meeting of Wednesday, 27 May
Unitholders by 10:00 on
ix) The general meeting of Unitholders to be held at 11:00 on Friday, 29 May
x) Results of the general meeting released on SENS on Friday, 29 May
xi) Results of the general meeting published in the press on Monday, 1 June
xii) Finalisation announcement released on SENS on Friday, 19 June
xiii) Finalisation announcement published in the press on Monday, 22 June
xiv) Last day to trade in SA Corporate Units on the JSE to Friday, 26 June
participate in the Transaction
xv) Anticipated listing of Newco on the JSE from the Monday, 29 June
commencement of trade on
xvi) SA Corporate Units suspended from the commencement of Monday, 29 June
trade on
xvii) Trading in Newco shares with the JSE share code: SAC and Monday, 29 June
ISIN: ZAE000203238 commences on
xviii) Effective Date of the Transaction Wednesday, 1 July
xix) Record date to participate in the delisting and to be entitled to Friday, 3 July
receive Newco shares
xx) Newco shares issued to Unitholders pursuant to the Monday, 6 July
Transaction
xxi) Accounts at CSDP or broker updated in respect of Monday, 6 July
dematerialised shareholders
xxii) Expected date of posting of Newco share certificates to certified Monday, 6 July
shareholders
xxiii) Delisting of SA Corporate Units from the JSE at Monday, 6 July
commencement of trade on
All dates and times are local dates and times in South Africa. The above dates and times are
subject to change. Any changes will be released on SENS
ABRIDGED PRE-LISTING STATEMENT FOR NEWCO
This abridged pre-listing statement relates to the proposed listing of Newco in respect of all its issued
shares in the “Real Estate”, “Diversified REITs”, sector of the JSE, in terms of the FTSE classification,
under abbreviated name: “SA Corp”, JSE share code: SAC and ISIN: ZAE000203238 with effect from
the commencement of trade on Monday, 29 June 2015.
This abridged pre-listing statement is not an invitation to the public to subscribe for shares in Newco.
It is issued in compliance with the Listings Requirements to provide information to Unitholders with
regards to Newco.
This announcement contains the salient information in respect of Newco, which is more fully
described in the Pre-listing Statement which was sent to Unitholders on 30 April 2015. For a full
appreciation of Newco, the Circular and the Pre-listing Statement should be read in their entirety.
1. Overview and background
1.1. Newco was incorporated on 19 January 2015 as a public company. Newco’s financial year
end is 31 December. Newco’s registered address is South Wing, First Floor, Block A, The
Forum North Bank Lane, Century City, 7441.
1.2. Newco is a diversified REIT invested in retail, industrial, office and residential property
primarily in the metropolitan centres of South Africa. Its strategy is to deliver sustainable
distribution growth, unlock value within its retail portfolio, maintain a quality industrial portfolio
and expand its Johannesburg inner-city residential portfolio.
1.3. Immediately after the listing of Newco on the JSE, it is expected that:
1.3.1 the authorised share capital of the Company will comprise 4 000 000 000 ordinary
shares of no par value;
1.3.2 the issued share capital of the Company will comprise 2 024 162 411 ordinary shares
of no par value with stated capital amounting to R6 891 373 842; and
1.3.3 the one share which the Manager holds in Newco will, after implementation of the
Transaction, be held as a treasury share.
2. The board of Newco
2.1. The Board of the Manager is also the board of directors of Newco, with the exception of Peter
Levett.
2.2. The board of Newco currently comprises nine directors of whom seven are independent non-
executive, and two are executive directors.
2.3. The full names, age, business addresses and positions of the directors of Newco are outlined
below:
Name and age Jeff Molobela (59)
Business address 114 Glendower Drive
Woodhill Golf Estate, Pretorius Park
Pretoria East, 0081
Position Independent Chairman, Non-Executive Director
Chairman of the Nomination Committee
Member of the Remuneration Committee
Name and age Terence Rory Mackey (53)
Business address SA Corporate Real Estate Fund
7th Floor, World Trade Center
Cnr West Road South and Lower Road
Morningside, Sandton, 2196
Position Managing Director
Member of the Social, Ethics and Environmental Committee
Member of the Risk and Compliance Committee
Member of the Investment Committee
Invited to attend the Nomination, Remuneration and Audit
Committee meetings
Name and age Antoinette Margaret Basson (45)
Business address SA Corporate Real Estate Fund
South Wing, First Floor
Block A, The Forum
North Bank Lane
Century City, 7441
Position Financial Director
Member of the Social, Ethics & Environmental Committee
Member of the Risk and Compliance Committee
Invited to attend the Audit and Investment Committee meetings
Name and age Robert John Biesman-Simons (60)
Business address Lombard Insurance Company Limited
Sanclare Building
21 Dreyer Street
Claremont, 7708
Position Independent Non-Executive Director
Chairman of the Remuneration Committee
Chairman of the Audit Committee
Member of the Investment Committee
Ex-officio member of the Risk & Compliance Committee
Name and age Gugulethu Patricia Dingaan (39)
Business address Wipcapital Proprietary Limited
WIPHOLD House, 29 Central Street,
Houghton, 2198
Position Independent Non-Executive Director
Member of the Audit Committee
Member of the Remuneration Committee
Name and age Kenneth John Forbes (65)
Business address 2 Thirlmere Place
Durban North
4051
Position Independent Non-Executive Director
Chairman of the Investment Committee
Member of the Social, Ethics & Environmental Committee
Name and age Ebrahim Suleman Seedat (63)
Business address EThekwini Municipality
6th Floor, Florence Mkhize Building
251 Smith Street,
Durban, 4001
Position Independent Non-Executive Director
Chairman of the Risk and Compliance Committee
Member of the Audit Committee
Name and age Emily Mauristene Hendricks (41)
Business address Absa Capital Investment Bank
15 Alice Lane
Sandton, 2196
Position Independent Non-Executive Director
Chairman of the Social, Ethics & Environmental Committee
Member of the Investment Committee
Name and age Mabotha Arthur Moloto (46)
Business address 315 Broadlands Estate
Bendor, Polokwane
0699
Position Independent Non-Executive Director
Member of the Investment Committee
Member of the Nomination Committee
Member of the Risk and Compliance Committee
All of the directors are South African nationals.
3. Management
3.1. Asset management
The asset management function will be housed internally through the Manager. SA Corporate
concluded the Internalisation in May 2014, which had the effect of internalising SA
Corporate’s management company. Further information regarding the Internalisation and
rationale is provided in the Circular.
3.2. Property management
The property management agreement between the Manager and OMP expired on 30 June
2013 and was not renewed. Following a request for proposals, Broll was appointed as
property manager for the entire property portfolio of SA Corporate excluding the Afhco
property portfolio (which is managed internally by Afhco employees). The property
management agreement with Broll expires on 30 June 2016. The monthly fee as a
percentage of collected income varies between 1% and 3%, depending on property type.
4. Adoption of distribution per share as a performance measure
4.1. In terms of paragraph 3.4(b)(vi) and 3.4(b)(vii) of the Listings Requirements, Unitholders are
advised that owing to the nature of the business conducted by Newco, being that of a
property company (with REIT status), the board of directors of Newco has decided to adopt
the “distribution per share” performance measure for future trading statement purposes.
5. Action required
If you are in any doubt as to what action to take, you should consult your broker, attorney or other
professional advisor immediately.
6. Further copies of the Pre-listing Statement
Copies of the Pre-listing Statement may be obtained during normal business hours from 30 April
2015 to 3 July 2015 from the following places and at www.sacorporatefund.co.za:
SA Corporate Real Estate Limited
South Wing, First Floor, Block A, The Forum,
North bank Lane
Century City, 7441
SA Corporate Real Estate Limited
7th Floor, World Trade Centre, Cnr West Road South and Lower Road
Morningside
Sandton, 2196
Computershare Investor Services Proprietary Limited
Ground Floor, 70 Marshall Street
Johannesburg, 2001
Investec Corporate Finance, a division of Investec Bank Limited
2nd Floor, 100 Grayston Drive
Sandown
Sandton, 2196.
Sandton
30 April 2015
Corporate Advisor and Transaction Sponsor
Investec Bank Limited
Attorneys, Tax and Competition Law Advisors
Cliffe Dekker Hofmeyr
Independent Reporting Accountants
Deloitte & Touche
Sponsor
Nedbank Capital (a division of Nedbank Limited)
Date: 30/04/2015 01:06:00 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.
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