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Acquisition of property portfolio from Griffin Holdings
INVESTEC PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 2008/011366/06)
Share code: IPF ISIN: ZAE000180915
(“Investec Property Fund” or “the Fund”)
ACQUISITION OF PROPERTY PORTFOLIO FROM GRIFFIN HOLDINGS
1 THE GRIFFIN PORTFOLIO ACQUISITION
The board of directors of Investec Property Fund is pleased to announce that the Fund has entered into
agreements with Griffin Holdings Proprietary Limited and various of its subsidiaries (collectively “Griffin”) for the
acquisition of a portfolio of 22 properties (collectively the “Griffin Property Portfolio”) for an aggregate
acquisition value of R826 million (“Purchase Consideration”) at a blended yield of 9.3% based on contractual
rentals and 8.6% excluding a portion of the contractual rentals which are above market and which have been
priced in terms of a “top slice” (“Griffin Acquisition”).
In addition, as part of the Griffin Acquisition, options and rights of first refusal have been granted to Investec
Property Fund in relation to a substantial portion of the remaining land and properties owned by Griffin
amounting to GLA in excess of 150,000m2.
The Griffin Acquisition will be implemented by means of:
- the subscription by the Fund of ordinary shares in a newly incorporated entity, Listani Proprietary
Limited (“Listani”), on the first business day after the transfer of at least 80% of the Griffin Property
Portfolio to Listani (“Effective Date”); and
- the repurchase by Listani of all ordinary shares in Listani other than those owned by the Fund.
Griffin was established in 1993 as a privately-held property company focusing on the South African industrial,
commercial and retail sectors and has since evolved into a multi-dimensional real estate group with offices in
Johannesburg, Cape Town and London.
2 OVERVIEW OF THE GRIFFIN PROPERTY PORTFOLIO
The Griffin Property Portfolio is an attractive, well-located portfolio with strong property fundamentals which
consists of 22 properties: 18 industrial properties, 2 office properties, and 2 motor dealerships. The portfolio has
contractual in force escalations of 8.6%, a 3.2 year weighted average lease expiry (“WALE”), and no vacancies
(after taking into account the rental guarantee referred to in paragraph 4).
Considering the quality of the portfolio, the Purchase Consideration has been priced at an attractive yield of
9.3% based on contractual income. The implied yield is 8.6% excluding the portion of the contractual rentals
which are above market and which have been priced in terms of a “top slice” of R21.3 million.
2.1 Industrial
The Griffin Property Portfolio is dominated by quality industrial properties, representing 71% by value,
and which properties are situated in the following prime industrial nodes: Longmeadow (2 properties);
Spartan (8 properties); Isando (3 properties); Linbro Park (1 property); Epping (1 property); Pomona
(1 property); Germiston (1 property) and Milnerton (1 property).
The industrial portfolio tenant base consists of 80% national and / or multi-national tenants, with a
WALE of 3.7 years and average contractual escalations of 8.7%.
The properties in Longmeadow, representing approximately a quarter of the Griffin Property Portfolio
value, are located in the Longmeadow Business Estate. The 200 hectare estate has become one of
the primary industrial addresses on the reef and benefits from its central location within 15 minutes of
Sandton, Midrand, Johannesburg and the East Rand industrial basin including the OR Tambo
International Airport. The estate offers excellent access being adjacent to both the N3 highway and
R25 Modderfontein Road. Both the Kevro (one of the leading manufacturers and wholesale suppliers
of branded and corporate clothing in South Africa) and Rohlig Grindrod (a subsidiary of Grindrod
Limited) properties front onto the N3 highway and provide prime visibility and signage opportunity for
tenants. The Longmeadow industrial node has a 0% vacancy, and has experienced improved
average rental growth of c. 7.1% according to the April 2015 IPD Industrial Vacancy Report.
The properties in Isando and Spartan are single tenanted light industrial units with the majority
ranging from between 2000 m2 – 4000 m2 . Isando and Spartan offer easy access to the R21, N12
and R24 and are ideally positioned next to OR Tambo International Airport, within easy reach of the
airport cargo terminals via the highways and back routes. Isando is home to the Rhodesfield Gautrain
Station, part of the rapid rail network linking the Johannesburg CBD, Sandton, Rosebank, Midrand,
Centurion, Hatfield, Isando and OR Tambo International Airport. 85% of the tenants in these
properties are in occupation of the premises for a second lease term.
Pomona is similarly well located relative to the OR Tambo International Airport, and offers efficient
access to all the major transport routes. The property in Pomona, tenanted by AGCO, is a newly
developed A grade warehouse which fronts onto the R21 highway offering prime visibility. AGCO is a
global manufacturer of agricultural equipment and is listed on the NYSE with a market capitalisation
of approximately US$4.5bn.
The remaining properties in Linbro Park, Epping, Germiston and Milnerton are well located in their
respective industrial nodes with good access and A grade tenants including Consol Glass, Kevro and
Premier Foods. The property in Linbro Park is a newly developed A-grade warehouse for Kevro.
2.2 Motor dealerships
The two motor dealerships represent 21% of the Griffin Property Portfolio value and are well
established in their respective nodes, with the joint dealership / workshop of Sabaru / Danmar (wholly
owned subsidiary of Imperial Holdings Limited) located in the heart of Longmeadow and the CMH
Nissan dealership located on New Road in Midrand.
2.3 Offices
The two office properties which represent 8% of the Griffin Property Portfolio value were acquired as
part of the packaged transaction. The Midrand property is located at Grand Central Airport and is
tenanted by International SOS, a company providing health and security risk management services to
international travellers Commerce Corner is a 3 321 m2 multi-tenanted office property in Randburg
the anchor tenant of which is Advanced Debt Recovery Solutions Proprietary Limited, is one of the
leading debt collection and debt collection management operations in South Africa. These properties
were valued by the directors at a blended yield of 12.5%, and the Fund will look to recycle its capital
on these properties in the near to mid-term.
Snapshot of the Griffin Property Portfolio
Net income
from 1 July
2015 to 30 Purchase
Rental/ WALE (by June 2016 Consideration
Property name Location Sector Tenant GLA (m2) m2 Revenue) (Rm) 2 (Rm)
Consol Glass Germiston, Gauteng Industrial / Storage Consol Glass 21,331 38.1 2.5 7.7
Longmeadow,
Kevro - Longmeadow Gauteng Industrial Kevro 10,852 102.9 4.2 13.1
Longmeadow,
Grindrod Gauteng Industrial Rohlig Grindrod 7,540 108.4 2.0 8.8
AGCO Pomona, Gauteng Industrial AGCO 6,888 76.3 7.4 5.8
Kevro - Longlake Linbro, Gauteng Industrial Kevro 4,914 62.7 4.2 3.3
National Urethane Industries
(New) Isando, Gauteng Industrial National Urethane Industries 3,628 36.3 4.2 1.4
North Safety Products Isando, Gauteng Industrial North Safety 3,000 34.0 4.3 1.1
National Urethane Industries
(Old) Isando, Gauteng Industrial National Urethane Industries 3,000 33.4 4.2 1.0
MTU Spartan, Gauteng Industrial MTU South Africa 3,384 46.7 4.4 1.6
Coastal Air, GTD Express, VDN Carriers and
Coastal Air Couriers Spartan, Gauteng Industrial Logistics 3,240 50.8 3.6 1.7
Jotun Paints Spartan, Gauteng Industrial Jotun Paints 2,600 45.8 0.9 1.2
Armadillo Spartan, Gauteng Industrial Armadillo Concepts 2,081 50.3 6.2 1.1
Thistle Bakery Spartan, Gauteng Industrial Thistle Bakery 1,850 49.1 1.4 0.8
Plastichem Spartan, Gauteng Industrial Plastichem 1,753 56.1 0.8 1.0
Baldwin Filters Spartan, Gauteng Industrial Baldwin Filters 1,450 57.0 5.7 0.9
Aluminco Spartan, Gauteng Industrial Aluminco 400 49.7 0.8 0.2
Premier Food CT Epping, Cape Town Industrial Premier Foods 7,250 55.7 0.5 4.9
Milnerton, Western
So - So Trading Cape Industrial Eurotiles 3,190 23.5 1.0 0.7
International SOS Midrand, Gauteng Office SOS International 5,822 83.7 2.3 5.4
Advanced Debt Recovery Solutions,
Hospitality Professionals SA, Junk Mail
Publishing,
Commerce Corner Randburg, Gauteng Office Rubi Blue IT Solutions, and others 3,321 91.7 1.6 2.6
Longmeadow, Retail (motor
Subdan Gauteng dealership) Subaru, Danmar Autobody 12,000 54.8 3.2 7.0
Retail (motor
CMH Midrand, Gauteng dealership) Combined Motor Holdings 3,918 135.5 2.7 6.0
Total 113,412 63.6 3.2 77.0 805.1 ^
Notes:
^ Reconciliation of the Purchase Consideration
1. The rental per m2 reflects the gross rental income, including operational costs but excluding utility R'm Income Yield (%)
recoveries, per m2
2. The net income shown is for the period 1 July 2015 to 30 June 2016. This forecast has not been Market value 805.1
reviewed or reported on by the Fund’s auditors Top slice 21.3
3. The income excluding the contractual rental in excess of market is R71.5m which implies an Portfolio value 826.4 77.0 9.3%3
acquisition yield of 8.6%
Less: Property fees reimbursed (see paragraph 4) (3.0)
Purchase price less reimbursements 823.4
3 RATIONALE FOR THE GRIFFIN ACQUISITION
The Griffin Acquisition is consistent with the Fund’s growth and investment strategy of building a quality portfolio
by investing in well-priced income producing properties that optimise capital and income returns over the
medium to long-term for shareholders. The Griffin Acquisition introduces a quality portfolio of income producing
properties into the Fund’s asset base and, in particular enhances the real estate fundamentals of the Fund’s
existing industrial portfolio. The Griffin Acquisition also increases the Fund’s assets to R9.5 billion, providing
further scale and diversification to the Fund.
The industrial sector is well understood by Investec Property Fund and its management team, and the Fund has
created significant value from its own industrial portfolio as a result of cost efficiency initiatives and well
executed letting and renewals.
Griffin has also granted options to the Fund over a further portfolio of properties and a right of first refusal in
respect of the remaining properties owned by Griffin comprising approximately 156,184m2 of GLA. This provides
the Fund with an attractive opportunity to acquire further quality properties from Griffin in future.
4 PURCHASE CONSIDERATION AND KEY TERMS
The Purchase Consideration will be settled in cash and will be funded either through debt and/or equity. The
Fund is conservatively geared with a gearing ratio of 23.6% and has significant headroom in terms of funding
capacity and available facilities to fund the purchase consideration.
Griffin and the Fund have agreed to, inter alia, the following additional commercial terms:
- Griffin has agreed to re-imburse the Fund an amount of R3.0 million in respect of property
management fees for two years from the Effective Date which will be deducted from the Purchase
Consideration;
- Griffin has granted the Fund a two year rental guarantee in respect of 433m2 of vacant space, and
certain storage income and parking income in Commerce Corner. The income in respect of the rental
guarantee is included in the net income for Commerce Corner shown above;
- Griffin has granted the Fund a rental guarantee totalling R900,000 in respect of Premier Cape Town
where the lease expires on 1 December 2015; and
- the Fund has agreed to pay Griffin an agterskot in respect of 5,000m2 of vacant office space which
adjoins the Consol Glass industrial facility should the space be let within 24 months of the Effective
Date. The agterskot payment will be calculated using a capitalisation rate of 10.5% on the 12 month
forward net income (after direct property related expenses and property management expenses).
5 CONDITIONS PRECEDENT
The Griffin Acquisition is subject to, inter alia, the fulfilment (or waiver, where applicable) of the following
conditions precedent:
i. at least 80% of the Griffin Property Portfolio by value, or a lesser percentage of the properties
acceptable to IPF, transferring into the name of Listani; and
ii. the approval of the Griffin Acquisition in terms of the Competition Act within 180 days from the
signature date of the transaction agreements.
6 OPTIONS AND RIGHTS OF FIRST REFUSAL
As part of the Griffin Acquisition, the Fund has been granted options to acquire certain of the remaining
properties owned by Griffin (“Option Properties”). The options allow the Fund to purchase the properties at an
agreed forward yield and provide the Fund with an attractive pipeline of additional quality properties.
The Option Properties comprise, inter alia:
Purchase Option
Property name Location Sector GLA Lease expiry Escalation yield 1 period 5
Pomona January
Sasfin Property Extension 3 Industrial 8,972 31 Dec 2018 7.0% 8.5% 4 2016 2
Serioplast Property Anderbolt Industrial 6,605 31 Oct 2026 7.5% 8.5% 4 June 2019 2
Notes:
1. Based on the 12 month forward net rental income from the date of transfer of the property (after all direct property and
property management expenses)
2. In terms of the lease, the tenant has an option to purchase the property, and the Fund’s option applies to the extent that
the tenant does not exercise their option
3. The Sasfin Development is a new facility located next to the AGCO building in Pomona
4. The purchase yield will be adjusted for movements in SWAP rates between signature date and the date of exercise of
the option
5. The option period is 90 days from the option commencement date
Investec has the right to conduct a due diligence on each of the Option Properties prior to exercising its option,
and the exercise of the options will be conditional on the Fund obtaining the necessary regulatory approvals.
In addition, Griffin has granted the Fund a right of first refusal (subject to other existing options and rights of first
refusal granted to tenants) over the remaining properties and developments owned by Griffin, comprising
approximately 156,184m2 of GLA. Most of these properties are single tenanted, with Unilever, Sasfin, Brait and
Eskom amongst the list of national anchor tenants.
The Unilever property is a newly developed 105,932m2 distribution facility in Anderbolt.
7 WARRANTIES
Griffin has provided warranties and indemnities to the Fund that are standard for a transaction of this nature.
8 VALUATION
The board of directors of the Fund is satisfied that the aggregate value of the Griffin Property Portfolio as shown
above is in line with the directors own assessment of the aggregate value of the portfolio.
9 CATEGORISATION
The Griffin Acquisition is classified as a category 2 transaction in terms of the JSE Listings Requirements and,
accordingly, is not subject to approval by the Fund’s shareholders.
Johannesburg
5 June 2015
Investment Bank and Sponsor Legal advisor
Investec Bank Limited Fluxmans Inc.
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