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INVESTEC AUSTRALIA PROPERTY FUND - Acquisition of new property for AUD 26,000,000

Release Date: 15/10/2015 07:05
Code(s): IAP     PDF:  
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Acquisition of new property for AUD 26,000,000

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 PROPERTY FOR AUD 26,000,000


1.   ACQUISITION OF NEW PROPERTY


1.1. Acquisition

             Unitholders are advised that the Fund has entered into a contract for sale with CTI Freight Systems Pty
             Limited to acquire the property located at 54 Miguel Road, Bibra Lake, Western Australia (Property).

             The effective date of the acquisition of the Property is the settlement date under the contract for sale,
             which is scheduled for 16 October 2015.

             There are no conditions precedent to the acquisition of the Property.

1.2. Purchase consideration

             The purchase consideration is AUD 26,000,000 which represents an annualised property yield of 7.94%
             (7.51% post all transaction costs).

             The purchase consideration and all transaction costs will be funded through the existing debt facility with
             Westpac Banking Corporation. The Fund’s gearing post the acquisition of the Property will be 37%.

1.3.    Rationale for acquisition of the Property

             The acquisition of the Property 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 of the
             Property represents an attractive investment for the Fund for the following reasons:

             (a)    the Property is located in the premier industrial precinct south of the Perth CBD which is home to
                    tenants such as Bidvest Logistics, Sims Metals and Masters Home Improvement;

             (b)    the Property is conveniently located in close proximity to the Kwinana Freeway, the main north /
                    south access road connecting to the Perth CBD, the Roe Highway, that provides direct access to
                    Perth airport, and to the Port of Fremantle;

             (c)    the Property is 100% leased to CTI Freight Systems Pty Limited, a wholly-owned subsidiary of
                    ASX-listed transport logistics and business services specialist CTI Logistics Limited;

             (d)    CTI Logistics Limited has provided an all obligations guarantee under the lease;

             (e)    the annual rent at the Property is AUD 92 per m² which is at market;

             (f)    the lease term is 12 years and contracted annual rental growth is the greater of 3% and CPI; and

             (g)    it is accretive based on the positive spread between the property yield and the Fund’s all in cost of
                    funding of 4.02%.
1.4. Specific information relating to the Property

         Registered description       Lot 157 on Plan 17235 Certificate of Title Volume 1923 Folio 106
         Title                        Freehold
         Sector                       Industrial
         Location                     21 km south of the Perth CBD
         Year built                   Between 1992 and 2008
         Site area                    40,824m2
         GLA                          22,358m²
         Rent per m2                  AUD 92
         Vacancy                      0%

        The Property has been valued at AUD 26,000,000 effective as at 2 September 2015 by Knight Frank
        Australia Pty Ltd (ACN 004 973 684). The valuer, Andrew Steed, is an independent valuer and is an
        Associate of the Australian Property Institute and a Certified Practicing Valuer (registration no.44704).

1.5.    Forecast information on the acquisition of the Property

        The forecasts have been prepared with effect from 1 November 2015 and include forecast results for the
        years ending 31 March 2016 and 31 March 2017.

        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 relate to the Property only and have been prepared in
        accordance with the Fund’s accounting policies and in compliance with IFRS.


                                                                                           Forecast 5             Forecast 12
                                                                                        months ending           months ending
                                                                                        31 March 2016           31 March 2017
                                                                                              AUD'000                 AUD'000
       Revenue (including straight line revenue adjustment)                                     1,018                  2,442
       Total property expenses                                                                    (43)                  (105)
       Net property income                                                                        975                  2,337
       Fund management fees                                                                       (65)                  (156)
       Net operating income before finance charges                                                910                  2,181
       Finance costs                                                                            (460)                 (1,105)
       Net profit attributable to equity holders                                                  449                  1,077
       Less: straight line revenue adjustment                                                   (157)                   (346)
       Distributable income pre-withholding tax                                                   292                    730
       Distributable income post-withholding tax                                                  269                    669

        Notes:

        1.    All revenue for the reporting periods shown is contracted and is based on the leases in place at 1 November
              2015.

        2.    Distributions are payable to unitholders attributable to the acquisition of the Property and are partially shielded by
              depreciation allowances.

        3.    Material expenditure items relate to the Fund management fees (approximately 60% of total expenses).

        4.    No material expenditure items have been increased in the forecast period ending 31 March 2017 by more than
              15% over the previous financial period.

        5.    The finance costs assume an all in cost of funds of 4.02% with 82% of the cost of funds fixed via interest rate
              swaps for 5 and 7 years.

1.6.   Categorisation

       The acquisition of the Property is a category 2 transaction in terms of the JSE Listings Requirements and
       accordingly does not require approval by unitholders.




Johannesburg
15 October 2015


Investment Bank and Sponsor
Investec Bank Limited

Date: 15/10/2015 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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