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Update on Mainstream Acquisition
Fairvest Property Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/005011/06)
Share code: FVT
ISIN: ZAE000203808
(“Fairvest” or “the Company”)
(Approved as a REIT by the JSE)
UPDATE ON MAINSTREAM ACQUISITION
1. INTRODUCTION
1.1. Shareholders are referred to the Company’s SENS announcement dated
8 September 2015 (“Transaction Announcement”), in which the Company
advised that it had entered into an agreement (“Acquisition
Agreement”) with Born Free Investments 385 Proprietary Limited (“the
Seller”) to acquire the rental enterprises carried on by the Seller
at Boxer Centre Elliotdale, Mpitshane Shopping Complex and Boxer
Centre Mqanduli, details of which are provided in the Transaction
Announcement (“Mainstream Acquisition”).
1.2. Any terms appearing in title case in this announcement and that are
not otherwise defined herein, shall bear the meanings assigned to
them in the Transaction Announcement.
1.3. Shareholders are advised that on 9 December 2015 (“Addendum No. 2
Signature Date”), Fairvest, the Seller and FPP Property Venture 103
Proprietary Limited (“FPP”) entered into an addendum to the
Acquisition Agreement (“Addendum”), regarding certain changes to the
Mainstream Acquisition. The Company wishes to provide its
shareholders with details of these changes and to update shareholders
on the current progress with the Mainstream Acquisition.
2. CHANGES TO TRANSACTION STRUCTURE
2.1. It is envisaged that Fairvest will, prior to the implementation of
the Mainstream Acquisition, acquire an 80% shareholding in FPP, with
the Seller holding the remaining 20% of FPP’s issued share capital.
2.2. Fairvest has, in terms of the Addendum, nominated FPP in its place
and stead as purchaser under the Acquisition Agreement.
3. REGISTRATION DATE
3.1. As indicated in the Transaction Announcement, the effective date of
the Mainstream Acquisition shall, in respect of each Notarial Lease,
be the date of registration of the cession and delegation of such
Notarial Lease in the name of the Company, which shall occur as soon
as possible after the fulfilment of the conditions precedent to the
Acquisition Agreement (as amended by the addendum).
3.2. It is now anticipated that the above registration of transfer will
occur on or about 1 February 2016 (“Registration Date”).
4. PURCHASE PRICE
In terms of the Addendum, the purchase price for the Mainstream
Acquisition is reduced from R133 000 000 (one hundred and thirty-three
million Rand) to R129 000 000 (one hundred and twenty-nine million
Rand), including VAT at the rate of 0% (“Purchase Price”). The
Purchase Price will be payable in cash on the Registration Date.
5. CONDITIONS PRECEDENT
5.1. Shareholders are advised that the Company has concluded its due
diligence investigation in respect of the Rental Enterprises and
that the conditions precedent detailed in paragraphs 6.1, 6.2, 6.3
and 6.4 of the Transaction Announcement have been fulfilled.
5.2. The only outstanding conditions precedent to be fulfilled, are those
detailed in paragraphs 6.5 and 6.6 of the Transaction Announcement,
as well as the following new conditions precedent arising from the
Addendum, namely that:
5.2.1. within a period of 30 (thirty) days after the Addendum No. 2
Signature Date, the Seller and Fairvest have concluded a written
shareholders agreement regulating the relationship between
themselves as shareholders of FPP and providing for, inter alia:
5.2.1.1. the allotment and issue of all of the issued shares in FPP in
the following proportions:
5.2.1.1.1. Fairvest as to 80% (eighty percent);
5.2.1.1.2. the Seller as to 20% (twenty percent); and
5.2.1.2. the contribution and funding of the Purchase Price in the
proportions provided for in paragraph 5.2.1.1 above; and
5.2.2. within a period of 30 (thirty) days from the Addendum No. 2
Signature Date, the Seller and Fairvest (or its nominee) have
concluded a written property management agreement in respect of
the Rental Enterprise, incorporating certain agreed-upon terms.
6. FORECAST FINANCIAL INFORMATION IN RESPECT OF THE MAINSTREAM
ACQUISITION
The forecast financial information relating to the Acquisition for the
financial periods ended 30 June 2016 and 30 June 2017 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 5 month the 12 month
period ended period ended
30 June 2016 30 June 2017
Rental income 7,773,885 19,699,212
Straight-line rental accrual 579,239 786,967
Gross revenue 8,353,124 20,486,179
Property expenses (2,286,243) (5,878,374)
Net property income 6,066,881 14,607,805
Asset management fee (218,763) (525,030)
Operating profit 5,848,118 14,082,775
Finance cost - -
Profit before taxation 5,848,118 14,082,775
Taxation - -
Total comprehensive income 5,848,118 14,082,775
Total comprehensive income
attributable to:
- Owners of the parent 4,634,742 11,161,214
- Non-controlling interest 1,213,376 2,921,561
Notes:
a) Distributable earnings is R4,055,503 for the 5 month period ended
30 June 2016 and R10,374,247 for the 12 month period ended 30 June
2017, being the total comprehensive attributable income less the
straight-line rental accrual as set out in the table above.
b) Rental income includes gross rentals and other recoveries, but
excludes any adjustment applicable to the straight-lining of
leases.
c) Property expenses include all utility and council charges
applicable to the Properties.
d) The forecast information for the 5 month period ended 30 June 2016
has been calculated from the anticipated Registration Date, being
on or about 1 February 2016.
e) Contracted revenue constitutes 96.67% of the revenue for the 5
month period ended 30 June 2016 and 88.97% of the revenue for the
12 month period ended 30 June 2017.
f) Near-contracted revenue constitutes 3.33% of the revenue for the
5 month period ended 30 June 2016 and 11.03% of the revenue for
the 12 month period ended 30 June 2017.
g) Uncontracted revenue constitutes 0% of the revenue for the 5 month
period ended 30 June 2016 as well as for the 12 month period ended
30 June 2017.
h) Leases expiring during the forecast period have been assumed to
renew at the future value of current market related rates.
i) This forecast has been prepared on the assumption that 100% of the
Purchase Consideration is funded through new equity. The Company
could elect to partially or fully utilise its existing and/or new
debt facilities.
7. GENERAL
7.1. As indicated in the Transaction Announcement, the Mainstream
Acquisition qualifies as a Category 2 acquisition for the Company
in terms of the JSE Listings Requirements.
7.2. FPP will, upon the issuing to Fairvest of the shares referred to in
paragraph 5.2.1.1.1 above, become a subsidiary of the Company. In
this regard, Fairvest confirms that the requirements of paragraph
10.21 of Schedule 10 of the JSE Listings Requirements will be
complied with.
10 December 2015
Cape Town
Sponsor
PSG Capital Proprietary Limited
Date: 10/12/2015 10:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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