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Acquisition Of a New Property
Fairvest Property Holdings Limited
Incorporated in the Republic of South Africa
(Registration number: 1998/005011/06)
Share code: FVT
ISIN: ZAE000203808
(Approved as a REIT by the JSE)
(“Fairvest” or “the Company”)
ACQUISITION OF A NEW PROPERTY
1. SHOPRITE HEIDELBERG ACQUISITION
1.1. Shareholders of the Company are hereby advised that the Company
entered into an agreement (“Sale Agreement”)on 18 January 2016
with Vilhas Property CC (“Seller”) to acquire, as a going
concern, the rental enterprise operated by the Seller (“the
Rental Enterprise”) in respect of the property at Erf 3429,
Heidelberg, situated at 61 Voortrekker Street, Heidelberg,
Gauteng (“the Property”), being the shopping centre more
commonly known as Shoprite Heidelberg (“the Acquisition”).
1.2. The effective date of the Acquisition shall be the date of
registration of transfer of ownership of the Property to
Fairvest (“Effective Date”), which is expected to occur on or
about 1 May 2016.
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
3.1. The purchase consideration for the Acquisition is R54 954 500
(fifty-four million nine hundred and fifty-four thousand five
hundred Rand), which includes VAT at the rate of 0%, payable
on the Effective Date against registration of transfer of
ownership of the Property into the name of Fairvest.
3.2. The Company will settle the purchase consideration as follows:
3.2.1 an amount of R4 500 000 (four million five hundred thousand
Rand) will be paid in cash; and
3.2.2 the balance will be settled by the issue of new Fairvest
ordinary shares to the Seller (“Consideration Shares”) at a
price per share (“Issue Price”) equal to the higher of R1.90
per share or 95% of the 5 day volume weighted average price
(“VWAP”) of a Fairvest share calculated up to (and including)
the last business day before the Effective Date.
4. THE PROPERTY
Details of the Property are as follows:
Property Name Geographical Sector GLA Weighted
and Address Location (m2) Average
Gross
Rental/m2
(R/m2)
Shoprite 61 Voortrekker Retail 7,015 62.94
Heidelberg, Road,
Erf 3429, Heidelberg,
Heidelberg, Gauteng, 2310
Gauteng
5. PROPERTY SPECIFIC INFORMATION
Details regarding the Acquisition, as at the expected
Effective Date, are set out below:
Property Name Weighted Lease Vacancy
and Address Average Duration % by GLA
Escalation (years)
Shoprite 6.31% 2.13 0%
Heidelberg,
Erf 3429,
Heidelberg,
Gauteng
Notes:
a) The costs associated with the acquisition of the Property
are estimated at R961 704.
b) The cost of the Property is considered to be its 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
6.1. The Acquisition is subject to fulfilment of the following
conditions precedent:
6.1.1. That, by no later than 20 business days from the date on
which the Seller has provided Fairvest with access to or
copies of the due diligence information requested by
Fairvest, Fairvest has concluded its due diligence
investigation in terms of the Sale Agreement to its entire
satisfaction and has given written notice thereof to the
Seller, with the date of Fairvest giving the said written
notice to the Seller being referred to as the “Due Diligence
Approval Date”;
6.1.2. that, within 10 business days from the Due Diligence Approval
Date, the investment committee of Fairvest approves the
purchase of the Rental Enterprise and Fairvest delivers a
copy of such resolution to the Seller;
6.1.3. that, within 15 business days from the Due Diligence Approval
Date, the board of directors of Fairvest approves the
purchase of the Rental Enterprise and Fairvest delivers a
copy of such resolution to the Seller; and
6.1.4. that, to the extent necessary, within 20 business days from
the signature date of the Sale Agreement, the approval of
the shareholders of the Seller be obtained in accordance
with the provisions of sections 112 and 115 of the Companies
Act 2008.
6.2. Fairvest is entitled to waive the conditions precedent set out
in paragraphs 6.1.1, 6.1.2 and 6.1.3 above.
7. WARRANTIES
The Seller has provided warranties to Fairvest that are standard
for a transaction of this nature.
8. TERMS REGARDING THE CONSIDERATION SHARES
8.1 If any distribution which is payable by Fairvest at any time
in respect of the Consideration Shares includes any income
which is attributable to any period prior to the Effective Date
(“Pre-transfer Period”), then the Seller waives its right to
such portion of the distribution payable in respect of each
Consideration Share which relates to such Pre-transfer Period.
8.2 In order to underpin the value of the Consideration Shares, the
parties have agreed that if, at the end of a period of 2 years
commencing on the Effective Date, the 30 day VWAP of a Fairvest
share (“Prevailing Market Price”) is less than the Issue Price
and the Seller still owns all the Consideration Shares, the
Seller shall be entitled, on written notice, to require Fairvest
to either:
8.2.1 pay the Seller in respect of any Consideration Shares still
owned by the Seller, an amount equal to the difference between
the Issue Price and the Prevailing Market Price;
8.2.2 repurchase the Consideration Shares at a price equal to the
Issue Price;
8.2.3 procure a third party purchaser for the Consideration Shares
at a price equal to the Issue Price; or
8.2.4 elect a combination of the above options,
with Fairvest being entitled to decide which of the above
options (or combination of options) it wishes to follow.
8.3 If the price at which Fairvest shares are traded on the JSE at
any time during the above-mentioned period equals or exceeds
the Issue Price, the Seller’s rights above shall fall away and
cease to apply.
9. FORECAST FINANCIAL INFORMATION IN RESPECT OF THE 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 2 month the 12 month
period ended period ended
30 June 2016 30 June 2017
Rental income 1,504,894 9,566,854
Straight-line rental accrual 55,227 208,721
Gross revenue 1,560,121 9,775,575
Property expenses (670,689) (4,468,354)
Net property income 889,432 5,307,221
Asset management fee (46,597) (279,581)
Operating profit 842,835 5,027,640
Finance cost (80,014) (480,084)
Profit before taxation 762,822 4,547,556
Taxation - -
Total comprehensive income 762,822 4,547,556
attributable to shareholders
Forecast distribution 707,595 4,338,835
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 Property.
c) The forecast information for the 2 month period ended 30
June 2016 has been calculated from the anticipated Effective
Date, being on or about 1 May 2016.
d) The Forecast distribution excludes straight-line rental
accrual.
e) Contracted revenue, which includes contracted turnover
rental, constitutes 84.38% of the revenue for the 2 month
period ended 30 June 2016 and 75.87% of the revenue for the
12 month period ended 30 June 2017.
f) Near-contracted revenue constitutes 15.62% of the revenue
for the 2 month period ended 30 June 2016 and 24.13% of the
revenue for the 12 month period ended 30 June 2017.
g) Uncontracted revenue constitutes 0% of the revenue for the
2 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 the
Purchase Consideration is funded as per paragraph 3.2 above.
The cash portion and acquisition fees will be funded via
debt facilities at an interest rate of 8.79%.
10. CATEGORISATION
The Acquisition qualifies as a Category 2 acquisition for the
Company in terms of the JSE Listings Requirements.
19 January 2016
Cape Town
Sponsor
PSG Capital Proprietary Limited
Date: 19/01/2016 04:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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