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Update and Amendments to the Proposed Related Party Transaction
REBOSIS PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2010/003468/06)
JSE share code: REB ISIN: ZAE000201687
(Approved as a REIT by the JSE)
(“Rebosis” or “the company)
UPDATE AND AMENDMENTS TO THE PROPOSED RELATED PARTY TRANSACTION
1. INTRODUCTION
Rebosis is pleased to announce the revised terms of the proposed acquisitions first outlined in its SENS announcement of
23 May 2016 (“first announcement”) which should not result in dilution in earnings growth. Terms defined in the first
announcement bear the same meaning in this announcement.
2. SALIENT TERMS OF AMENDMENTS TO THE TRANSACTION
2.1. The acquisition of BT Ngebs City shopping centre has been excluded from the proposed transaction. This is due
to its lower acquisition yield relative to the other centres and hence higher impact on earnings growth to Rebosis.
It however remains available and subject to the right of first refusal Rebosis enjoys regarding the Billion pipeline.
2.2. The net property income for both Baywest Mall and Forest Hill City have been updated from the last
announcement made. These updated numbers have been derived from the process of working with Grant
Thornton as reporting accountants for the transaction and are therefore considered to be the latest and final values
for each shopping centre. Grant Thornton are in process of completing their review of total financial effects of the
transaction which will be reported on in the circular issued to Rebosis shareholders. The acquisition yields, based
on the review process by Grant Thornton, for these assets have increased, particularly in regard to Baywest Mall
for which the acquisition yield has increased from 7.6% as per the first announcement to 7.8%, before the
reductions in acquisition pricing set out in this announcement.
2.3. The consideration payable in respect of Forest Hill City has been reduced by R120 million from R2.213 billion to
R2.093 billion, thus taking its acquisition yield from 7.1% to 7.5% (including bulk).
2.4. The consideration payable in respect of Baywest Mall has been reduced by R60 million from R2.332 billion to
R2.272 billion, thus taking its acquisition yield from 7.8% to 8.0% (including bulk).
2.5. The consideration payable for BPS has been reduced by R20 million from R229 million to R209 million resulting
in an effective forward yield of 13.3%.
2.6. The consideration payable for BAM remains unchanged.
2.7. The initial claw-back offer will be launched at an issue price equal to the 30 day vwap of Rebosis shares
preceding 1 September 2016, the effective date of the transaction. The initial claw-back offer will be underwritten
by Billion.
2.8. The consideration payable for BPS and BAM will be further reduced on a relative basis in the event that Rebosis
disposes of any properties (net of any acquisitions) managed by BAM and BPS in a period of 6 months from the
completion of the transaction.
2.9. R700 million of the aggregate price will still be deferred and settled in cash in two tranches of R350 million each.
The additional consideration of R115 million has been reduced by R50 million to R65 million. This additional
consideration is in recognition of the fact that a significant portion of the consideration has been deferred . The
company will fund the payment of each tranche by way of a claw-back offer, at a price equal to the 30 day vwap
of Rebosis shares immediately before the relevant subsequent claw-back offer is launched, but not less than
R11.30 per share. The subsequent claw-back offers will be underwritten by Billion and/or Abacus Holdings
(Proprietary) Limited (“Abacus”).
2.10. Rebosis is currently negotiating the disposal of commercial properties that are smaller and non-core of up to
R1.5 billion in value. This will serve to bring down the total debt and loan to value ratio of Rebosis and dispense
the need to raise any equity prior to the transaction. Post the implementation of the transaction and the anticipated
disposal of commercial properties, it is expected that the retail assets as a percentage of total value of Rebosis
under management will represent 72%, positioning Rebosis as a high quality retail fund of 6 large dominant
shopping centres.
2.11. The aggregate consideration of R4.934 billion is payable in cash by Rebosis of which up to c.R3.7 billion will be
funded through debt raised by Rebosis. The debt raised will be reduced to the extent that the commercial
properties are disposed of as referred to in paragraph 2.10 above. The balance of the consideration, net of the
deferred consideration, in the amount of R534 million will be funded by way of a claw-back offer.
2.12. The remaining terms of the transaction as outlined in the first announcement are unchanged.
2.13. With regard to the conditions of the transaction, the parties are in the course of formalising written transaction
agreements and the date for obtaining all required third party consents and waivers has been extended to
30 September 2016.
2.14. As a result of the amendments noted in this announcement to the transaction, it is expected that the dilution in the
distribution per Rebosis share for the period 1 September 2016 to 31 August 2017 will reduce from 9.1% (as per
the first announcement) to neutral.
2.15. Given that the price of the subsequent claw-back offer will not be less than R11.30 per share and the net effect of
the revised terms, the impact of the deferral of portion of the purchase price, (measured with reference to an
independent forecast of the Rebosis distribution per share for the year ending 31 August 2017), is expected to
result in distribution growth of c.8.0% for the year ended 31 August 2017.
3. PROPERTY SPECIFIC DETAILS
3.1. Property specific details of the shopping centres, including property name, physical address, rentable area and
valuation are set out below. Refer to 4.1 for weighted average rental information.
Forest Hill City Baywest Mall
Name Shopping Centre Shopping Centre
Physical address 6922 Forrest Beech Street, 100 Baywest Boulevard,
Monavoni, Baywest City,
Pretoria, Port Elizabeth,
Gauteng Eastern Cape
GLA (m2) 72 811 89 989
Independent valuation (R) R2 192 063 000 R2 334 000 000
3.2. Rebosis has now obtained valuations of the shopping centres from Mike Gibbons of Mills Fitchet Magnus Penny
Wolffs, who is registered as an external professional valuer in terms of the Property Valuers Profession Act, No
47 of 2000. The shopping centres have been valued as at 31 August 2016.
4. ADDITIONAL PROPERTY AND ILLUSTRATIVE FINANCIAL INFORMATION
4.1. The additional property and financial information set out below provides further illustrative financial metrics on
the shopping centres that are to be acquired as part of the transaction for the twelve month period to 31 August
2017. The information is not pro forma financial information and is provided for illustrative purposes only. This
illustrative financial information is the responsibility of the directors of Rebosis and has not been reviewed or
reported on by Rebosis’ auditors.
Forest Hill City Baywest Mall Total
Weighted average gross rental income per m²
Base rental income R176.7 R157.8 R166.2
Marketing recovery R2.9 R2.2 R2.5
Operating cost recovery R0.2 R9.2 R5.2
Other tenant recoveries R1.0 R0.8 R0.9
Utility recoveries (excl. electricity and water) R5.9 R7.0 R6.5
Gross rental income per m² R186.8 R177.0 R181.4
Advertising income R1.1 R1.4 R1.2
Parking income R10.7 R8.4 R9.4
Other municipal recoveries R39.0 R69.6 R55.9
Sundry income R0.7 R1.4 R1.1
Property expenses (R58.8) (R88.8) (R75.4)
Net property income per m² R179.4 R169.0 R173.7
4.2. The additional financial information set out below provides further illustrative financial metrics on the BAM and
BPS entities that are to be acquired as part of the transaction for the twelve month period to 31 August 2017. The
information is not pro forma financial information and is provided for illustrative purposes only. This illustrative
financial information is the responsibility of the directors of Rebosis and has not been reviewed or reported on by
Rebosis’ auditors.
R'000 BAM BPS Total
Net income for the 12 months to 31 August 2017*^ (R’m) R38.7 R27.7 R66.4
Consideration (R’m) R360.0 R209.0 R569.0
Yield (before consolidation adjustments)* 10.7% 13.3% 11.7%
* Net income and yield shown before elimination on consolidation of asset management fees of R14.3 million
charged by BAM on Forest Hill City and Baywest Mall
^ Net income from BAM and BPS include revenue to be earned from BT Ngebs shopping centre. BAM is in the
process of finalising a contractual agreement with Billion and other owners of this centre to provide both asset
management and property management services for this shopping centre. There will be a defined contractual
terms with adequate notice incorporated into the contract
5. FORECAST STATEMENT OF COMPREHENSIVE INCOME ON THE ACQUIRED ASSETS
Set out below are the forecast revenue, net property income, net operating profit and distributable earnings for the
transaction, being Forest Hill City, Baywest Mall, BAM and BPS (“the forecasts”) for the year ending 31 August 2017
and the year ending 31 August 2018 (“the forecast periods”). The forecasts have been prepared on the assumption that the
transaction will be implemented on 1 September 2016 and on the basis that the forecasts include forecast results for the
duration of the forecast periods.
The forecasts, including the assumptions on which they are based and the financial information from which they are
prepared, are the responsibility of the directors of Rebosis. The forecasts have not been reviewed or reported on by
independent reporting accountants.
The forecasts presented in the table below have been prepared in accordance with Rebosis’ accounting policies and in
compliance with IFRS.
Forecast for the Forecast for the
year ending year ending
31 August 2017 31 August 2018
Basic contractual rental income and tenant recoveries 486 498 522 405
Straight-line rental accrual 34 243 16 502
Forecast property revenue 520 741 538 907
Net property income* 339 253 363 648
Forest Hill City 156 776 167 504
Baywest Mall 182 477 196 144
Net operating profit 425 617 443 845
Total comprehensive profit for the year*^ 71 952 92 695
Distributable earnings 37 709 76 193
*Net property income is excluding straight-line rental accrual and before consolidation adjustments
^Includes finance costs
The forecasts incorporate the following material assumptions in respect of revenue and expenses that can be influenced by the directors:
1. Management forecasts for the year ending 31 August 2017 and the year ending 31 August 2018 are based on analysis of
historical information, contracts, information provided by the property manager and the independent valuers.
2. The properties underlying the forecasts comprise only the shopping centres.
3. Contracted revenue is based on existing lease agreements including stipulated increases, all of which are valid and enforceable.
4. Rebosis has entered into a rental guarantee agreement with Billion whereby Billion has undertaken to pay a guaranteed monthly
amount to the extent that existing premises remain vacant or are forecast to become vacant from the effective date of the
acquisition until 31 August 2018, being the end of the forecast period. By virtue of this rental guarantee, all rental revenue
associated with existing vacant space is regarded as contracted revenue linked to a rental guarantee;
5. Leases expiring during the periods have been forecast on a lease-by-lease basis, and in circumstances where discussion with the
lessee has proven positive, are forecast to be let at prevailing market rates;
6. Property operating expenditure has been forecast on a line-by-line basis for each property based on management’s review of
historical expenditure and discussion with the property manager.
7. The forecast includes revenue received for asset management and property management services rendered to Ascension
Properties Limited, Billion and Rebosis; and
8. No fair value adjustment to investment properties has been provided for.
The forecasts incorporate the following material assumptions in respect of revenue and expenses that cannot be influenced by the
directors:
9. Existing interest-bearing borrowings advanced by various South African banks and financial institutions will be refinanced post
the transaction and will incur interest based on prevailing interest rates and with reference to revised funding terms that are
currently under negotiation;
10. There will be no unforeseen economic factors that will affect the lessees’ abilities to meet their commitments in terms of existing
lease agreements.
Material items of expenditure within the property operating expenses line item include:
- R64.55 million in electricity and R33.12 million in rates in respect of the year ending 31 August 2017; and
- R71.01 million in electricity and R35.36 million in rates in respect of the year ending 31 August 2018.
Property expenses are not comparable with historic expenditure given that the one of the operating assets is a recently completed large-
scale development that only became operational during the 2016 financial year.
6. CATEGORISATION, RELATED PARTY CONSIDERATIONS AND SHAREHOLDER EXPRESSIONS OF
SUPPORT
6.1. The transaction remains classified as a category 1 transaction in terms of the JSE Listings Requirements and
requires shareholder approval by ordinary resolution.
6.2. In terms of paragraph 10.1(b)(vii) of the Listings Requirements, Sisa Ngebulana is a related party to the
transaction as he is both a director of Rebosis and a trustee and beneficiary of the Amatolo Family Trust, which
owns 100% of the share capital of Billion, BAM and BPS.
6.3. In terms of paragraph 10.1(b)(vii) of the Listings Requirements, Jaco Odendaal is a related party to the transaction
as he is both a director of Rebosis and a trustee and major beneficiary of the Abacus Trust, which owns 100% of
the share capital of Abacus, which owns 50% of the share capital of Baywest Mall.
6.4. Accordingly, the transaction is subject to approval of Rebosis shareholders by ordinary resolution, excluding the
votes cast by Sisa Ngebulana, Jaco Odendaal and their associates.
6.5. Shareholders including the three largest shareholders of Rebosis have provided Rebosis with written
confirmations of their support for the transaction as now proposed. Rebosis has received over whelming support
from its shareholders for the transaction which is well in excess of the required majority to pass this transaction.
The reinvestment by Billion of any cash proceeds received from the initial claw-back offer or any subsequent
claw-back offer, by way of the subscription for additional Rebosis shares, which will be separately proposed on a
stand-alone basis and subject to approval of Rebosis shareholders by the higher threshold for a special resolution.
6.6. A circular, detailing the terms of the transaction and incorporating a form of proxy and a notice convening a
general meeting in order to pass the necessary resolutions to implement the transaction, will be posted to Rebosis
shareholders by no later than 17 August 2016.
13 July 2016
Corporate advisor and sponsor Legal advisor Corporate advisor and investment bank
Java Capital Cliffe Dekker Hofmeyr Nedbank
Date: 13/07/2016 03:53:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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