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TRANSCEND RESIDENTIAL PROPERTY FUND LIMITED - Abridged prospectus opening of offer to invited investors to subscribe for shares & listing of Transcend on JSE

Release Date: 16/11/2016 09:00
Code(s): TPF     PDF:  
Wrap Text
Abridged prospectus – opening of offer to invited investors to subscribe for shares & listing of Transcend on JSE

Transcend Residential Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2016/277183/06)
(JSE share code: TPF)
(ISIN: ZAE000227765)
(“Transcend” or “the company”)


ABRIDGED PROSPECTUS – OPENING OF OFFER TO INVITED INVESTORS TO SUBSCRIBE FOR SHARES AND LISTING OF TRANSCEND ON THE JSE


Abridged prospectus relating to:

   - a private placement (“the private placement”) to raise up to approximately R51.8 million by way of an offer
     for subscription to invited investors for up to approximately 7 million shares in the company (“private
     placement shares”) at an issue price to be determined by demand and for which an indicative issue price of
     R7.40 per private placement share has been used; and

   - the subsequent listing in the “Residential REIT’s” sector on the AltX of the JSE Limited (“JSE”) of all the
     ordinary shares of the company (“listing”).

This abridged prospectus is not an invitation to the general public to subscribe for shares in Transcend. It is
issued in compliance with the Listings Requirements and the Companies Act, 2008 for the purpose of providing
information to the public regarding Transcend and to provide information to select investors with regards to
the private placement.

Invited investors will be contacted by and will receive application forms to participate in the private placement
from the bookrunners.

This announcement contains the salient information in respect of Transcend, which is more fully described in the
prospectus (“the full prospectus”) which will be made available to invited investors from today and a copy of which
was registered with the CIPC on Friday, 11 November 2016 in terms of the Companies Act, 2008. For a full
appreciation and understanding of Transcend, the private placement and the listing, the full prospectus should be read
in its entirety.

Terms defined in the full prospectus bear the same meaning in this abridged prospectus.

1.   Introduction

     Subject to raising R51.8 million in order to achieve a reasonable spread of shareholders acceptable to the JSE,
     the JSE has granted Transcend a listing, in terms of section 13 of the Listings Requirements, of up to
     approximately 66 046 445 shares in the “Residential REIT’s” sector of the JSE, in terms of the FTSE
     classification, under the abbreviated name: “Transcend”, JSE share code: “TPF” and ISIN: ZAE000227765,
     with effect from the commencement of trade on Thursday, 1 December 2016, subject to the company having
     satisfied the Listings Requirements regarding the spread of public shareholders.

2.   History and nature of the business

     The primary strategy of Transcend will be to acquire yield-accretive residential properties, with a focus on
     housing opportunities that are affordable and lifestyle enhancing and located in well-situated and high growth
     urban areas. It is anticipated that Transcend will own these assets directly. At listing, Transcend will have an
     initial portfolio that is located in and around South Africa’s major cities and targets middle-income households,
     thus, delivering housing to a heavily under-serviced portion of the real estate market at prices that are
     affordable. Expansion into other housing market segments or African countries may be considered in time.

     Transcend’s strategy is to familiarise the market with its asset class and to establish a track record of consistent
     performance and growth in distributions. During this time, it is Transcend’s intention to maximise the
     performance of the initial portfolio and only acquire properties that it is familiar with. A preliminary pipeline of
     rental properties that could be considered for acquisition by Transcend have been identified from the existing
     assets under management by IHS. This pipeline consists of approximately 3,700 units, with a total value in the
     order of R2.5 billion, demonstrating the opportunities for portfolio expansion.

     Transcend will hold a property portfolio of 13 properties, comprising 2 472 units, including 1 879 sectionalised
     residential units and 3 non-sectionalised properties, located primarily in Gauteng, the Western Cape and
     Mpumalanga, South Africa. The properties are in the process of being transferred and, as at the last practical
     date, 1 990 (80.50%) of the 2 472 units to the value of R942 800 000 (being 80.93% of total value) have been
     transferred.

     Transcend was incorporated as a private company on 8 July 2016 and converted to a public company on
     22 August 2016. The company’s financial year end is 31 December.

3.   Investment and growth strategy

     Once a stable and consistent track record has been established with the properties, and the cost of capital
     becomes more attractive, it is Transcend’s intention to grow through the acquisition of stabilised open market
     rental portfolios in South Africa and Sub-Saharan Africa. To this extent, Transcend will utilise the extensive
     market network and experience of the IHS team in order to acquire similar well-positioned affordable
     residential properties that are yield accretive, and which provide good potential for increased rental income as
     well as capital growth over time.

     Transcend’s portfolio is externally managed by IHS Asset Management, a wholly-owned subsidiary of IHS, and
     leverages off IHS’ extensive experience in the residential rental markets. Over time, once a track-record for the
     listed company has been established and there is an improved understanding of the affordable housing market,
     Transcend intends to expand its public share-offering to become more liquid.

4.   Prospects

     The board is confident that following the listing Transcend will achieve consistent growth in dividends. The
     selection of stabilised and quality rental assets is expected to support meaningful capital growth and regular
     income in the form of a monthly rental from the property portfolio. Efficient property management and the
     acquisition of new properties are also expected to help enhance performance of the company’s portfolio over
     time.

5.   Directors

     Name and age          Robert Nicolaas Wesselo (Rob) (52)

     Business address      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191,
                           Gauteng, South Africa

     Qualification         LLB from University of Witwatersrand

     Position              Chief executive officer

     Name and age          David Peter Lange (Dave) (33)

     Business address      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191,
                           Gauteng, South Africa

     Qualification         BCom (Acc) and BCom (Acc) (Hons) from the University of Johannesburg; CA (SA);
                           MSc (Property Studies) from University of Cape Town

     Position              Chief financial officer

     Name and age          Solly Mboweni (Solly) (47)

     Business address      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191,
                           Gauteng, South Africa

     Qualification         BCom and Postgraduate Diploma in Property Studies from University of
                           Witwatersrand
     
     Position              Chief operating officer

     Name and age          Michael Louis Falcone (Mike) (54)

     Business address      3600 O’Donnell St #600, Baltimore, MD 21224, USA

     Qualification         BA (Economics) from Dartmouth College and MBA from Harvard Business School

     Position              Non-executive director

     Name and age          Cathal Padraig Conaty (Cathal) (52)

     Business address      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191,
                           Gauteng, South Africa

     Qualification         BA from the University College (Dublin, Ireland) and an MBA from IESE (Barcelona,
                           Spain)

     Position              Non-executive director

     Name and age          Robert Reinhardt Emslie (Robert) (58)

     Business address      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191,
                           Gauteng, South Africa

     Qualification         Undergraduate degree from Rand Afrikaans University, and a graduate degree from
                           Rand Afrikaans University

     Position              Chairman, independent non-executive director

     Name and age          Faith Nondumiso Khanyile (Faith) (49)

     Business address      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191,
                           Gauteng, South Africa

     Qualification         BA (Economics) Wheaton College, USA, MBA (Finance) Bentley Graduate School of
                           Business, USA

     Position              Independent non-executive director

     Name and age          Michael Simpson Aitken (Michael) (59)

     Business address      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191,
                           Gauteng, South Africa

     Qualification         BA and LLB

     Position              Independent non-executive director

     Apart from Mike, who is an American citizen and Cathal, who is an Irish citizen, all of the directors are South
     African nationals.

6.   Asset management

     The asset management function of the property portfolio is undertaken by IHS Asset Management, further
     details of which are set out in paragraph 2.5 of the full prospectus.

7.   Property management

     The property management function of the company is outsourced on market related terms to IHSPM, further
     details of which are set out in paragraph 2.6 of the full prospectus.

8.   Summarised forecast information

     Given the nature of its business, Transcend uses distribution per share as its key performance measure as it is
     considered a more relevant performance measure than earnings or headline earnings per share.

     Set out below are the summarised forecast statements of comprehensive income (“summarised forecasts”) for
     the 3 months ending 31 December 2016 and the year ending 31 December 2017 (“forecast periods”). The
     summarised forecast information is based on the assumption that the private placement is fully subscribed and
     that R51.8 million is raised through the issue of 7 million shares at an issue price of R7.40 per share.

     The summarised forecasts comprise forecast figures for the duration of the forecast periods.

     The summarised 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 Transcend.

     The summarised forecasts have been prepared in compliance with IFRS and in accordance with Transcend’s
     accounting policies.

                                                                      Forecast for the three           Forecast for the
                                                                               months ending                year ending
                                                                            31 December 2016           31 December 2017
      Basic and diluted (loss)/earnings per share (cents)                             (31.1)                       62.8

      Headline and diluted headline earnings per share (cents)                          17.2                       62.8


      Distribution per share (cents)                                                     2.1                       62.8


      Weighted average number of shares in issue                                  31 916 796                 66 046 445

      Number of shares in issue at period-end                                     66 046 445                 66 046 445

      The figures set out above are extracted from detailed forecasts for the 3 months ending 31 December 2016 and
      the year ending 31 December 2017 and have been reported on by the independent reporting accountant, KPMG
      Inc. The detailed forecasts, the independent reporting accountants’ report on the detailed forecast and the
      assumptions on which the detailed forecasts are based, are set out in the full prospectus.

9.    Purpose of the private placement and the listing

      The main purposes of the private placement and the listing are to:

      -   provide investors, both institutional and private, with an opportunity to participate over the long term in the
          income streams and future capital growth of the company;

      -   enhance the liquidity and tradability of the shares;

      -   provide the company with a platform to raise equity funding to pursue growth and investment opportunities
          in the future; and

      -   enhance the public profile and general public awareness of Transcend.

10.   Details of the private placement

      The private placement will be constituted by the issue of up to approximately 7 million private placement shares
      in the company at an issue price to be determined by demand and for which an indicative issue price of R7.40
      per private placement share has been used in the full prospectus.

      The board reserves the right to close the private placement early.

      The private placement shares issued in terms of the full prospectus will be allotted subject to the provisions of
      the MOI and will rank pari passu in all respects including distributions, with all existing issued shares in the
      company.

      There are no convertibility or redemption provisions relating to any shares.

      The private placement shares will only be issued in dematerialised form. No certificated private placement
      shares will be issued.

      No fractions of private placement shares will be offered in terms of the private placement.

      The private placement is open to invited investors only. The following parties may not participate in the private
      placement:

      -    any person who may not lawfully participate in the private placement; and/or

      -    any investor who has not been invited to participate; and/or

      -    any person acting on behalf of a minor or deceased estate.

11.   Salient dates and times

                                                                                                               2016
      Opening date of the private placement (09:00) on                                       Wednesday, 16 November

      Closing date of the private placement (12:00) on                                         Tuesday, 22 November

      Results of the private placement released on SENS on                                   Wednesday, 23 November

      Notification of allotments to successful invited investors on or from                  Wednesday, 23 November

      Accounts at CSDP or broker updated and debited in respect of dematerialised
      shareholders on                                                                          Thursday, 1 December

      Listing of shares and the commencement of trading on the JSE (09:00)                     Thursday, 1 December


      Notes:
      1 All references to dates and times are to local dates and times in South Africa. These dates and times are
        subject to amendment. Any such amendment will be released on SENS and published in the press.
      2 Invited investors must advise their CSDP or broker of their acceptance of the private placement in the
        manner and cut-off time stipulated by their CSDP or broker.
      3 CSDP’s effect payment on a delivery-versus-payment basis.

12.   Application of proceeds

      The proceeds of the private placement will be applied as follows:

      -    to partially settle interest-bearing borrowings;

      -    to settle transfer and bond registration costs; and

      -    to settle the preliminary and issue expenses.

13.   Condition to which the private placement and the listing are subject

      The listing is subject to raising an amount of R51.8 million in order to achieve a spread of public shareholders
      acceptable to the JSE, being public shareholders holding not less than 10% of the issued shares at the point of
      listing on the JSE.

      If the condition precedent fails, the private placement and any acceptance thereof shall not be of any force or
      effect and no person shall have claim whatsoever against Transcend or any other person as a result of the failure
      of any condition.

14.   Availability of the full prospectus and the investor presentation

      Copies of the full prospectus and the document presented to invited investors (“investor presentation”) may be
      obtained between 08:30 and 17:00 on business days from Wednesday, 16 November 2016 to Thursday, 1
      December 2016 at the following places and on the company’s website: www.transcendproperty.co.za. The
      investor presentation contains no material or significant information over and above that contained in the full
      prospectus.

      Transcend Residential Property Fund Limited

      54 Peter Place, Peter Place Office Park, Block G, Ground Floor, Bryanston 2191

      Java Capital Trustees and Sponsors Proprietary Limited

      6A Sandown Valley Crescent, Sandown, Sandton, 2196

      Link Market Services South Africa Proprietary Limited

      19 Ameshoff Street, 13th Floor, Rennie House, Braamfontein, Johannesburg, 2001


16 November 2016

Corporate advisor, designated advisor and bookrunner
Java Capital

Independent reporting accountants and auditors
KPMG

Attorneys
White & Case SA

Date: 16/11/2016 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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