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Acquisition of various property letting enterprises in Louis Trichardt
GEMGROW PROPERTIES LIMITED
(previously Synergy Income Fund Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2007/032604/06)
JSE share code: GPA ISIN: ZAE0000223269
JSE share code: GPB ISIN: ZAE0000223277
(Granted REIT status with the JSE)
(“Gemgrow” or “the company”)
ACQUISITION OF VARIOUS PROPERTY LETTING ENTERPRISES IN LOUIS TRICHARDT
1. INTRODUCTION
Shareholders are advised that Gemgrow has, subject to the fulfilment of certain conditions precedent, concluded the
following indivisible and inter-conditional purchase agreements (the “purchase agreements”), namely:
1.1. an agreement with Erf 266 Louis Trichardt Proprietary Limited for the acquisition of a letting enterprise conducted
by the seller in respect of and including the property known as the Checkers Centre in Louis Trichardt, Limpopo
(the “Checkers Centre acquisition”);
1.2. an agreement with the trustees of the Solly Noor Trust (the “Solly Noor Trust”) for the acquisition of a letting
enterprise conducted by the seller in respect of and including the properties situated on:
- Erf 128 Louis Trichardt, Limpopo which has the Legal Aid Board of South Africa (“Legal Aid Board”) as its
only tenant;
- Erf 200 Louis Trichardt, Limpopo, which is more commonly known as the Hawana Noor Centre;
- Portion 4 of Erf 278 Louis Trichardt, Limpopo, which has Foschini as its only tenant;
- Portion 5 of Erf 278 Louis Trichardt, Limpopo, which has Total Sports as its principal tenant;
- Portion 2 of Erf 199 Louis Trichardt, Limpopo, which has Pep Stores as its principal tenant; and
- the remainder of Erf 199 Louis Trichardt, Limpopo, which has ABSA as its principal tenant,
(collectively, the “Hawana Noor Centre acquisition”); and
1.3. an agreement with Solly Noor Prop Proprietary Limited for the acquisition of a letting enterprise conducted by the
seller in respect of and including the properties known as the Shoprite Centre and Noor Centre (the “Shoprite and
Noor Centre acquisition”),
(individually “an acquisition” and collectively, the “acquisitions” or the “properties”).
2. RATIONALE
The acquisitions are in line with the company’s stated objective of repositioning itself as a specialist high yielding, high
growth fund with a portfolio of retail, industrial and office assets.
3. TERMS OF THE ACQUISITION
3.1. The effective date of each acquisition will be the date of registration of transfer of the relevant property/ies in the
name of Gemgrow (the “effective date”).
3.2. The purchase price (payable by the company on the effective date of each acquisition) is as follows:
- R100 million in respect of the Checkers Centre acquisition;
- R100 million in respect of the Hawana Noor Centre acquisition; and
- R130 million in respect of the Shoprite and Noor Centre acquisition,
constituting an aggregated purchase consideration of R330 million (the “purchase consideration”).
3.3. The purchase agreements provide for undertakings, warranties and indemnities which are normal for acquisitions of
this nature.
4. CONDITIONS PRECEDENT
The purchase agreements are subject to the fulfilment or waiver, as the case may be, of the following conditions precedent:
4.1. Gemgrow securing the unconditional approval of its investment committee to the conclusion and implementation of
the purchase agreements;
4.2. Gemgrow securing finance on terms acceptable to Gemgrow in order to proceed with the acquisitions;
4.3. the satisfactory outcome of a comprehensive full due diligence investigation of the leases and physical condition of
the properties;
4.4. to the extent that any third party enjoys any pre-emptive or similar rights over the properties, such person waiving
such pre-emptive rights; and
4.5. Gemgrow obtaining to the extent necessary all the requisite approvals from any regulatory authorities including but
not limited to the Competition Commission approval, where required.
5. Property specific information
Property name Address and Sector Total Weighted Value Purchase
geographical location GLA average attributed price^
(m2) rental to the (R)
(per m²) property
(R)
Checkers Centre Erf 5084, Louis Trichardt, Retail 5 843 R143.60 100 000 000 100 000 000*
Limpopo
Hawana Noor Erf 128, and Portion of Retail/ 6 947 R190.73 100 000 000 100 000 000*
Centre Erven 199, 200 and 278, Mixed use
Louis Trichardt, Limpopo
Shoprite & Noor Erf 3407 and 4282, Louis Retail 14 266 R111.80 130 000 000 130 000 000*
Centre Trichardt, Limpopo
Total 27 056 R138.93 330 000 000 330 000 000*
^ The purchase price in connection with the acquisition of the properties includes all other expenditure incurred by the
company.
* The purchase price of the properties 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. Financial information
Set out below are the forecast revenue, net property income, net profit after tax and profit available for distribution of the
acquisitions (“the forecast”) for the 12 months ending 30 June 2018 (“the forecast period”).
The forecast has been prepared on the assumption that the acquisitions will be implemented on 30 June 2017 and on the
basis that the forecast includes forecast results for the duration of the forecast period.
The forecast, including the assumptions on which it is based and the financial information from which it has been prepared,
is the responsibility of the directors of the company. The forecast has not been reviewed or reported on by independent
reporting accountants.
The forecast presented in the table below has been prepared in accordance with the company’s accounting policies, which
are in compliance with International Financial Reporting Standards.
Forecast for the
12 months ending
30 June 2018
R’000
Revenue 45 108
Net property income* 39 541
Net operating profit 4 891
Profit available for distribution 4 891
*This equates to an average yield of 12%
The forecast incorporates the following material assumptions in respect of revenue and expenses:
1. The forecast is based on information derived from the management accounts and budgets, provided by the sellers.
2. Rental income is derived from the forecasts provided to the company by the sellers.
3. Net property income includes the effects of straight lining rental income.
4. Profit available for distribution includes the effects of finance costs.
5. Contracted revenue is based on existing lease agreements including stipulated increases, all of which are valid and
enforceable.
6. Leases expiring during the forecast period have been forecast on a lease-by-lease basis, and have been assumed to
renew at current market rates unless the lessee has indicated its intention to terminate the lease.
7. Of the rental income of R45 108 000, 98% relates to contracted rental and 2% relates to uncontracted rental. No near
contracted rental income is forecast.
8. Property operating expenditure has been forecast by the property manager on a line-by-line basis based on
management’s review of historical expenditure, where available, and discussion with the property manager.
9. A funding cost has been recognised for the additional interest bearing liabilities and equity to be raised of R330 000 000
to fund the cash portion of the purchase consideration relating to the acquisitions, based on the anticipated cost of
raising new debt and equity of the company of 10.5%. It is assumed that the finance cost relating to the interest-
bearing liabilities raised to fund the cash portion of the purchase consideration relating to the acquisitions is
capitalised in terms of IAS 23 Borrowing Costs.
10. No fair value adjustment is recognised.
11. There will be no unforeseen economic factors that will affect the lessees’ ability to meet their commitments in terms
of existing lease agreements.
CATEGORISATION OF THE ACQUISITION
The acquisitions are from inter-related parties and have accordingly been aggregated for the purposes of categorisation for JSE
Listings Requirements. The composite transaction is classified as a category 2 transaction in terms of the JSE Listings
Requirements. and accordingly, is not subject to shareholder approval.
16 May 2017
Sponsor
Java Capital
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