Wrap Text
Sale of Seed Portfolio to Izandla Property Fund Proprietary Limited
INVESTEC PROPERTY FUND LIMITED
Approved as a REIT by the JSE
(Incorporated in the Republic of South Africa)
(Registration Number 2008/011366/06)
Share code: IPF ISIN: ZAE000180915
(“Investec Property Fund”, “IPF” or “the Fund”)
SALE OF SEED PORTFOLIO TO IZANDLA PROPERTY FUND PROPRIETARY LIMITED
Izandla Property Fund Proprietary Limited (“Izandla Property”)
1. Introduction
Shareholders are referred to the announcement released on the Stock Exchange News Service of the JSE
Limited on Thursday, 8 June 2017, in which Investec Property Fund announced its participation in the
establishment of Izandla Property, a company set to become a leading broad-based landlord in South
Africa’s property landscape.
2. Salient features and rationale
Pursuant to the above, Investec Property Fund has entered into agreements with Izandla Property in terms
of which IPF will seed Izandla Property by disposing of a portfolio of 17 properties (the “Izandla Property
Seed Portfolio”) for an aggregate disposal value of R586.9 million (“Disposal Consideration”) (the
“Transaction”). This represents an initial property yield of 10.4% on a fully let basis.
The Disposal Consideration will be settled partly in cash and partly through the provision of the requisite
funding to Izandla Property by Investec Property Fund and the Entrepreneurship Development Trust (the
“ED Trust”).
The effective date of the Transaction, subject to the fulfilment of all conditions precedent described below, is
1 June 2017.
The Izandla Property Seed Portfolio comprises properties with an average value per property of
approximately R35 million. The portfolio weighted average lease expiry (“WALE”) is 3.4 years (including the
income support provided by IPF – see section 4. below) with an average escalation of 7.8% per annum and
benefits from both strong quality of earnings and potential upside through redevelopment. The two largest
assets (by value) are the Union Castle Building which has an international call centre operator and the
Department of Public Works as anchor tenants with a WALE of 4.8 years, and Greenhill Village which is a
multi-tenanted office property located in Lynwood, Pretoria. Furthermore, the Foschini building in the
Johannesburg CBD presents potential future residential conversion opportunities which can be explored by
Izandla. Further details of the Izandla Property Seed Portfolio are set out below in section 3. Overview of
the Izandla Property Seed Portfolio.
Given IPF’s investment into Izandla Property, the Transaction is not expected to result in a material impact
on IPF’s distribution per share for the year ending 31 March 2018. The aforegoing forecast statement and
the forecast underlying such statement are the responsibility of the board of IPF and have not been
reviewed or reported on by the independent reporting accountants.
3. Overview of the Izandla Property Seed Portfolio
Details of the Izandla Property Seed Portfolio are set out the table below:
Weighted
average
Property name Location Sector lease
expiry Weighted average
(years) Gross Lettable Area net rental Valuation1
(m²) (R/m²) R’million
Union Castle Building Cape Town CBD, Western Cape Office 4.8 8,936 122.3 139.0
Greenhill Village Lynwood, Gauteng Office 2.8 4,687 130.0 88.4
Foschini Johannesburg CBD, Gauteng Retail 3.8 6,305 109.3 80.0
95 Main Reef Road Boksburg, Gauteng Industrial 2.8 14,171 38.0 55.5
Scientific Building Randburg, Gauteng Industrial 1.0 5,733 76.3 39.0
Minolta Bellville Bellville, Western Cape Office 4.8 2,166 113.8 31.2
Edcon Carltonville Carltonville, Gauteng Retail 5.8 3,811 56.3 29.0
Capital Motors Pretoria CBD, Gauteng Industrial 1.2 7,463 32.9 21.4
Shoprite Checkers Thabazimbi Vanderbijl Street, Thabazimbi Ext 6, Retail 2.8 4,125 40.4 20.5
Thabazimbi
National Urethane Industries (New) Isando, Gauteng Industrial 2.2 3,628 37.3 16.7
Cashbuild Nongoma 3 Nongoma, Kwa-Zulu Natal Retail 5.4 2,202 22.8 9.3
Armadillo Spartan, Gauteng Industrial 4.2 2,081 50.0 13.0
North Safety Products Isando, Gauteng Industrial 2.3 3,000 35.0 12.8
National Urethane Industries (Old) Isando, Gauteng Industrial 2.2 3,000 32.8 12.0
Plastichem Spartan, Gauteng Industrial 1.8 1,753 53.5 11.6
Baldwin Filters Spartan, Gauteng Industrial 3.7 1,618 50.0 9.9
Boxer Cofimvaba Cofimvaba, Eastern Cape Retail 2.8 1,045 56.5 7.0
Total 3.4 75,724 65.6 596.3
Notes:
1. An independent valuation of the properties comprising the Izandla Property Seed Portfolio has been performed by Mills Fitchet Magnus Penny Proprietary Limited (“Mills Fitchet” or
“Independent Property Valuer”), who are registered as professional valuers in terms of the Property Valuers Profession Act, No 47 of 2000.
2. The net property income attributable to the Izandla Property Seed Portfolio in respect of the 12 months ended 31 March 2017 was a total of R58.7 million and excludes income on
either currently vacant space, or space assumed to become vacant during the year. On a fully let basis, the net property income would be R2.5 million higher for the same period.
3. The property is subject to a right of first refusal in favour of the existing tenant.
4. Significant terms of the Transaction
Investec Property Fund and Izandla Property have agreed to, inter alia, the following significant terms:
- Investec Property Fund will guarantee the gross rental income of the Izandla Property Seed Portfolio for
the period ending 31 May 2018, which rental income will increase by at least 8.0% per annum until the
period ending 31 May 2020 (“Guarantee Period”);
- Investec Property Fund will provide an aggregate amount of up to R13.0 million for the purposes of
funding maintenance capital expenditure, tenant installations and letting commissions during the
Guarantee Period;
- Investec Property Fund will subscribe for R20.5 million of equity in Izandla Property, representing a 35%
shareholding;
- Investec Property Fund will provide debt funding of R212.7 million to Izandla Property to be used in part
settlement of the Disposal Consideration of the Izandla Property Seed Portfolio. The interest rate
charged on the debt will vary to ensure that the returns earned from the Fund’s investment in Izandla
Property, net of the aggregate capex and net property income support provided, do not exceed what
IPF would have earned had the transaction not occurred, presenting potential upside to Izandla on
vacant GLA and increase in capital value of the properties; and
- Investec Property Fund has provided warranties and indemnities that are standard for a transaction of
this nature.
5. Conditions precedent
The Transaction is subject to, inter alia, the fulfilment (or waiver, where applicable) of the following conditions
precedent prior to 30 November 2017:
i. to the extent legally required, the approval of all relevant regulatory authorities (including the
competition authorities);
ii. Izandla Property’s debt funding documents becoming fully unconditional in accordance with their
terms; and
iii. all of the transaction documents necessary to implement the Transaction becoming fully
unconditional in accordance with their terms.
6. Small related party transaction
The Transaction constitutes a small related party transaction in terms of the JSE Listings Requirements
(“Listings Requirements”), as the ED Trust is an Associate, as defined by the Listings Requirements, of
Investec Limited which, though a wholly-owned subsidiary, is the management company of Investec Property
Fund. The Transaction does not require approval by IPF shareholders.
BDO Corporate Finance Proprietary Limited (“BDO”), an independent expert acceptable to the JSE, has
concluded that the terms of the Transaction are fair as far as shareholders of Investec Property Fund are
concerned.
Based on the Independent Property Valuer’s value of the properties comprising the Izandla Property Seed
Portfolio, and having had regard to the fairness opinion prepared by BDO, the board of directors of Investec
Property Fund has declared the Transaction to be fair as far as Investec Property Fund shareholders are
concerned.
The JSE has been provided with a summary of the sworn valuation of the Izandla Property Seed Portfolio by
the Independent Property Valuer, as well as the fairness opinion prepared by BDO. Copies of the valuation
report prepared by Mills Fitchet, as well as the fairness opinion prepared by BDO, are available for inspection
at the registered office of Investec Property Fund during normal business hours for a period of 28 days from
the date of this announcement.
Johannesburg
11 August 2017
Financial advisor and Sponsor Legal advisor
Investec Bank Limited Werksmans Inc.
Date: 11/08/2017 11:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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