Wrap Text
Response To Rumours And Allegations Emanating From Short Sellers / Withdrawal Of Cautionary Announcement
RESILIENT REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2002/016851/06)
JSE share code: RES ISIN: ZAE000209557
(Approved as a REIT by the JSE)
(“Resilient” or “the Company”)
RESPONSE TO RUMOURS AND ALLEGATIONS EMANATING FROM SHORT SELLERS / WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
The Company has analysed the 36One report referred to in the SENS announcement released on 9 February 2018. Having fully
considered the content and context of the report, the Company is of the view that there is no reason for shareholders to continue to
exercise caution in their dealings in the Company’s securities and the cautionary announcement of 9 February 2018 is accordingly
withdrawn.
The Company has engaged and will continue to engage with its shareholders, all relevant regulators and authorities including the
JSE and the Directorate of Market Abuse.
The Company is preparing a FAQ document to address matters raised in the reports and rumours circulated in the market over the
last few weeks and is engaging with major shareholders in the course of today to ensure any of their concerns are addressed. This
document will be made available on the Company website as soon as the process is complete. The Company will announce on
SENS when the link to the FAQ document is active.
In the meantime, the following points are worth noting, which will be expanded on in the FAQ document:
Background to Resilient and this announcement
• Resilient is a REIT that owns direct property and investments in other REITs as well as property companies. Resilient played
a founding role in NEPI Rockcastle, Fortress REIT and Greenbay and its investments in these companies have always been a
clear and important component of Resilient’s business. Each of the companies was established to pursue a strategy
differentiated from the core strategy of Resilient and the structure of Resilient’s investments has been a function of its South
African context including regulatory and exchange control considerations.
• With the success of the differentiated strategies, each of the companies has become substantial in its own right. While these
companies have common history, each has its own and independent board of directors and management which operate in full
conformity with applicable stock exchange requirements and best practices in respect of governance. As a result of this history,
Resilient is generally available to assist these companies with access to its range of skills and experience and, in some instances,
Resilient’s interests are represented through non-executive board appointments. These matters are fully disclosed.
• Resilient is satisfied that market participants generally have a thorough understanding of the investment case the Company
offers and that this understanding is appropriately supported by Resilient’s disclosure. Resilient engages and will continue to
engage constructively with its auditors, investors, sell-side analysts as well as the JSE with the purpose of disclosing all the
information required to conform to applicable standards and inform the investment decisions of market participants.
• It is for the market to judge whether a narrow focus on tangible asset value provides an adequate reflection of the investment
case for Resilient or any of the companies it has invested in. Other factors considered relevant by objective market commentators
include growth in distributions, capital structure, quality of property portfolio, geographical spread of assets, lease covenants,
debt profile, experience of management, alignment between key executives and shareholders, internalised asset management,
real estate skills and experience and the ability to develop/redevelop properties.
• The Company does not determine the market price of its shares and 36One’s untested allegations of concealment, deception
and share price manipulation are not substantiated and will not stand up to independent scrutiny, which is underway by the
relevant regulators with the full co-operation of the Company and its board and management. The Company believes that
36One’s views, which have been widely disseminated over the last month, are more informed by its large short position than
by objective analysis. 36One’s failure to put any of its views forward to the Company for comment should also be noted.
The Siyakha Trusts
• Some background to the establishment, objectives and operations of the Siyakha Educational Trusts is available in the integrated
reports available on Resilient’s website at www.resilient.co.za.
• The current trustees of the Siyakha Trusts are as follows:
Name of trust Trustees
The Siyakha Education Trust Dazray Tarr
Jacques Johannes van Wyk
Leeone Phoebe Gindan
The Siyakha 1 Education Trust Dazray Tarr
Jacques Johannes van Wyk
Leeone Phoebe Gindan
The Siyakha 2 Education Trust Tshiamo Daphne Vilakazi
Ndhlabole Shongwe
Leeone Phoebe Gindan
Thembi Chagonda is not a trustee of any of the above trusts. She was previously a trustee of The Siyakha Education
Trust and The Siyakha 1 Education Trust, but resigned on 1 March 2017 following her appointment as chairperson of
the Resilient board.
• Resilient’s decision not to consolidate the Siyakha Trusts reflects Resilient’s judgement regarding applicable
accounting standards based primarily on the fact that Resilient was not exposed to credit risk and variable returns as a
result of its relationship with the Siyakha Trusts. Resilient, with its auditors, re-evaluates this decision for each
reporting period. Resilient closely monitors the credit risk in its funding of the Siyakha Trusts. At 31 December 2017,
the net asset value of the Siyakha Trusts on a combined basis was R4.9 billion and this remains positive despite current
conditions.
• Perhaps more important to investors is that there would be no material impact if Resilient were to consolidate the
Siyakha Trusts at 31 December 2017. Consolidation would enhance Resilient’s NAV without any impact on its
distributable earnings or distributions. IFRS accounting does not determine distributable earnings. In accordance with
the SA REIT Association Best Practice Recommendations (the “BPR”), Resilient discloses a reconciliation between
its distributable earnings calculated in terms of the BPR and its IFRS net income. The effect of a consolidation of the
Siyakha Trust on the IFRS net income of Resilient would be adjusted in the reconciliation so that Resilient’s
distributions would be unchanged if the Siyakha Trusts were consolidated.
Scrip dividends and antecedent dividends governed by the BPR
• It is common practice for REITs and listed property companies to provide shareholders with an election to receive
distributions either in cash or in the form of new shares. When NEPI Rockcastle and Greenbay offer new shares as an
alternative to their semi-annual distributions, Resilient evaluates the economics in each instance in light of its overall cash
flow requirements. If Resilient elects to receive the distribution in the form of new shares rather than in cash, this is an
investment decision and this component of Resilient’s distribution will then be funded out of Resilient’s other available
cash resources. A decrease in the share price of the companies Resilient is invested in will not impact on their distributions
and in respect of each distribution Resilient will assess its election to receive cash or shares dependent on all relevant
factors including its cash position.
• In terms of the BPR, for any REIT issuing new equity, pursuant to a scrip dividend or a placement, antecedent dividends
form part of the cash inflow on the issue of new equity and should be recognised as such. Antecedent dividends should
not be accounted for as income in the IFRS compliant statement of comprehensive income, but the REIT should bring in
the antecedent dividend when determining its distributable earnings, on a fully disclosed basis, so as to ensure that the
antecedent portion will not result in dilution of existing shareholders. Not distributing the antecedent portion will result in
existing shareholders being diluted, due to the payment of a dividend based on a greater number of shares in issue, without
having had the benefit of the cash flow from the new issues of shares (or the risks and rewards of ownership of any
investment property purchased with the issue of new shares) in the financial period to which the dividend relates.
Loans to employees
• Resilient’s remuneration policies have always reflected the principle that equity incentivisation should align key executives
with shareholders through exposure to the upside and downside of share price performance. The Company’s remuneration
policies are approved by shareholders annually.
Share trades
• The full details of the purchases and sales of shares by Resilient, Fortress and the Siyakha Trusts will be provided in
the FAQ document. It is evident from the detail that these transactions, undertaken in all instances for appropriate
commercial objectives, could not have served any manipulative purpose.
• A summary of relevant purchases and sales of shares by Resilient is as follows:
Resilient FFB NRP ROC GRP
30-Jun-17 172 930 000 29 270 000 200 400 000 1 550 975 000
Purchase in bookbuild (1 1 544 583 400 000 000
bookbuild each)
Purchase in the market 18 965 13 678
Sale in the market (4 877)
ROC convert to NRP on merger 42 638 296 (200 400 000)
Scrip dividend shares received 1 533 033 30 311 322
31-Dec-17 172 930 000 75 000 000 - 1 981 300 000
The scrip dividend received on the NRP investment in October 2017 accrued to Resilient Properties (790 263 NRP
shares) and was sold to its wholly-owned subsidiary on 17 October 2017. This is intra-group and not included above.
• Fortress has provided Resilient with a summary of the relevant purchases and sales by Fortress as follows:
RES NRP ROC GRP
Fortress
30-Jun-17 39 456 000 59 154 000 358 432 000 1 480 410 000
Purchase in bookbuild (1 1 544 583 400 000 000
bookbuild each)
Purchase in the market 154 000 2 322 5 010
Sale in the market
ROC convert to NRP on 76 262 122 (358 432 000)
merger
Scrip dividend shares 2 886 973 29 214 990
received
31-Dec-17 39 610 000 139 850 000 - 1 909 630 000
• The Siyakha Trusts have provided Resilient with a summary of the relevant purchases and sales by them as follows:
Siyakha 2 Education Trust RES FFA FFB
30-Jun-17 9 317 547 20 444 141 20 444 141
Aug 2017 - buy in market 184 622
Aug 2017 - RES bookbuild 1 983 262
Oct 2017 - Fortress BEE issue 9 281 603 9 281 603
Nov 2017 - RES BEE issue 1 879 000
31-Dec-17 13 364 431 29 725 744 29 725 744
Siyakha Education Trust RES FFA FFB
30-Jun-17 39 886 513 87 495 313 101 533 488
Aug 2017 – sell in market (2 600 000)
Sep 2017 – sell in market (938 175)
Oct 2017 – sell in market (3 917 384)
Nov 2017 – sell in market (68 440) (5 040 826)
Dec 2017 – buy/sell in market 512 970 (265 560)
31-Dec-17 39 818 073 88 008 283 88 771 543
• The following shares were transferred between wholly-owned subsidiaries of Resilient during October 2017 and
December 2017:
Number of shares From To
transferred
GRP 1 490 460 000 Resilient Properties (Pty) Resilient 1 (Pty) Ltd
Ltd
Resilient 2 (Pty) Ltd
Resilient 3 (Pty) Ltd
Resilient 4 (Pty) Ltd
NRP 43 267 986 Resilient Properties (Pty) Resilient 1 (Pty) Ltd
Ltd
• The following shares were transferred between wholly-owned subsidiaries of Fortress during December 2017:
Number of From To
shares
transferred
GRP 1 895 314 300 Capital Propfund (Pty) Ltd Fortress Income 10 (Pty) Ltd
Fortress Income 2 (Pty) Ltd Fortress Income 11 (Pty) Ltd
Fortress Income 3 (Pty) Ltd Fortress Income 12 (Pty) Ltd
Lodestone Investments (Pty) Ltd Fortress Income 13 (Pty) Ltd
NRP 139 847 678 Capital Propfund (Pty) Ltd Fortress Income 10 (Pty) Ltd
Capital Propfund 3 (Pty) Ltd Fortress Income 11 (Pty) Ltd
Capital Propfund 4 (Pty) Ltd Fortress Income 12 (Pty) Ltd
Capital Propfund 4 (Pty) Ltd (previously iFour Fortress Income 13 (Pty) Ltd
Properties 2 (Pty) Ltd)
Fortress Income 2 (Pty) Ltd
Fortress Income 3 (Pty) Ltd
Pangbourne Properties Limited
• All Resilient executives have provided the Company’s audit committee with detailed explanations of all on and off-
market transactions and intra-account movements in shares in which the executive or any associate of the executive
are interested. Resilient can discern no impropriety and the rationales for and manner of implementation of the
transactions and movements do not show any purpose or effect that could be considered manipulative. All parties
involved have undertaken to co-operate fully with independent investigations.
• Associates of senior executives of Resilient restructured their holdings of shares without any change in underlying
beneficial interests, as summarised below.
Resilient executive director Previous associate Current associate
Andries de Lange Nano Trust Dyer Investments (Pty) Ltd (owned by Dyer
Trust)
Des de Beer Hollyrood Investments (Pty) Ltd Delsa Investments (Pty) Ltd (owned by Grove
(owned by Suni Trust) Trust)
Nick Hanekom Eaglelet Investments (Pty) Ltd Nubie Investments (Pty) Ltd (owned by Zinnia
(owned by Eaglelet Trust) Trust)
• The following shares were affected by the restructuring :
RES 28 887 383
NRP 10 756 493
FFB 23 413 045
GRP 236 974 474
• The following shares were transferred between broker accounts (same name transfers) for collateral purposes:
Name of entity Investment Number of shares Month
Diversified Properties 2 (Pty) Ltd NRP 4 000 000 May 2017
Resilient Properties (Pty) Ltd GRP 500 000 000 May 2017
Resilient Properties (Pty) Ltd FFB 15 000 000 May 2017
Fortress Income 2 (Pty) Ltd GRP 33 335 334 Apr 2017
Fortress Income 2 (Pty) Ltd GRP 404 792 017 Nov 2017
• Mr J da Costa, the CEO of Improvon, is a reputable and well-known figure in the SA real estate market and previously
provided valuable service on the boards of listed REITs including Resilient and, before that, Capital Property Fund.
Mr da Costa was involved with the establishment of Greenbay, which was first listed as Green Flash Properties Ltd,
before Resilient made its investment in that company. There have been no related party transactions with Mr da Costa
that have not been fully disclosed. Mr da Costa’s personal transactions in shares have nothing to do with Resilient or
its board or management.
• Mr HJ Oberholzer is known to the Company as a manager of substantial private investments, representing principals
who have long invested in Resilient and the companies it is invested in. No member of the board or management of
Resilient has any interest or involvement in these investing activities.
• Allistar Fredericks was the first black hockey player selected to the SA national team, represented South Africa in
hockey at the Olympics and remains prominent in the administration of SA hockey at school and national level. In
December 2012, he established the Allistar Fredericks Development HOC (the “HOC Trust”) as a registered Public
Benefit Organisation providing educational scholarships for black children skilled at hockey. The affairs of the HOC
Trust are not substantial: it had a net worth at 31 December 2017 of approximately R39 million and an annual expense
budget of R5 million. Its trustees are Allistar Fredericks, Tim Hewan and Des de Beer, none of whom are beneficiaries.
Des is personally a supporter of the HOC Trust, but is not involved in its day to day affairs. One of the Siyakha Trusts
has also supported the HOC Trust. Tim Hewan (B.Sc, MBA) is an independent financial consultant, certified financial
planner and certified tax practitioner and he is the trustee tasked with management of the financial affairs of the HOC
Trust. Early in May 2017, the HOC Trust sold various investments including Greenbay shares to fund a project it then
re-considered. Its liquidity requirements changed within a few weeks after it sold the investments and, when Greenbay
undertook an accelerated book build late in May 2017, the HOC Trust reacquired Greenbay shares. The HOC Trust’s
sale of Greenbay shares in early May 2017 was at an average sale price of R1,72 per share and its reacquisition of
Greenbay shares at the end of May 2017 was at the placement price of R1,86 per share.
Having assessed all allegations and insinuations of wrongdoing disseminated by short sellers, the board of Resilient is of the view
that there is no reason for shareholders to exercise caution in their dealings in the Company’s securities.
Resilient is committed to transparency and full disclosure and will continue to address valid concerns from all market participants,
including through the FAQ document currently being prepared. The company will also continue to engage with the relevant
authorities, especially regarding the circumstances surrounding the 36One report.
12 February 2018
Sponsor
Java Capital
Date: 12/02/2018 09:10:00 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.