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Update on R1.25 billion property portfolio acquisition and withdrawal of cautionary announcement
DIPULA INCOME FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2005/013963/06)
JSE share code: DIA ISIN: ZAE000203378
JSE share code: DIB ISIN: ZAE000203394
(Approved as a REIT by the JSE)
(“Dipula” or “the company”)
UPDATE ON R1.25 BILLION PROPERTY PORTFOLIO ACQUISITION AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION AND RATIONALE
Shareholders are referred to the SENS announcement released on 10 November 2017 which disclosed components of a
composite transaction (the “Transaction”) to acquire a portfolio of properties. The pre-emptive rights in respect of the
industrial property portfolio which is subject to a head lease, have now been waived and as such shareholders are hereby
advised of the full suite of information in respect of the Transaction.
The portfolio of properties acquired pursuant to the Transaction (the “portfolio”) has an aggregate purchase consideration
of R1.25 billion (the “acquisition”) at a forward yield of 11.8% (based on Dipula’s share of the net operating profit for
the 12 month period 1 May 2018 to 30 April 2019). The purchase price of R1.27 billion originally indicated in the SENS
announcement released on 10 November 2017 has been adjusted to account for certain properties on which pre-emptive
rights were exercised as well as a result of price adjustments to account for contracted purchase price escalations.
The Transaction is in line with Dipula’s strategy of acquiring quality earnings enhancing assets and properties where
additional value can be created through redevelopment and refurbishment. The portfolio has minimal vacancies (at 0.8%
of gross lettable area) (“GLA”), a weighted average lease expiry of 4.5 years by gross rental income and will be income
enhancing.
2. TERMS OF THE TRANSACTION
2.1. The Transaction
Dipula has entered into inter-conditional agreements with Setso Holdco Proprietary Limited (“Setso”) and Rec
Group Property Trust (“Rec Trust”) to acquire a 100% shareholding in the Setso wholly-owned subsidiary
Luxanio Trading 181 Proprietary Limited (“Luxanio”) and to subscribe for a 50% + 1 stake in Bajascape
Proprietary Limited (“Bajascape”), a company that will hold the property portfolio of Rec Trust. The Transaction
will be effective from the date on which the last of the conditions precedent has been fulfilled or waived (as the
case may be), or such other date as may be agreed in writing (the “closing date”).
2.2. Purchase price
The aggregate consideration payable in respect of the Transaction is R1.25 billion payable in cash on the third
business day following the closing date,unless certain portions thereof are deferred so that payment coincides with
the transfer of certain of properties.
2.3. Conditions precedent
The Transaction is subject to the fulfilment or waiver, as the case may be, of, inter alia, the following material
conditions precedent:
- Dipula securing equity funding with which to settle the component of the purchase price not funded by third
party debt; and
- the agreements with Setso and Rec Trust having become unconditional.
2.4. Material terms
The agreements in respect of the Transaction contain undertakings, warranties and indemnities which are normal
for a transaction of this nature, including the following material term:
- A cash sum of R29,6 million will be unconditionally paid by Setso to Dipula. This amount will be utilised by
Dipula towards current and future repairs and maintenance as well as in respect of a rental guarantee for
unforeseen potential vacancies or lower than budgeted renewals over a three year period commencing from
the closing date.
3. PROPERTY PORTFOLIO DETAILS
Weighted
average
gross rental
GLA Attributable per m2 Attributable
Property name Geographic Location (m2) GLA (m2) (ZAR/m2) value (ZAR)
RETAIL
Chilli Lane Sunninghill, Gauteng 13 653 13 653 169.89 286 308 423
Chilli on Top Sunninghill, Gauteng 5 082 5 082 156.31 88 426 153
18 735 18 735 166.21 374 734 576
OFFICE
55 Hyde Park Hydepark, Gauteng 2 167 2 167 143.91 39 648 555
Carnation Place Constantia Kloof, Gauteng 4 440 4 440 186.86 103 234 380
Detnet (66.67%) Modderfontein, Gauteng 2 074 1 383 169.26 23 453 699
Valley View Office
Park Constantia Kloof, Gauteng 6 793 6 793 106.10 111 315 922
Avanti Bellville, Western Cape 8 382 8 382 160.60 175 765 860
263 Oxford (50.01%) Illovo, Gauteng 1 755 878 247.55 21 696 137
25 611 24 042 155.94 475 114 552
INDUSTRIAL
(50.01%)
Prospecton, Kwa-Zulu
Prospecton Natal 25 062 12 531 20.21 25 294 607
Wilsonia East London, Eastern Cape 25 900 12 950 12.87 16 648 112
Wentworth, Kwa-Zulu
Wentworth Natal 17 271 8 636 19.20 16 567 425
Port Elizabeth, Eastern
PE Grahamstown Road Cape 22 179 11 090 13.66 15 129 309
Port Elizabeth, Eastern
PE Burman Road Cape 17 843 8 922 14.97 13 334 421
Wadeville 4 Wadeville, Gauteng 14 784 7 392 14.33 10 578 778
Middelburg Middelburg, Mpumalanga 13 888 6 944 13.22 9 169 018
Wadeville 1 Wadeville, Gauteng 15 937 7 969 11.05 8 790 904
Middelburg 2 Middelburg, Mpumalanga 12 858 6 429 13.38 8 591 854
Richards Bay, Kwa-Zulu
Richards Bay Natal 11 532 5 766 14.21 8 180 656
Pietermaritzburg, Kwa-
Pietermaritzburg Zulu Natal 7 500 3 750 19.49 7 300 137
Watloo 3 Watloo, Gauteng 8 009 4 005 18.24 7 292 666
Newcastle, Kwa-Zulu
Newcastle Natal 14 571 7 286 8.65 6 289 095
Rustenburg Rustenburg, North West 10 813 5 407 11.46 6 186 980
Clayville Clayville, Gauteng 9 798 4 899 12.42 6 077 177
Vanderbijlpark Vanderbijlpark, Gauteng 23 612 11 806 4.97 5 856 815
Congella Congella, Kwa-Zulu Natal 5 084 2 542 18.84 4 786 153
Alrode Alrode, Gauteng 10 583 5 292 7.44 3 934 377
Phoenix Phoenix, Kwa-Zulu Natal 3 566 1 783 20.53 3 656 341
Wadeville 3 Wadeville, Gauteng 4 587 2 294 12.61 2 888 186
Alrode South Alrode South, Gauteng 4 843 2 422 8.93 2 159 372
Hercules Hercules, Gauteng 2 620 1 310 14.35 1 876 911
282 840 141 420 13.49 190 589 294
REDEVELOPMENTS
Kerk Street JHB 4 Johannesburg, Gauteng 9 147 9 147 193 915 280 3
GM Hatfield 5 Hatfield, Gauteng 3 888 972 15 814 047
13 035 10 119 209 729 327
340 221 194 316 1 250 167 749
1. The value attributed to each property for purposes of the Transaction 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.
2. Dipula’s attributable share of the value of the portfolio is R1.25 billion.
3. Attributable GLA is weighted by the effective ownership interest being purchased.
4. The Kerk Street JHB property has additional bulk of 17 000 m2.
5. The GM Hatfield redevelopment has attributable bulk of 4 533 m2.
4. FINANCIAL INFORMATION
Set out below is the forecast revenue, net operating profit, net profit after tax and earnings available for distribution of
the portfolio (the “forecast”) for the 4 months ending 31 August 2018 and year ending 31 August 2019 (the “forecast
period”).
The forecast includes forecast figures for the duration of the forecast period.
The forecast has been prepared on the assumption that the closing date is 1 May 2018.
The forecast, the assumptions on which it is based and the 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 compliant with International Financial Reporting Standards.
Forecast for the Forecast for the
4 months ending 12 months ending
31-Aug-18 31-Aug-19
Revenue 71 014 435 222 105 535
Net operating profit 56 235 224 174 740 847
Finance costs (18 027 479) (54 082 437)
Total comprehensive income for the period 38 207 745 120 658 409
Total profit and comprehensive income for
the period attributable to :
- Shareholders of the company 32 529 230 102 633 361
- Non-controlling interest 5 678 515 18 025 048
Profit available for distribution 32 529 230 102 633 361
The forecast incorporates the following material assumptions in respect of revenue and expenses:
1. Of the gross rental income (rental, operating cost recoveries and rates recoveries) assumed in the forecast, 98%
relates to contracted rental and 2% relates to uncontracted rental
2. Contracted rental income is based on existing lease agreements including stipulated increases which are valid and
enforceable.
3. Contracted rental income was verified to lease agreements which 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.
4. Uncontracted rental income relates to assumptions on leases that expire and are assumed to be relet during the
forecast period.
5. No straight-line rental income is recognised.
6. Rental guarantees and contributions towards repairs and maintenance of R 18.3 million were included in revenue
and net operating income for the forecast period.
7. Property operating expenditure has been forecast on a line-by-line basis based on management’s review of historical
expenditure and internal benchmarks.
8. No fair value adjustment is recognised.
9. The Transaction has been assumed to be funded 40% by debt and 60% through a vendor consideration placement
of Dipula ordinary shares. The assumed interest rate is 9.25%.
10.It has been assumed that there will be no unforeseen economic factors that will affect the lessees' ability to meet
their commitments in terms of existing lease agreements.
5. CATEGORISATION OF THE TRANSACTION
The Transaction is classified as a category 2 transaction in terms of the JSE Listings Requirements. Accordingly, it is not
subject to the approval of Dipula shareholders.
6. WITHDRAWAL OF CAUTIONARY
Shareholders are referred to the cautionary announcements in respect of the Transaction released on 13 October 2017, 10
November 2017, 22 December 2017 and 7 February 2018 and are advised that following the release of this announcement,
caution is no longer required to be exercised by shareholders when dealing in their shares.
22 March 2018
Sponsor
Java Capital
Legal Advisor to Dipula
Cliffe Dekker Hofmeyr
Legal Advisor to Setso
Adams & Adams
Legal Advisor to Rec Trust
Chris Boulle Inc
Date: 23/03/2018 07:05:00 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
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