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Acquisition of three shopping centres
VUKILE PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2002/027194/06)
JSE share code: VKE NSX share code: VKN
ISIN: ZAE000180865
Debt company code: VKEI
(Granted REIT status with the JSE)
("Vukile" or "the company")
ACQUISITION OF THREE SHOPPING CENTRES
1. Introduction
Shareholders are advised that on 12 May 2019 ("signature date") Vukile concluded an agreement ("acquisition
agreement") pursuant to which, subject to the fulfilment of various conditions precedent (more fully detailed
below), Vukile will acquire from Rebosis Property Fund Limited ("Rebosis"), as an indivisible transaction, the
rental enterprises comprising three shopping centres known as Mdantsane City Shopping Centre, Bloed Street
Mall and Sunnypark Shopping Centre (collectively the "shopping centres" or "rental enterprise") ("the
acquisition").
The rental enterprise includes the immoveable properties, land and buildings together with all movable assets,
fixed assets, assets installed therein used in connection with the operations including the rights and obligations in
terms of the Bloed Street Mall notarial leases and Rebosis' rights and obligations in terms of all lease agreements
and other contracts used in the operation of the rental enterprise.
2. Rationale
The acquisition of the shopping centres is in line with Vukile's stated strategy of being a high-quality, low-risk
JSE listed retail focussed REIT operating in South Africa and in Spain. The acquisitions are consistent with
Vukile's South African focus on mid to low LSM shopping centres in South African townships and urban areas.
The acquisition will complement Vukile's retail portfolio and positioning as a leading retail REIT in South Africa.
3. Description of the shopping centres
3.1. Mdantsane City
Mdantsane City is a shopping centre that is located in one of the largest townships in South Africa. It is
an established and very well supported shopping centre in the node and is situated on the main arterial
route through Mdantsane. Mdantsane City has over 90 shops, with Shoprite, Pick n Pay and Cashbuild
as anchor tenants. It has a high national tenant component and includes other national retailers such as
Truworths, Woolworths, Foschini, Mr Price and Markham.
3.2. Bloed Street Mall
Bloed Street Mall is situated in central Pretoria. Its location makes it easily accessible to commuters. The
taxi rank located in the basement beneath the mall is the largest and busiest taxi interchange in the greater
Tshwane region. Established almost two decades ago it continues to provide an exceptional and
convenient shopping experience for local shoppers and commuters. Bloed Street Mall is anchored by
Game, Superspar, Usave and also has an excellent mix of national fashion retailers.
3.3. Sunnypark Shopping Centre
Sunnypark Shopping Centre is situated in Pretoria and provides shoppers with a contemporary shopping
experience. The mall is anchored by Woolworths, Checkers, Mr Price, Truworths and Foschini. The food
court comprises some of the best-loved South African food brands such as Nandos, Wimpy, Debonairs,
Steers, Fishaways, Ocean Basket, and Chicken Licken. The shopping centre has a Virgin Active gym.
Sunnypark Shopping Centre is well positioned and easy to access. It is situated close to local and national
government buildings, embassies and tourist attractions. The mall is well supported by a loyal and
established customer base.
4. Salient terms of the acquisition
4.1. Transfer date
Vukile will acquire the rental enterprise, with effect from the date of registration of transfer of ownership
of the relevant immoveable properties and the assignment of the Bloed Street Mall notarial leases into
Vukile's name (the "transfer date"), which is anticipated to be on 31 August 2019. Ownership, risk and
benefit in the rental enterprises shall vest in Vukile as from the transfer date.
4.2. Purchase price
4.2.1. The purchase consideration will be an amount determined by applying a yield of 9.00% to the
forecast net property income (the "forecast NOI") to be generated from the shopping centres
for the 12-month period commencing 31 August 2019 plus (i) any agterskot payments referred
to in in paragraph 4.3 ("agterskot") and (ii) any payment in respect of the Mdantsane bulk
referred to in paragraph 4.4 below ("Mdantsane bulk") (the "purchase consideration").
4.2.2. The forecast NOI has been provided by Rebosis and has not been reported on by Vukile's
auditors or reporting accountants and is subject to confirmation during a due diligence process
to be undertaken by Vukile.
4.2.3. The NOI for the purpose of the acquisition agreement has been assumed to be R160 million
(which would translate into an aggregate purchase price of R1 777 777 778.00). That will
constitute the maximum purchase price payable by Vukile, subject only to the agterskot and any
payment that may be made in respect of Mdantsane bulk. If during the due diligence process it
is established that the forecast NOI is less than R160 million (as determined by way of
agreement between Vukile and Rebosis or, failing agreement, as determined by an independent
expert), then Vukile shall pay a lower purchase price determined by applying a yield of 9.00%
to the forecast NOI as agreed or as so independently determined. If the agreed or determined
forecast NOI is less than R155 million then Vukile may elect to either purchase the rental
enterprise for a purchase consideration of R1 722 222 222.22, or not to proceed with the
acquisition.
4.2.4. If the shopping centres are not transferred into Vukile's name on or before 31 August 2019, the
purchase consideration will be escalated by 6.00% per annum, calculated and expressed as an
effective daily rate, from 31 August 2019 until the transfer date.
4.2.5. The purchase consideration will be settled in cash and will be discharged on the transfer date.
4.3. Agterskot formulation
As at the signature date, 2 300m2 of the office and retail components within the Sunnypark Shopping
Centre is vacant ("Sunnypark vacancy"). If, prior to the first anniversary of the transfer date, Rebosis is
able to procure independent creditworthy 3rd party tenants to lease the Sunnypark vacancy (on terms
acceptable to Vukile) for lease periods of at least 3 years, then Vukile will pay Rebosis an additional
amount of consideration in respect of the acquisition limited to R55 555 555 ("agterskot payment").
The agterskot payment shall be determined by applying a yield of 9.00% to the net property income of
the first year of the relevant leases. If post the transfer date and prior to the first anniversary of the transfer
date Vukile leases out all or portion of the Sunnypark vacancy, then Vukile will pay Rebosis 35% of the
relevant agterskot payment.
4.4. Mdantsane bulk
If Vukile, within 24 months of the transfer date, commences construction of an extension in respect of
the undeveloped bulk at Mdantsane Shopping Centre, then subject to the development delivering at least
a 10.5% development yield in the first year to Vukile, Vukile will pay to Rebosis an amount attributable
to the undeveloped Mdantsane bulk used in the extension.
Such amount is to be determined by Norval Wenzel Steinberg ("NWS") from a development feasibility
to be prepared by NWS. If the development yield as determined by NWS is lower than 10.5% in the first
year, then the cost attributable to the undeveloped bulk to be used in the extension will be reduced by
such an amount in order for Vukile to achieve a development yield of 10.5%. The payment of any amount
payable in terms of this paragraph shall be paid to Rebosis, within 30 days of the practical completion of
the development.
4.5. General terms
4.5.1. Rebosis shall remain liable for all liabilities associated with the rental enterprise up to the
transfer date and has provided Vukile with appropriate indemnities in this regard.
4.5.2. Employees of the seller directly involved in the management and operation of the shopping
centres will transfer together with the rental enterprise. It is anticipated that these employees
will be accommodated within Vukile's existing outsource property management arrangements.
4.5.3. The acquisition agreement provides for undertakings, warranties and indemnities which are
normal for transactions of this nature.
5. Funding of the purchase consideration
Whilst it is anticipated that Vukile may gear up to 25% of the purchase consideration under debt arrangements,
Vukile proposes funding a significant portion of the purchase price by way of a vendor consideration placement
of Vukile shares (a "vendor consideration placement"), thereby reducing the level of gearing against the
shopping centres. The acquisition is conditional on inter alia Vukile shareholders approving both the acquisition
and the vendor consideration placement.
6. Conditions precedent
The acquisition is subject to the fulfilment or waiver, as the case may be, of the following conditions precedent,
the last of which is required to be fulfilled by not later than 150 days of the signature date:
6.1. the securing, to the extent necessary, of any necessary regulatory approvals required to implement the
acquisition including, in particular, any required Competition Authority approval;
6.2. Vukile having completed a comprehensive due diligence investigation in respect of the rental enterprise
and Vukile issuing a written confirmation to Rebosis that Vukile is in its sole and absolute discretion
satisfied as to the outcome of its due diligence investigation;
6.3. Rebosis securing any necessary consents, approvals and/or waivers of any third party pre-emptive rights
in order for Rebosis to effect transfer of the immovable properties and/or the assignment of the Bloed
Street Mall notarial leases to Vukile;
6.4. the securing by Rebosis of any necessary shareholder approvals required for it to dispose of the rental
enterprise;
6.5. the securing by Vukile of shareholder approval for the acquisition and for Vukile to undertake the vendor
consideration placement; and
6.6. the successful conclusion of the vendor consideration placement in respect of at least 75% of the purchase
price at a pricing and on terms acceptable to Vukile.
7. Property specific information
Details of the shopping centres, including the name, geographical location, sector, GLA, weighted average rental
per square metre, the net operating profit and the valuations, are set out in the table below. The financial
information in this announcement has been provided to Vukile as extracted by Rebosis from the audited financial
statements of Rebosis for the year ended 31 August 2018 which was prepared in terms of International Financial
Reporting Standards.
Weighted
average
rental per Net operating
Name and geographical GLA m2 profit Valuation(1)
No location Sector (m2) (R/m2) (R'million) (R'million)
1 Mdantsane Shopping Retail 34 935 116.20 40.2 635
Centre, Eastern Cape
2 Bloed Street Mall, Retail 26 400 155.20 48.7 695
Gauteng
3 Sunnypark Shopping Retail 27 507 157.00 55.1 770
Centre, Gauteng Office 1 423
Total 90 265 144 2 100
Notes:
(1) The shopping centres were valued as at 31 August 2018 by Mills Fitchet Magnus Penny & Wolffs (Pty) Ltd,
who are external independent valuers registered as professional valuers or as professional associate valuers
in terms of the Property Valuers Profession Act, No.47 of 2000.
8. CATEGORISATION OF THE ACQUISITION
Whilst the acquisition is classified as a category 2 transaction in terms of the JSE Listings Requirements and as
such does not, in terms of the JSE Listings Requirements, require Vukile shareholder approval, Vukile has made
the acquisition conditional on its shareholders approving the acquisition and its shareholders providing the Vukile
board with the requisite authorities to undertake the vendor consideration placement. A circular convening a
general meeting and providing further information on the acquisition and the vendor consideration placement will
be sent to Vukile shareholders in due course.
13 May 2019
Corporate advisor and JSE sponsor NSX sponsor Attorneys and Competition law advisors
Java Capital IJG Securities (Pty) Ltd Cliffe Dekker Hofmeyr
Date: 13/05/2019 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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