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REBOSIS PROPERTY FUND LIMITED - Proposed disposal of three retail properties for an aggregate consideration of circa R1.8 billion

Release Date: 13/05/2019 08:00
Code(s): REB REA REBC09     PDF:  
 
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Proposed disposal of three retail properties for an aggregate consideration of circa R1.8 billion

REBOSIS PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2010/003468/06)
JSE share codes:
REA ISIN: ZAE000240552
REB ISIN: ZAE000201687
Alpha code: REBI
(Approved as a REIT by the JSE)
(“Rebosis” or the “Company”)


PROPOSED DISPOSAL OF THREE RETAIL PROPERTIES FOR AN AGGREGATE CONSIDERATION OF CIRCA R1.8 BILLION


1. Introduction

    Rebosis shareholders are hereby advised that the Company has entered into a sale of rental
    enterprise agreement with Vukile Property Fund Limited (“Vukile” or the “Purchaser”), dated
    12 May 2019 (“Signature Date”) (“Sale Agreement”), to dispose of three retail properties
    comprising Mdantsane City Shopping Centre, Sunnypark Shopping Centre and Bloedstreet Mall
    (the “Properties”) together with the rental enterprises conducted thereon by Rebosis (the “Rental
    Enterprise”) for an aggregate consideration anticipated to be R1 777 777 778 (“Disposal
    Consideration”) (the “Disposal/s”), which excludes the Agterskot (as defined in paragraph 3.2
    below) and the consideration payable in respect of the Mdantsane Bulk (as detailed in paragraph
    3.3 below).

    The proceeds of the Disposals will be used to reduce the existing debt of the Company. The
    Disposals will become effective on the date of registration of transfer of ownership of the
    Properties into the name of the Purchaser (“Transfer Date”) which is anticipated to be 31 August
    2019 (“Anticipated Transfer Date”).

2. Rationale

    The Disposals are in line with the Company’s intention to reduce its loan to value (“LTV”) ratio as
    outlined in the road-map included in the results announcement released by the Company on SENS on
    12 November 2018 and the pre-close presentation presented to Rebosis shareholders on 27 February 2019.

    The Company has experienced delays in the planned disposals of its office portfolio, as funding the
    acquisition of office properties rely on tenants’ long term leases which have been taking longer
    than anticipated to renew. The Company is of the view that it is important to expedite the
    reduction of its LTV ratio in order to achieve a lower cost of funding, an improved credit rating and
    a stronger balance sheet, all of which are expected to return market confidence in Rebosis.

3. Salient Terms

3.1 Disposal Consideration
    The amount payable for the Rental Enterprise including the Properties shall be the Disposal
    Consideration including additional amounts which may be payable in respect of the Agterskot and
    the Mdantsane Bulk. The Disposal Consideration shall be payable by the Purchaser in cash on the
    Transfer Date. If the transfer of the Properties takes place after the Anticipated Transfer Date, the
    Disposal Consideration will escalate by 6% per annum, calculated and expressed as an effective
    daily rate, from 31 August 2019 until the Transfer Date.

    The Disposal Consideration is calculated on the basis of a forecast net property income (“NOI”) in
    relation to the Rental Enterprise for the 12 month period commencing on the Anticipated Transfer
    Date, which excludes the vacant office accommodation comprising approximately 2 300m2
    situated in the office and retail components of the Sunnypark Shopping Centre (“Sunnypark
    Vacancy”).

    If during the due diligence investigation to be carried out by the Purchaser, it is established that
    the forecast NOI is less than R160 million but equal to or more than R155 million (as determined
    by way of agreement between Vukile and Rebosis or, failing agreement, as determined by an
    independent expert), the purchase price payable by the Purchaser shall be determined by applying
    a forward yield of 9% to the forecast NOI as agreed or as so independently determined. However,
    if the agreed or determined forecast NOI is greater than R160 million, the Disposal Consideration
    shall remain unchanged. If it is established that the NOI is less than R155 million, the Purchaser
    may elect to either purchase the Properties and the Rental Enterprise for a consideration of
    R1 722 222 222, or not to proceed with the Disposals.

3.2 Agterskot
    An additional amount may be payable by Vukile in respect to the letting of the Sunnypark Vacancy,
    which amount shall not exceed R55 555 555 (“Agterskot”). Rebosis shall be entitled, but not
    obliged, to procure a tenant/s for the Sunnypark Vacancy, for a period terminating 12 months after
    the Transfer Date, subject to the Purchaser approving the tenant/s and the provisions of the
    respective lease/s. The Agterskot payment shall be determined by applying a forward yield of 9%
    to the NOI of the first year of the relevant lease/s. If post the Transfer Date and prior to the first
    anniversary of the Transfer Date the Purchaser leases out all or portion of the Sunnypark Vacancy,
    the Purchaser will pay to Rebosis 35% of the relevant Agterskot payment.

3.3 Mdantsane Bulk
    If the Purchaser, within 24 months of the Transfer Date, commences construction with 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 the Purchaser, the
    Purchaser 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 is determined by NWS
    as being 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 the Purchaser 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. The Properties and related financial information

    The financial information provided below has been extracted from the Company’s audited results
    for the year ended 31 August 2018, which were prepared in terms of International Financial
    Reporting Standards. The financial information in this announcement is the responsibility of the
    directors of Rebosis and has not been reported on or reviewed by a reporting accountant.

 Property         Location      Sector     Gross       Single or   Weighted     Net          Value of
                                           lettable    multi-      average      operating    the
                                           area        tenanted    rental per   income       Properties*
                                                                   m2
                                           (m2)                    (R)          (R’m)        (R’m)
 Mdantsane      East            Retail     34 935      Multi-
 City Shopping  London                                 tenanted    116.20       40.2         635
 Centre

 Sunnypark      Gauteng         Retail     27 507      Multi-
 Shopping                                              tenanted
 Centre                                                            157.00       55.1         770
                                Office     1 423       Multi-
                                                       tenanted

 Bloedstreet    Pretoria        Retail     26 400      Multi-
 Mall                                                  tenanted    155.20       48.7         695
                                                       
 Total                                     90 265                               144          2 100

   *The valuations were performed by Mills Fitchet Magnus Penny & Wolffs (Pty) Ltd, who is
   independent from the Company and registered as a professional valuer in terms of the Property
   Valuers Profession Act, No. 47 of 2000.

5. Conditions precedent

The Disposals are subject to the fulfilment of the following outstanding conditions precedent, the last
of which is required to be fulfilled by not later than 150 days of the Signature Date:

5.1 the Purchaser confirms in writing to Rebosis that it is satisfied with the outcome of the due
    diligence investigation to be carried out by the Purchaser, in its sole and absolute discretion;

5.2 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 Properties and/or the assignment of the Bloed
    Street Mall notarial leases to the Purchaser;

5.3 the shareholders of Rebosis have passed such resolutions as may be required in terms of the JSE
    Listings Requirements in respect of a Category 1 transaction, and, if applicable, the Companies Act
    No 71 of 2008;

5.4 the Purchaser secures approval from its shareholders for the Disposals and for the Purchaser to
    undertake a vendor consideration placement to fund at least 75% of the Disposal Consideration
    (“Vendor Placement”);

5.5 the Disposal is approved by the relevant competition authority/ies in terms of the Competition
    Act, No 89 of 1998, either unconditionally or conditional on terms acceptable to the parties; and

5.6 the Purchaser successfully concludes the Vendor Placement to raise at least 75% of the Disposal
    Consideration by way of vendor placement at a placement price and on terms acceptable to the
    Purchaser.

6. Other

   6.1 The Sale Agreement provides for undertakings, warranties and indemnities which are normal
       for transactions of this nature.

   6.2 Employees of Rebosis directly involved in the management and operation of the shopping
       centres will transfer together with the Rental Enterprise.

   6.3 The Disposals were not directly or indirectly introduced by or concluded through the agency
       of any third party and no finder's fee, brokerage, commission or similar compensation is
       payable in respect of the Disposals or any part thereof.

7. Categorisation

In terms of the JSE Listings Requirements, the Disposals are classified as a Category 1 transaction for
Rebosis, which accordingly requires approval by Rebosis shareholders. Details of the Disposals,
together with inter alia, pro forma financial effects of the Disposals and a valuation report on the
Properties will be included in a circular to Rebosis shareholders (“Circular”). The salient dates and
times pertaining to the Disposals will be released on SENS and published in the press at the time of
posting of the Circular.


Johannesburg
13 May 2019

Investment Bank, Corporate Advisor, and Equity and Debt Sponsor:
Nedbank Corporate and Investment Banking, a division of Nedbank Limited

Legal Advisor:
Cliffe Dekker Hofmeyr Inc.

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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