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Acquisition Of Nonkqubela Mall
FAIRVEST PROPERTY HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1998/005011/06)
Share code: FVT
ISIN: ZAE000203808
(Approved as a REIT by the JSE)
(“Fairvest” or “the Company”)
ACQUISITION OF NONKQUBELA MALL
1. NONKQUBELA MALL
1.1. Shareholders are advised that the Company entered into an agreement (“Sale
Agreement”) on 14 May 2019 with Investec Property Fund Limited (“Seller”) to
acquire, as a going concern, the shopping centre rental enterprise operated by the
Seller (“Rental Enterprise”) in respect of the properties situated at Erf 50261 and Erf
13435, Sulani Street, Site B, Khayelitsha, Cape Town, Western Province (collectively
the “Property”), more commonly known as Nonkqubela Mall (“Acquisition”).
1.2. The effective date of the Acquisition shall be the date of registration of transfer of
ownership of the Property into the name of Fairvest at the applicable Deeds Office
(“Effective Date”), which is expected to occur on or about 1 September 2019.
2. RATIONALE FOR THE ACQUISITION
The Acquisition is consistent with the Company’s growth strategy focusing on the
acquisition of retail assets with a weighting in favour of non-metropolitan areas and lower
living standards measure (LSM) sectors.
3. PURCHASE CONSIDERATION
3.1. The purchase consideration for the Rental Enterprise amounts to R162 876 181
(including VAT at the rate of 0%) (“Purchase Consideration”), payable in cash on
the Effective Date against registration of transfer of ownership of the Property into the
name of Fairvest (“Transfer”). The Purchase Consideration is based on the projected
net operating income of the Rental Enterprise of R15 880 428 for the 12-month period
from 1 April 2019 to 31 March 2020, capitalised at a rate of 9.75%.
3.2. If Transfer occurs after 1 September 2019 due to reasons beyond the Company’s
reasonable control, the Purchase Consideration will escalate at a rate of 7% per
annum for the period commencing from 1 September 2019 and terminating on the
date on which Transfer occurs. If, due to reasons within the Company’s reasonable
control, Transfer occurs after 1 September 2019, the Purchase Consideration will
escalate at a rate of 7% per annum for the period commencing from 1 April 2019 and
terminating on the date on which Transfer occurs. In both instances, the Sale
Agreement limits the maximum escalation period, given the longstop date of 30 June
2020 referred to in paragraph 6.2 below.
4. THE PROPERTY
Details of the Property are as follows:
Property Name and Geographical Sector GLA Weighted
Address Location (m2) Average Base
Rental/m2
(R/m2)
Nonkqubela Mall, Erf 50261 Sulani Street, Retail 10 811 159.35
and Erf 13435 Site B, Khayelitsha,
Cape Town,
Western Province
5. PROPERTY SPECIFIC INFORMATION
Details regarding the Property, as at the expected Effective Date of 1 September 2019,
are set out below:
Property Name and Weighted Lease Duration Vacancy % by
Address Average (years) GLA
Escalation
Nonkqubela Mall, Erf 6.8% 4.2 0%
50261 and Erf 13435,
Sulani Street, Site B,
Khayelitsha, Cape Town,
Western Province
Notes:
a) The costs associated with the Acquisition are estimated at R2 934 821. No agents’
commission is payable in respect of the Acquisition.
b) The Purchase Consideration of the Property 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.
c) Vacancy percentage by gross lettable area (“GLA”) has been reflected as 0%,
taking into account the rental guarantee in paragraph 7.3 below.
6. SUSPENSIVE CONDITION
6.1. The Acquisition is subject to fulfilment of the suspensive condition that, within 90 days
from the signature date of the Sale Agreement, the Competition Authorities
unconditionally approve the Acquisition, or subject to such conditions as are
acceptable to the parties.
6.2. The Seller and the Company may by agreement extend the date for fulfilment of the
suspensive condition, provided that such extended date cannot be later than 30 June
2020.
7. WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE SALE AGREEMENT
7.1. The Seller has provided warranties to Fairvest that are standard for a transaction of
this nature.
7.2. Save for such warranties, the Rental Enterprise is sold “voetstoots”.
7.3. The Seller provides a rental guarantee to the Company in terms of which the Seller
guarantees to the Company a maximum gross aggregate rental of R158 210 per
annum in respect of the current vacant premises on the Property for as long as these
premises remain vacant or for a period of 36 months after the Effective Date,
whichever is the shorter.
8. FORECAST FINANCIAL INFORMATION IN RESPECT OF THE ACQUISITION
The forecast financial information relating to the Acquisition for the financial periods
ending 30 June 2020 and 30 June 2021 are set out below. The forecast financial
information has not been reviewed or reported on by a reporting accountant in terms of
section 8 of the JSE Listings Requirements and is the responsibility of the Company’s
directors.
Forecast for the 10- Forecast for the
month period ending 12-month period
30 June 2020 ending 30 June
(R) 2021
(R)
Rental income 21 398 137 27 362 791
Straight-line rental accrual 1 568 663 901 409
Gross revenue 22 966 800 28 264 200
Property expenses (7 619 477) (9 988 219)
Net property income 15 347 323 18 275 981
Asset management fee (690 879) (829 055)
Operating profit 14 656 444 17 446 926
Finance cost (12 435 825) (14 922 990)
Profit before taxation 2 220 619 2 523 936
Income tax expense - -
Total comprehensive income 2 220 619 2 523 936
attributable to shareholders
Adjusted for:
Straight-line rental accrual (1 568 663) (901 409)
Distributable profit 651 956 1 622 527
Notes:
a) Rental income includes gross rentals and other recoveries, but excludes any
adjustment applicable to the straight-lining of leases.
b) Property expenses include all utility and council charges applicable to the
Property.
c) The forecast information for the 10-month period ending 30 June 2020 has been
calculated from the anticipated Effective Date, being on or about 1 September
2019.
d) The forecast distribution excludes straight-line rental accruals.
e) The Seller has provided the rental guarantee to the Company in respect of the
Rental Enterprise, as set out in paragraph 7.3 above. Contracted revenue
constitutes 87.55% of the revenue for the 10-month period ending 30 June 2020
and 68.97% of the revenue for the 12-month period ending 30 June 2021.
f) Near-contracted revenue constitutes 12.45% of the revenue for the 10-month
period ending 30 June 2020 and 31.03% of the revenue for the 12-month period
ending 30 June 2021.
g) There is no uncontracted revenue for either the 10-month period ending 30 June
2020 or for the 12-month period ending 30 June 2021.
h) Leases expiring during the forecast period have been assumed to renew at the
future value of current market related rates.
i) This forecast has been prepared on the assumption that the Purchase
Consideration and acquisition fees will be funded via debt facilities, at an interest
rate of 9.0% per annum.
9. CATEGORISATION
The Acquisition qualifies as a Category 2 acquisition for the Company in terms of the
JSE Listings Requirements.
15 May 2019
Cape Town
Sponsor
PSG Capital
Date: 15/05/2019 10:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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