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VUKILE PROPERTY FUND LIMITED - Update on the acquisition of three shopping centres

Release Date: 23/07/2019 16:50
Code(s): VKE VKE13 VKE14 VKE07 VKE09 VKE10 VKE12 VKE11     PDF:  
 
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Update on the 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")


UPDATE ON THE ACQUISITION OF THREE SHOPPING CENTRES


1.   Introduction

     Shareholders are referred to the announcement released on SENS on Monday, 13 May 2019 relating to
     the conclusion of an agreement ("the agreement") between Rebosis Property Fund Limited ("Rebosis")
     and Vukile in respect of the proposed transaction for the acquisition by Vukile of the rental enterprise
     comprising three shopping centres known as Mdantsane City Shopping Centre, Bloed Street Mall and
     Sunnypark Shopping Centre from Rebosis ("the transaction").

     Following negotiations pursuant to the due diligence investigation undertaken by Vukile, Vukile and
     Rebosis have agreed that Vukile will not proceed with the acquisition of Bloed Street Mall and
     Sunnypark Shopping Centre and that Vukile will only purchase the Mdantsane City Shopping Centre
     for a purchase consideration of R512.222 million being an implied 9.00% acquisition yield.
     Consequently, Rebosis and Vukile have agreed in principle to amend the terms of the transaction as
     further detailed below. It is envisaged that the formal agreement recording the amended transaction
     terms will be executed within the next week.

2.   Salient terms of the transaction

     Vukile will acquire the rental enterprise comprising Mdantsane City Shopping Centre ("Mdantsane
     City" or "rental enterprise") from Rebosis for a consideration of R512.222 million ("the base price")
     (the "proposed amended transaction").

     The rental enterprise includes the immoveable property, land and buildings together with all movable
     assets, fixed assets, assets installed therein used in connection with the operations including Rebosis’
     rights and obligations in terms of all lease agreements and other contracts used in the operation of the
     rental enterprise.

     2.1.    Transfer date

             Vukile will acquire the rental enterprise, with effect from the date of registration of transfer of
             ownership of the immoveable property into its name (the "transfer date"), which is anticipated
             to be on 15 October 2019. Ownership, risk and benefit in the rental enterprise will vest in Vukile
             as from the transfer date.

     2.2.    Purchase consideration

             2.2.1.   The total consideration payable by Vukile to Rebosis will be the base price plus any
                      payment in respect of any development of the undeveloped bulk at Mdantsane City
                      referred to in paragraph 2.3 below ("Mdantsane bulk") (the "purchase
                      consideration"). Accordingly, the maximum purchase consideration that may be
                      payable in respect of the proposed amended transaction (assuming no escalation of the
                      base price as contemplated in paragraph 2.2.2 below) will be R557.222 million, subject
                      to a downward adjustment to be agreed between Rebosis and Vukile in respect of any
                      capital expenditure to be undertaken by Vukile after the transfer date if and to the extent
                      that Rebosis has not by the transfer date undertaken the agreed capital expenditure in
                      relation to Mdantsane City.

             2.2.2.   If Mdantsane City is not transferred into Vukile's name on or before
                      15 September 2019, the base price will be escalated by 6.00% per annum, calculated
                      and expressed as an effective daily rate, from 15 September 2019 until the transfer date.

             2.2.3.   The base price will be settled in cash and will be discharged on the transfer date.

             2.2.4.   The proposed amended transaction will no longer be conditional on Vukile undertaking
                      any form of vendor consideration placement.

     2.3.    Mdantsane bulk

             2.3.1.   If Vukile, within 24 months of the transfer date, commences construction of an
                      extension in respect of the 15 000m2 Mdantsane bulk, 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 Mdantsane bulk used in the extension.

             2.3.2.   Any amount payable in respect of the Mdantsane bulk (capped at R3 000.00 per m2 and
                      R45 million in aggregate) is to be determined by an independent quantity surveyor,
                      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 Mdantsane 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 will be paid to Rebosis,
                      within 30 days of the practical completion of the development.

     2.4.   General terms

            2.4.1.   Rebosis will 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.

            2.4.2.   Employees of Rebosis directly involved in the management and operation of Mdantsane
                     City will transfer together with the rental enterprise. It is anticipated that these
                     employees will be accommodated within Vukile's existing outsourced property
                     management arrangements.

            2.4.3.   The agreement provides for undertakings, warranties and indemnities which are normal
                     for transactions of this nature.

     2.5.   Conditions precedent

            The proposed amended transaction will be conditional on the fulfilment or waiver, as the case
            may be, of the conditions precedent which are summarised below, by no later than
            30 September 2019:

            2.5.1.   the securing, to the extent necessary, of any necessary regulatory approvals required to
                     implement the proposed amended transaction including, in particular, any required
                     Competition Authority approval;
            
            2.5.2.   the securing by Rebosis of any necessary consents, approvals and/or waivers of any
                     third party pre-emptive rights in order for Rebosis to effect transfer of Mdantsane City
                     to Vukile; and

            2.5.3.   any necessary shareholder approvals required by Rebosis for it to dispose of the rental
                     enterprise.

3.   Categorisation of the proposed amended transaction

     The proposed amended transaction would not be categorisable from a Vukile perspective and no
     shareholder approval is required by Vukile for its implementation.

     It is anticipated that the formal agreement to effect the proposed amended transaction will be concluded
     within a week. Shareholders will be informed once the formal agreement has been concluded.

23 July 2019


Corporate advisor and JSE                    NSX sponsor                     Attorneys and Competition law
sponsor                                      IJG Securities (Pty) Ltd        advisors
Java Capital                                                                 Cliffe Dekker Hofmeyr

Date: 23/07/2019 04:50:00
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