SA CORPORATE REAL ESTATE FUND

Transcription

1 SA CORPORATE REAL ESTATE FUND (A portfolio forming part of SA Corporate Real Estate Trust Scheme (the Scheme ), a Collective Investment Scheme in property registered in terms of the Collective Investment Schemes Control Act, No. 45 of 2002) (the Act ) (Approved as a REIT by the JSE Limited) JSE share code: SAC ISIN: ZAE ( SA Corporate or the Fund ) Managed by SA Corporate Real Estate Fund Managers Limited (Registration number 1994/009895/06) (Incorporated in the Republic of South Africa) ( the Manager or Manco ) SA CORPORATE REAL ESTATE LIMITED (Incorporated in the Republic of South Africa) (Registration number 2015/015578/06) JSE share code: SAC ISIN: ZAE ( Newco or the Company ) POSTING OF CIRCULAR RELATING TO ESTABLISHMENT OF SA CORPORATE REAL ESTATE FUND AS AN INTERNALLY MANAGED CORPORATE REIT AND AN ABRIDGED PRE-LISTING STATEMENT FOR NEWCO SA CORPORATE CONVERSION CIRCULAR 1. Introduction SA Corporate unitholders ( Unitholders ) are referred to the previous SENS announcements on 31 October 2013 and 2 April 2014, regarding the economic internalisation of the management of SA Corporate which had the effect of the Manager taking over from Old Mutual Property Proprietary Limited ( OMP ) the asset management function in relation to the assets of the Fund (the Internalisation ). This announcement sets out the proposed transaction whereby SA Corporate will be reconstituted to an internally managed corporate Real Estate Investment Trust ( REIT ) and listed on the JSE as Newco (the Transaction ). 2. Background and rationale 2.1. In line with SA Corporate's four pillar strategy, which includes aligning investor and management interests, the Fund concluded the Internalisation on 1 May The existing service charge arrangement in respect of the Fund was changed from a monthly charge based on a value of one twelfth of 0.4% of the aggregate market capitalisation of the Fund plus borrowings, to a monthly charge equal to the actual operating costs incurred by the Manager in administering the Fund as well as scrapping the initial charge of 5% on the value of any new participatory interests ( Units ) issued. A lump sum of R185 million plus Value Added Tax ( VAT ) was paid by the Fund to the Manager, which was settled through cash resources.

2 2.3. The rationale for SA Corporate in executing the Internalisation was to align the interests of the Manager with those of its Unitholders and eliminate any real and perceived conflicts. In order to achieve a complete Internalisation, which results in Unitholders having control over management and the board of directors of the Manager ( the Board ) as well as ownership of the Manager, a two-phased approach was proposed, with the Internalisation comprising phase I Phase II involves the conversion of the Scheme and the Fund from a collective investment scheme in property ( CISIP ) to a corporate REIT, as soon as the appropriate regulatory framework is in place to achieve this ( Phase II ) On 28 March 2014 the Registrar of Collective Investment Schemes ( Registrar ) appointed in terms of the Act, issued Board Notice 42 of 2014 ( Notice ), which sets out the framework for converting the Scheme to a corporate REIT and the subsequent winding up of the CISIP concerned. Subject to the approval of Unitholders, the Transaction will be given effect to in accordance with the provisions of the Notice The Board believes that it is the appropriate time for SA Corporate to convert from a CISIP to a corporate REIT, which will further align the interests of the Manager with Unitholders. Furthermore, the introduction of the REIT regime has resulted in the alignment of the fiscal consequences of investing in a CISIP and a property loan stock company, and thus the key rationale for investing in a CISIP no longer exists. There is also an investor preference for corporate REITs as a result of institutional investors having a better understanding of the regulatory environment of corporate REITs when compared to a CISIP. 3. Mechanics of the transaction 3.1. Prior to the implementation of the Transaction, SA Corporate has undertaken an internal restructure in terms of which SA Corporate has disposed of its directly held properties to one of its wholly-owned fixed property companies, SA Retail Properties Proprietary Limited ( SA Retail ). As a result SA Corporate will hold all of its immovable properties indirectly via whollyowned fixed property companies prior to implementation of the Transaction In terms of the Transaction and with effect from 30 June 2015, SA Corporate will dispose of all its assets comprising its holdings in its wholly-owned fixed property companies to Newco in consideration for: the assumption by Newco of SA Corporate's liabilities; and shares in Newco, which shares will be issued directly to Unitholders on behalf of SA Corporate, ( the Amalgamation ). In addition, Newco has indemnified the Manager, SA Corporate and the SA Corporate trustee FirstRand Bank Limited ( Trustee ) against any claims which may be brought against any of them in respect of any claim arising out of or in connection with any contractual or delictual claim of any nature incurred by SA Corporate Unitholders recorded in the SA Corporate register on the record date, being Friday, 3 July 2015, will receive Newco shares on a pro rata basis in the ratio of one Newco share for every one SA Corporate Unit held on the record date Current Unitholders in SA Corporate will become direct shareholders in Newco. They will therefore continue to be invested in the same base of assets in which they are currently invested via their holding of SA Corporate Units, namely all of the immovable properties held

3 directly by SA Corporate and shares in SA Corporate's wholly-owned fixed property companies Newco has secured a listing by way of an introduction in the Real Estate, Diversified REITs, sector of the Johannesburg Stock Exchange ( JSE ), in terms of the FTSE classification, under the abbreviated name: "SA Corp", JSE share code: SAC and ISIN: ZAE with effect from the commencement of trade on Monday, 29 June In this regard, SA Corporate has posted a pre-listing statement dated 30 April 2015 ( Pre-listing Statement ) to Unitholders which contains full details of Newco. An abridged version of the Pre-listing Statement is set out below Following Unitholder approval of and subsequent implementation of the Transaction, SA Corporate will no longer hold any assets and liabilities and will therefore no longer qualify for a listing on the JSE in terms of the JSE Listings Requirements ( Listings Requirements ). Accordingly, the listing of SA Corporate on the Main Board of the JSE will be terminated with effect from Monday, 6 July 2015 and SA Corporate will be liquidated and wound-up The net effect of the above will be to transform SA Corporate from a CISIP to a corporate REIT The Registrar and the Trustee have indicated that they have no objection to the Transaction, subject to Unitholders approving the Transaction by passing a resolution at a general meeting convened for that purpose. 4. Conditions precedent The Transaction is subject to the fulfilment of the following conditions precedent by Friday, 26 June 2015: 4.1. the approval by Unitholders of the resolution proposed in the notice of general meeting; 4.2. the Competition Authorities having approved the Transaction to the extent required; 4.3. the approval by SA Corporate's lenders regarding a syndicated loan to SA Retail, secured by guarantees by SA Corporate and some of its fixed property companies; 4.4. the Registrar having approved the Transaction (which is subject to the requisite majority of Unitholders voting in favour of the Transaction at the general meeting); and 4.5. suitable rulings being obtained from the Advance Tax Ruling Unit of the South African Revenue Service relating to certain aspects of the Transaction, including in respect of rollover relief in terms of sections 42 and 44 of the Income Tax Act. The Manager shall have the discretion to waive the requirements in relation to the obtaining of such rulings or any part thereof, should it determine that such ruling or part thereof is no longer required. 5. Financial information 5.1. At the time of implementing the Internalisation it was agreed that during Phase II, Newco will purchase the shares of the Manager from Marriott Property Services Proprietary Limited ( Marriott ) (a subsidiary of OMP) for R1.00 and the Manager will become a wholly-owned subsidiary of Newco ( Manco Transaction ). The Internalisation was effective from 1 May 2014, therefore the Manco Transaction will have no further material financial effect on Unitholders.

4 5.2. The Transaction will result in once-off costs being incurred by SA Corporate of approximately R2 million, in addition to internal restructuring costs (relating to conveyancing and bond registration fees) of approximately R3.76 million, which will be settled by Newco in cash. After the effective date of the Transaction (being midnight on 30 June 2015) ( Effective Date ), the capital adequacy reserves ("CAR") required to be held by the Manager in terms of CISCA as a result of the reduced scope of the Manager's functions in relation to the Fund, namely the winding-up of SA Corporate, will be reduced and a portion of the amount available will be applied towards the discharge of the transaction costs. As the CAR was approximately R8.6 million as at the end of April 2015, and it is anticipated that the CAR after the Effective Date will be approximately R , the full amount of the Transaction costs will be funded from the balance of approximately R8 million. Furthermore the Transaction is considered to be a capital reorganisation in terms of International Financial Reporting Standards and the Transaction costs will be netted off against the capital of Newco Accordingly, the net effect of the Transaction on SA Corporate's earnings per Unit, headline earnings per Unit, net asset value per Unit and distribution per Unit for the twelve months ended 31 December 2014 are insignificant, as defined in the Listings Requirements. 6. Notice of general meeting 6.1. SA Corporate unitholders are hereby advised that SA Corporate has posted a circular dated 30 April 2015 (the Circular ) to Unitholders, containing full details of the Transaction and a notice of general meeting to approve the Amalgamation, the de-listing of SA Corporate, the winding-up of SA Corporate and the payment of the costs associated with the Transaction A general meeting of Unitholders will be held at the Johannesburg offices of Cliffe Dekker Hofmeyr, being 1 Protea Place, Sandown, Sandton at 11:00 on Friday, 29 May 2015 for the purpose of considering and, if deemed fit, passing with or without modification, the resolution necessary to implement the Transaction A copy of the Pre-listing Statement has been posted to Unitholders together with a copy of the Circular and should be read in conjunction with the Circular as it contains important information for Unitholders about Newco, as required by the Listings Requirements. 7. Related party considerations 7.1. SA Corporate paid a lump sum of R185 million plus VAT to the Manager for the Internalisation, and the parties to the Internalisation agreed that at the time of the Transaction, being Phase II, Newco would purchase, for a nominal sum of R1.00 ( Manco Consideration ) (pursuant to the provisions of a relationship agreement between Marriott, OMP and the Manager, dated 31 October 2013), the Manager's shares from Marriott. The R185 million less withholdings for taxation and the CAR, was distributed to the Manager s shareholders Accordingly, as the percentage ratio of the Manco Consideration to SA Corporate's market capitalisation is less than 0.25%, the Manco Transaction in terms of paragraph 10.6 of the Listings Requirements is not regarded as a related party transaction Manco will be excluded from voting at the general meeting in terms of the Notice.

5 8. Salient dates of the Transaction The salient dates and times of the Transaction are set out below i) Last day to trade to receive the Circular and the Pre-listing Statement Friday, 17 April ii) Record date to be entitled to receive the Circular and the Prelisting Statement Friday, 24 April iii) Circular and Pre-listing Statement posted to Unitholders on Thursday, 30 April iv) Announcement of posting of Circular, notice of General Meeting and abridged Pre-listing Statement on SENS on Thursday, 30 April v) Announcement of posting of Circular, notice of general meeting and abridged Pre-listing Statement in the press on Monday, 4 May vi) vii) Last day to trade to be recorded in the SA Corporate register in order to be eligible to vote at the general meeting Record date in order to be eligible to participate in and vote at the general meeting Friday, 15 May Friday, 22 May viii) Receipt of forms of proxy in respect of the general meeting of Unitholders by 10:00 on Wednesday, 27 May ix) The general meeting of Unitholders to be held at 11:00 on Friday, 29 May x) Results of the general meeting released on SENS on Friday, 29 May xi) Results of the general meeting published in the press on Monday, 1 June xii) Finalisation announcement released on SENS on Friday, 19 June xiii) Finalisation announcement published in the press on Monday, 22 June xiv) xv) xvi) Last day to trade in SA Corporate Units on the JSE to participate in the Transaction Anticipated listing of Newco on the JSE from the commencement of trade on SA Corporate Units suspended from the commencement of trade on Friday, 26 June Monday, 29 June Monday, 29 June xvii) Trading in Newco shares with the JSE share code: SAC and ISIN: ZAE commences on Monday, 29 June xviii) Effective Date of the Transaction Wednesday, 1 July xix) xx) xxi) xxii) Record date to participate in the delisting and to be entitled to receive Newco shares Newco shares issued to Unitholders pursuant to the Transaction Accounts at CSDP or broker updated in respect of dematerialised shareholders Expected date of posting of Newco share certificates to certified Friday, 3 July Monday, 6 July Monday, 6 July Monday, 6 July

6 xxiii) shareholders Delisting of SA Corporate Units from the JSE at commencement of trade on Monday, 6 July All dates and times are local dates and times in South Africa. The above dates and times are subject to change. Any changes will be released on SENS ABRIDGED PRE-LISTING STATEMENT FOR NEWCO This abridged pre-listing statement relates to the proposed listing of Newco in respect of all its issued shares in the Real Estate, Diversified REITs, sector of the JSE, in terms of the FTSE classification, under abbreviated name: SA Corp, JSE share code: SAC and ISIN: ZAE with effect from the commencement of trade on Monday, 29 June This abridged pre-listing statement is not an invitation to the public to subscribe for shares in Newco. It is issued in compliance with the Listings Requirements to provide information to Unitholders with regards to Newco. This announcement contains the salient information in respect of Newco, which is more fully described in the Pre-listing Statement which was sent to Unitholders on 30 April For a full appreciation of Newco, the Circular and the Pre-listing Statement should be read in their entirety. 1. Overview and background 1.1. Newco was incorporated on 19 January 2015 as a public company. Newco s financial year end is 31 December. Newco s registered address is South Wing, First Floor, Block A, The Forum North Bank Lane, Century City, Newco is a diversified REIT invested in retail, industrial, office and residential property primarily in the metropolitan centres of South Africa. Its strategy is to deliver sustainable distribution growth, unlock value within its retail portfolio, maintain a quality industrial portfolio and expand its Johannesburg inner-city residential portfolio Immediately after the listing of Newco on the JSE, it is expected that: the authorised share capital of the Company will comprise ordinary shares of no par value; the issued share capital of the Company will comprise ordinary shares of no par value with stated capital amounting to R ; and the one share which the Manager holds in Newco will, after implementation of the Transaction, be held as a treasury share. 2. The board of Newco 2.1. The Board of the Manager is also the board of directors of Newco, with the exception of Peter Levett The board of Newco currently comprises nine directors of whom seven are independent nonexecutive, and two are executive directors The full names, age, business addresses and positions of the directors of Newco are outlined below:

7 Name and age Jeff Molobela (59) Business address 114 Glendower Drive Woodhill Golf Estate, Pretorius Park Pretoria East, 0081 Independent Chairman, Non-Executive Director Chairman of the Nomination Committee Member of the Remuneration Committee Name and age Terence Rory Mackey (53) Business address SA Corporate Real Estate Fund 7th Floor, World Trade Center Cnr West Road South and Lower Road Morningside, Sandton, 2196 Managing Director Member of the Social, Ethics and Environmental Committee Member of the Risk and Compliance Committee Member of the Investment Committee Invited to attend the Nomination, Remuneration and Audit Committee meetings Name and age Antoinette Margaret Basson (45) Business address SA Corporate Real Estate Fund South Wing, First Floor Block A, The Forum North Bank Lane Century City, 7441 Financial Director Member of the Social, Ethics & Environmental Committee Member of the Risk and Compliance Committee Invited to attend the Audit and Investment Committee meetings Name and age Robert John Biesman-Simons (60) Business address Lombard Insurance Company Limited Sanclare Building 21 Dreyer Street Claremont, 7708 Chairman of the Remuneration Committee Chairman of the Audit Committee Member of the Investment Committee Ex-officio member of the Risk & Compliance Committee Name and age Gugulethu Patricia Dingaan (39) Business address Wipcapital Proprietary Limited WIPHOLD House, 29 Central Street, Houghton, 2198 Member of the Audit Committee Member of the Remuneration Committee Name and age Kenneth John Forbes (65) Business address 2 Thirlmere Place Durban North 4051 Chairman of the Investment Committee Member of the Social, Ethics & Environmental Committee Name and age Ebrahim Suleman Seedat (63) Business address EThekwini Municipality 6th Floor, Florence Mkhize Building 251 Smith Street, Durban, 4001 Chairman of the Risk and Compliance Committee Member of the Audit Committee

8 Name and age Emily Mauristene Hendricks (41) Business address Absa Capital Investment Bank 15 Alice Lane Sandton, 2196 Chairman of the Social, Ethics & Environmental Committee Member of the Investment Committee Name and age Mabotha Arthur Moloto (46) Business address 315 Broadlands Estate Bendor, Polokwane 0699 Member of the Investment Committee Member of the Nomination Committee Member of the Risk and Compliance Committee All of the directors are South African nationals. 3. Management 3.1. Asset management The asset management function will be housed internally through the Manager. SA Corporate concluded the Internalisation in May 2014, which had the effect of internalising SA Corporate s management company. Further information regarding the Internalisation and rationale is provided in the Circular Property management The property management agreement between the Manager and OMP expired on 30 June 2013 and was not renewed. Following a request for proposals, Broll was appointed as property manager for the entire property portfolio of SA Corporate excluding the Afhco property portfolio (which is managed internally by Afhco employees). The property management agreement with Broll expires on 30 June The monthly fee as a percentage of collected income varies between 1% and 3%, depending on property type. 4. Adoption of distribution per share as a performance measure 4.1. In terms of paragraph 3.4(b)(vi) and 3.4(b)(vii) of the Listings Requirements, Unitholders are advised that owing to the nature of the business conducted by Newco, being that of a property company (with REIT status), the board of directors of Newco has decided to adopt the distribution per share performance measure for future trading statement purposes. 5. Action required If you are in any doubt as to what action to take, you should consult your broker, attorney or other professional advisor immediately. 6. Further copies of the Pre-listing Statement Copies of the Pre-listing Statement may be obtained during normal business hours from 30 April 2015 to 3 July 2015 from the following places and at SA Corporate Real Estate Limited South Wing, First Floor, Block A, The Forum, North bank Lane Century City, 7441

9 SA Corporate Real Estate Limited 7th Floor, World Trade Centre, Cnr West Road South and Lower Road Morningside Sandton, 2196 Computershare Investor Services Proprietary Limited Ground Floor, 70 Marshall Street Johannesburg, 2001 Investec Corporate Finance, a division of Investec Bank Limited 2nd Floor, 100 Grayston Drive Sandown Sandton, Sandton 30 April 2015 Corporate Advisor and Transaction Sponsor Investec Bank Limited Attorneys, Tax and Competition Law Advisors Cliffe Dekker Hofmeyr Independent Reporting Accountants Deloitte & Touche Sponsor Nedbank Capital (a division of Nedbank Limited)