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VIF
VIF
VIF - Vividend - Update regarding A) The Vusani Acquisition B) The Specific
Issue C) Posting of Circular and Notice Of General Meeting D) Withdrawal Of
Cautionary Announcement
Vividend Income Fund Limited
Previously known as Business Venture Investments No 1381 (Proprietary) Limited
Incorporated in the Republic of South Africa
(Registration Number 2010/003232/06)
JSE Alpha Code: VIF
ISIN: ZAE000150918
("Vividend" or "the Company")
UPDATE REGARDING A) THE VUSANI ACQUISITION B) THE SPECIFIC ISSUE C) POSTING OF
CIRCULAR AND NOTICE OF GENERAL MEETING D) WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Linked Unitholders are referred to the announcement released on SENS on 10
October 2011 and in the press on 11 October 2011, advising Linked Unitholders
that an agreement had been entered into between Vividend and Vusani, detailing
the proposed acquisition by Vividend of a portfolio of retail and commercial
properties known as the Vusani Portfolio and setting out the salient terms of
the Agreement ("the Vusani Acquisition"). In terms of the Agreement the
effective date of the Vusani Acquisition shall be the date of transfer of the
Vusani Portfolio into the name of Vividend, which, subject to the fulfilment of
the applicable conditions precedent, is expected on or about 1 April 2012.
2. RATIONALE FOR VUSANI ACQUISITION
The Vusani Acquisition is consistent with Vividend`s strategy of identifying
and acquiring properties that have free cash-flow yields that provide adequate
value enhancement to Linked Unitholders from the effective date of their
acquisition.
The Vusani Acquisition will add to and enhance the quality, stability and
longevity of the Company`s earnings by introducing a portfolio of well
diversified, high-quality, well tenanted, previously owner-managed and recently
refurbished properties while at the same time allowing Vividend to achieve its
portfolio objectives, in terms of GLA, value and income diversity. The
following characteristics of the Vusani Portfolio are highlighted in this
regard:
* Tenantable vacant GLA of 5,055 square meters (4.1% of GLA);
* Maximum Geographical Concentration of 32.4%, being Gauteng
* Maximum Sector Concentration of 58.4%, being Retail;
* Lease escalation percentage of 7.3%;
* Weighted average Gross Rental per square meter of R62.59;
* 47.4% of Gross Revenue is secured from leases that expire beyond 31
August 2014;
* 70.0% of Gross Revenue is secured from A Grade Tenants, being anchor
or national tenants with low default risk; and
* The introduction of the South African Government, via the South
African Revenue Service, as a tenant for 25,111 square meters of GLA.
3. THE SPECIFIC ISSUE OF LINKED UNITS FOR CASH
Linked Unitholders are further referred to the update announcement regarding
the Vusani Acquisition, dated 23 November 2011, and are hereby informed that
the Company intends to raise R415 million at a price of R4.80 per Linked Unit
(the Issue Price") by way of a specific issue of Linked Units for cash ("the
Specific Issue") to new and existing Linked Unitholders ("Specific Issue
Participants").
The Specific Issue is being undertaken to fund part of the purchase
consideration payable to Vusani, in respect of the Vusani Portfolio, of R790
million. The remaining portion of the purchase consideration will be financed
by a debt financing facility to be secured by the Company.
The total number of Linked Units to be issued to Specific Issue Participants in
terms of the Specific Issue is a total of 86 458 334, which will be issued to
the Specific Issue Participants as follows:
* 52 083 335 Linked Units to Coronation Asset Management (Pty) Limited;
* 15 625 000 Linked Units to Element Investment Managers (Pty) Limited;
* 11 458 333 Linked Units to Stanlib Asset Management Limited;
* 5 208 333 Linked Units to Regarding Capital Management (Pty) Limited;
and
* 2 083 333 Linked Units to Momentum Asset Management (Pty) Limited.
Specific Issue Participants are entitled to a commitment fee of 1.6% of the
amount allocated to them in terms of the Specific Issue.
4. COMMENTARY RELATING TO SPECIFIC ISSUE TO SPECIFIC ISSUE PARTICIPANTS
The Company believes that the Issue Price is considered appropriate in light of
a) the amount raised by the Company relative to its market capitalisation b)
the market price of the Company`s Linked Unit, it being noted that the Issue
Price is at a discount of less than 1% to the 30 day weighted average price of
Vividend c) the additional liquidity provided by the introduction of Coronation
Asset Management (Pty) Ltd as a Linked Unitholder of the Company d) the
additional liquidity provided by the additional Linked Units in issue.
To adhere to the timelines detailed in the Vusani Acquisition Agreement,
Specific Issue Participants were required to submit signed Irrevocable
Commitments to Subscribe for Linked Units to the Company by 30 November 2011.
In return, the Specific Issue Participants are entitled to a commitment fee of
1.6% of the amount allocated to them in terms of the Specific Issue. The
commitment fee is considered reasonable and competitive in light of a) the
absence of an Underwriter in respect of the Specific Issue b) the capital
raising abilities of the Company c) the current economic environment d) the
commitment duration of the Irrevocable Commitment e) the uncertainty
surrounding the approval of the Vusani Acquisition and Specific Issue f)
alternative placement options presented to the Company in respect of the
Specific Issue.
A copy of the Independent Experts` fairness opinion on the Specific Issue is
included in the Circular to Linked Unitholders.
5. PRO FORMA FINANCIAL EFFECTS OF THE VUSANI ACQUISITION AND SPECIFIC ISSUE
The unaudited pro forma financial effects of the Vusani Acquisition and the
Specific Issue, as set out below, are the responsibility of the directors of
Vividend. The unaudited pro forma financial effects are presented in a manner
consistent with the basis on which the historical financial information has
been prepared and in terms of Vividend`s accounting policies. The unaudited pro
forma financial effects have been presented for illustrative purposes only and,
because of their nature, may not give a fair reflection of Vividend`s financial
position post the implementation of the Vusani Acquisition and the Specific
Issue.
The table below sets out the unaudited pro forma financial effects of the
Vusani Acquisition and the Specific Issue on Vividend, based on the audited
annual financial results for the financial year ended 31 August 2011 and on the
assumption that for calculating the net asset value per Linked Unit and net
tangible asset value per Linked Unit, the Vusani Acquisition and the Specific
Issue was effected on 31 August 2011.
Audited Pro forma Change Pro forma Change
Results before results (%) results (%)
the Specific after the after the
Issue and the Specific Specific
Vusani Issue Issue and
Acquisition the Vusani
Acquisition
Net asset value 503 489 (2.8%) 490 0.2%
per Linked Unit
(cents)
Net tangible asset 509 492 (3.3%) 493 0.2%
value per Linked
Unit (cents)
Notes and assumptions:
1. The "Audited results before the Specific Issue and the Vusani
Acquisition" figures are extracted from the audited consolidated
financial statements of Vividend for the year ended 31 August 2011.
2. The net asset value per Linked Unit and net tangible asset value per
Linked Unit figures are calculated based on the actual number of
Linked Units in issue at 31 August 2011 and on the basis that the
Vusani Acquisition and Specific Issue was effected on 31 August 2011.
3. In terms of the Vusani Acquisition, Vividend will acquire the Vusani
Portfolio for a purchase consideration of R790 million. Interest paid
on the purchase consideration, in terms of the acquisition agreement,
has been capitalised to the purchase consideration.
4. In terms of IFRS, the Vusani Portfolio will be recorded at market
value on the date of acquisition, which market value will include the
interest paid on the purchase consideration in terms of the
acquisition agreement, with the difference between the market value
and the purchase consideration being allocated to distributable
reserves.
5. Transaction costs of R11 210 000 are assumed to be applicable to the
Vusani Acquisition and the Specific Issue. R6 640 000 of these costs,
which relate to placement fees applicable to the Specific Issue, are
allocated to Debenture capital.
6. Vividend will issue 86 458 334 Linked Units at 480 cents per Linked
Unit to the Specific Issue Participants in terms of the Specific
Issue.
7. All adjustments, except for transaction costs, are expected to have a
continuing effect.
8. No pro forma Group statement of comprehensive income for the year
ended 31 August 2011 is presented as the Specific Issue has no effect
on the pro forma earnings and pro forma headline earnings of
Vividend. Subsequent to the Specific Issue, and assuming the Specific
Issue was effected on 1 September 2010, Vividend`s weighted average
Linked Units in issue at 31 August 2011 will increase from 82 260 571
to 168 718 905. Linked Unitholders are referred to the forecast
financial information of Vividend incorporating the Vusani Portfolio
for the years ended 31 August 2012 and 31 August 2013, as presented
in paragraph 6 below.
6. FORECAST FINANCIAL INFORMATION OF THE VUSANI PORTFOLIO
The profit forecast for the Vusani Portfolio has been prepared for the 5 month
period ending 31 August 2012 and the 12 month period ending 31 August 2013. The
forecasts have been prepared on the assumption that the effective date of the
acquisition is on or about 1 April 2012.
The profit forecasts, including the assumptions on which they are based and the
financial information from which they are prepared, are the responsibility of
the directors of Vividend, provided that, in this regard, the directors of
Vividend and the reporting accountants have reviewed the reasonableness of
representations and information received from Vusani.
The profit forecasts have been:
* prepared in accordance with Vividend`s accounting policies and in
compliance with IFRS; and
* prepared in relation to the Vusani Portfolio only, which post
implementation of the Vusani Acquisition will be transferred into the name
of Vividend.
A limited review was conducted by the independent reporting accountants on the
forecast financial information, whose report is contained in the Circular to
Linked Unitholders.
Forecast for the 5 Forecast for the 12
months ending 31 months ending 31
August 2012 August 2013
R`000 R`000
Revenue 61 558 105 858
Operating Costs (12 468) (22 070)
Net Property Income 49 090 83 788
Administration expenses (1,676) (4,023)
Net Operating income 47,414 79,765
Fair value adjustments of (6,019) 1,258
investment properties
Finance costs, excluding (14,608) (35,059)
debenture interest
Debenture interest (26,787) (45,964)
Total comprehensive income - -
for the period attributable
to equity holders
Basic and diluted earnings 18.12 24.06
per Linked Unit (cents)
Headline earnings per Linked 21.62 23.49
Unit (cents)
Distribution per Linked Unit 14.02 24.06
(cents)
The annualised income yield applicable to the Vusani Portfolio for the
financial years ended 31 August 2012 and 31 August 2013, calculated with
reference to the purchase consideration of R790million and excluding the
impacts of the head lease secured from Vusani over the vacant space within the
Vusani Portfolio to 31 August 2012,is 10.64% and 11.16% respectively.
ASSUMPTIONS WITHIN THE CONTROL OF MANAGEMENT
* Vividend does not plan to dispose of any properties within the Vusani
Portfolio during the period of the forecasts.
* Gross Rentals forecasted from the Vusani Portfolio consist of contracted
and un-contracted revenue. Un-contracted revenue from the Vusani
Portfolio, in aggregate, accounts for 9.2% and 25.8% of Revenue for the
2012 and 2013 forecast periods respectively. Un-contracted revenue is
calculated for each property within the Vusani Portfolio with reference to
the following 1) current contracted Gross Rentals 2) escalation profiles
applicable to contracted Gross Rentals 3) rental guarantees provided 4)
current market-related rentals 5) current market-related escalation rates
6) location and size of un-contracted GLA 7) marketability of un-
contracted GLA.
* Lease agreements that are subject to contingent rentals or turnover
rentals are maintained at existing levels.
* All existing lease agreements are valid and enforceable.
* Leases that expire during the 2012 and 2013 forecast periods are assumed
to be renewed at consistent Gross Rentals and escalations at the time of
expiry.
* Current vacant space has been assumed to remain vacant during the period
of the forecasts.
* Property expenses have been determined based on a detailed review of the
historical information provided by Vusani and the existing Property
Managers. No property expenses have been increased in the 2012 and 2013
forecast periods by more than 15% over the historical financial period.
* Consumption based recoveries are consistent with the 1) historical
information provided, 2) valuator income statements 3) Property Manager
forecasts and budgets 4) market related information.
* A doubtful debt impairment provision amounting to 3.5% of Gross Rentals
(contracted and un-contracted) has been included in operating costs for
the duration of the forecast period to account for possible doubtful
debts. This provision is over and above the vacancy profile maintained
during the period of the forecast.
* No fair value adjustments have been made to investment properties held,
other than as a result of amortised lease escalations.
* The basic asset management fee applicable to the Asset Manager has been
calculated on a market price per Linked Unit of R5 throughout the period
of the forecast.
* Distributions to Linked Unit holders are paid biannually on 28 February
and 31 August.
ASSUMPTIONS OUT OF THE CONTROL OF MANAGEMENT
* The Effective Date of the Specific Issue is set at 29 February 2012.
* The fixed interest rate applicable to the debt funding facility is set at
9% for the duration of the forecast. The origination cost applicable to
the deployment of the debt funding facility is included in the interest
cost over the period of the facility.
* The Transfer Date, and therefore the effective date of the Vusani
Acquisition, is expected to be 1 April 2012.
* The inflation rate applicable to all expenditure carried forward into the
2012 and 2013 forecast periods is 8%.
7. FORECAST FINANCIAL INFORMATION OF VIVIDEND, INCLUDING THE VUSANI PORTFOLIO
The profit forecast for Vividend, including the Vusani Portfolio has been
prepared for the 12 month period ending 31 August 2012 and the 12 month period
ending 31 August 2013 and is subject to the approval by Linked Unitholders of
the Vusani Acquisition at the convened general meeting. The forecasts have been
prepared on the assumption that the effective date of the Vusani Acquisition is
on or about 1 April 2012.
The profit forecasts, including the assumptions on which they are based and the
financial information from which they are prepared, are the responsibility of
the directors of Vividend, provided that, in this regard, the directors of
Vividend and the reporting accountants have reviewed the reasonableness of
representations and information received from Vusani in respect of the Vusani
Portfolio.
The profit forecasts are:
* prepared in accordance with Vividend`s accounting policies and in
compliance with IFRS; and
* prepared in relation to the Property Portfolio, including the Vusani
Portfolio as from the expected date of transfer into the name of Vividend.
A limited review was conducted by the independent reporting accountants on the
forecast financial information, whose report is contained in the Circular to
Linked Unitholders.
Forecast for the 12 Forecast for the 12
months ending 31 months ending 31
August 2012 August 2013
R`000 R`000
Revenue 154 005 200 055
Operating costs (42 562) (46 901)
Net Property Income 111 443 153 154
Administration expenses (12,518) (10,853)
Net Operating Income 98,925 142,301
Fair value adjustments of (9,848) 2,516
investment properties
Investment income 2,041 268
Finance costs, excluding (16,265) (45,000)
debenture interest
Debenture interest (79,423) (100,085)
Total comprehensive (4 570) -
income/(loss) for the period
attributable to equity
holders
Basic and diluted earnings 50.63 52.38
per Linked Unit (cents)
Headline earnings per Linked 56.36 51.25
Unit (cents)
Distribution per Linked Unit 50.50 52.38
(cents)
ASSUMPTIONS WITHIN THE CONTROL OF MANAGEMENT
* Vividend does not plan to dispose of any properties during the period of
the forecasts.
* Gross Rentals forecasted from the Property Portfolio consist of contracted
and un-contracted revenue. Un-contracted revenue from the Property
Portfolio, in aggregate, accounts for 7.5% and 21.9% of Revenue for the
2012 and 2013 forecast periods respectively. Un-contracted revenue is
calculated for each property within the Property Portfolio with reference
to the following 1) current contracted Gross Rentals 2) escalation
profiles applicable to contracted Gross Rentals 3) rental guarantees
provided 4) current market-related rentals 5) current market-related
escalation rates 6) location and size of un-contracted GLA 7)
marketability of un-contracted GLA.
* Gross Rentals forecasted from the deployment of the funds post the Vusani
Acquisition are 100% un-contracted revenue.
* Lease agreements that are subject to contingent rentals or turnover
rentals are maintained at existing levels.
* All existing lease agreements are valid and enforceable.
* Leases that expire during the 2012 and 2013 forecast periods are assumed
to be renewed at consistent Gross Rentals and escalations at the time of
expiry.
* Current vacant space has been assumed to remain vacant during the period
of the forecasts.
* Property expenses have been determined based on a detailed review of the
historical information provided by Vusani and the existing Property
Managers. No property expenses have been increased in the 2012 and 2013
forecast periods by more than 15% over the historical financial period.
* Consumption based recoveries are consistent with the 1) historical
information provided 2) valuator income statements 3) Property Manager
forecasts and budgets 4) market related information.
* A doubtful debt impairment provision amounting to 3.5% of Gross Rentals
(contracted and un-contracted) has been included in operating costs for
the duration of the forecast period to account for possible doubtful
debts. This provision is over and above the vacancy profile maintained
during the period of the forecast.
* No fair value adjustments have been made to investment properties held,
other than as a result of amortised lease escalations.
* The basic asset management fee applicable to the Asset Manager has been
calculated on a market price per Linked Unit of R5 throughout the period
of the forecast.
* Distributions to Linked Unit holders are paid biannually on 28 February
and 31 August.
* Circular and transaction fees associated with the Vusani Acquisition and
Specific Issue for Cash are expensed through the statement of
comprehensive income but treated as capital costs for the purposes of
determining the debenture distribution in both the 2012 and 2013 forecast
periods. Placement fees associated with the Specific Issue are allocated
to Debenture capital.
ASSUMPTIONS OUT OF THE CONTROL OF MANAGEMENT
* The Effective Date of the Specific Issue is set at 29 February 2012.
* The deposit rate of interest applicable to all Linked Unit equity raised
and not deployed is set at 5%.
* The fixed interest rate applicable to the debt funding facility is set at
9% for the duration of the forecast. The origination cost applicable to
the deployment of the debt funding facility is included in the interest
cost over the period of the facility.
* The Transfer Date, and therefore the effective date of the Vusani
Acquisition, is expected to be 1 April 2012.
* The inflation rate applicable to all expenditure carried forward into the
2012 and 2013 forecast periods is 8%.
* Additional Portfolio acquisitions of R110 million are included in the
forecast with effect from 1 July 2012 at an acquisition yield of 10.5% and
an escalation rate of 6%. These Portfolio Acquisitions are yet to be
identified and will be paid for from a debt funding facility secured by
the Company on the Effective Date of the Vusani Acquisition.
8. COMMENTARY RELATING TO THE FORECAST FINANCIAL INFORMATION OF VIVIDEND,
INCLUDING THE VUSANI PORTFOLIO
The financial forecasts have been prepared on a conservative and prudent basis,
encompassing amongst other things, the following highlighted assumptions:
* The application of a debt funding cost equivalent to 9% for the duration
of the forecast period, it being noted that the current indicative rate
applicable to the debt-funding facility secured by the Company is 8.50%.
* The existence of 8,159 square meters (4.4%) of vacant, non-revenue
generating GLA for the duration of the forecast period.
* The inclusion of a conservative doubtful debt impairment provision,
calculated on contracted and un-contracted GLA, for the duration of the
forecast period.
* The inclusion of additional portfolio acquisitions in July 2012 at an
aggregate acquisition yield of 10.50%, it being noted that the portfolio
acquisition yield of Vividend, prior to the Vusani Acquisition, was
11.10%.
In addition, the financial forecasts have been prepared on the assumption that
the effective date of the Vusani Acquisition, which encompasses the 10
properties constituting the Vusani Portfolio, is on or about 1 April 2012.
Should the transfer of the Vusani Portfolio into the name of Vividend occur
before or after 1 April 2012, Linked Unitholders are advised that the
forecasted distributions per Linked Unit will be impacted. Accordingly Linked
Unitholders will be informed of the final transfer date of all properties
within the Vusani Portfolio.
9. NOTICE OF GENERAL MEETING AND POSTING OF CIRCULAR TO LINKED UNITHOLDERS
Vividend Linked Unitholders are advised that the Company has posted a Circular,
incorporating Revised Listing Particulars by registered post, dated Friday, 27
January 2012 ("the Circular"), to its Linked Unitholders regarding the Vusani
Acquisition and the Specific Issue. A copy of the Circular will also be
available on Vividend`s website (www.vividend.co.za).
The General Meeting, convened in terms of the notice incorporated in the
Circular, will be held at Unit 6, Rozenhof Office Court, 20 Kloof Street,
Gardens, Cape Town on Monday, 27 February 2012, commencing at 11h00 for
purposes of considering and, if deeming fit, passing with or without
modification, the resolutions required to give effect to the Vusani Acquisition
and the Specific Issue.
Salient dates and important times for the General Meeting are:
2012
Circular containing Revised Listing Particulars, Friday, 27 January
notice of General Meeting and form of proxy posted
to Linked Unitholders on
Last day to trade in order to be eligible to vote Friday, 10 February
at the General Meeting
Record date to be eligible to vote at the General Friday, 17 February
Meeting
Last day to lodge forms of proxies in respect of Thursday, 23 February
the General Meeting by 11h00 on
General meeting of Vividend Linked Unitholders to Monday, 27 February
be held at 11h00 on
Results of the General Meeting released on SENS on Monday, 27 February
Results of the General Meeting published in the Tuesday, 28 February
press on
JSE lists the Specific Issue Linked Units on or Wednesday, 29 February
about
Note:
i) Dematerialised Linked Unitholders, other than those with "own name"
registration, must inform their CSDP or broker of their intention to
attend the General Meeting in order for such CSDP or broker to be
able to issue them with the necessary letters of representation to
enable them to attend such meeting. Alternatively, should they not
wish to attend the General Meeting, they should provide their CSDP or
broker with their voting instructions. This must be effected in terms
of the agreement entered into between the Linked Unitholder and the
CSDP or broker.
10. WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
Linked Unitholders are referred to the renewal of cautionary announcement,
dated 5 January 2012, and are advised that the relevant details of the Vusani
Acquisition and the Specific Issue have been disclosed in this announcement and
accordingly caution is no longer required to be exercised by Linked Unitholders
when dealing in the Company`s securities.
27 January 2012
Cape Town
Sponsor and Independent Expert
PSG Capital (Pty) Limited
Auditors and Reporting Accountants
Charles Orbach & Company
Independent Property Valuer
Active Blue Valuation Solutions cc
Attorneys and Trustee for Debenture Holders
Fluxmans Attorneys
Date: 27/01/2012 13:30:00 Produced by the JSE SENS Department.
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