COMMUNIQUÉ for the period ended SEPTEMBER 2015

Transcription

1 SHAREHOLDERS / NOVA PROPERTY GROUP HOLDINGS LIMITED and DEBENTURE HOLDERS / NOVA PROPERTY GROUP INVESTMENTS PROPRIETARY LIMITED COMMUNIQUÉ for the period ended SEPTEMBER 2015 The Board of Directors of Nova Property Group Holdings Limited ( Nova Holdings ) and Nova Property Group Investments Proprietary Limited ( Nova Investments ) report as follows DEAR SHAREHOLDERS AND DEBENTURE HOLDERS 1. The Group is successful with Commercial Loan Funding 1.1 The Board is pleased to announce that it has achieved success with regard to procuring Commercial Loan Funding into the Group, for upgrading of a number of its Shopping Centres. 1.2 This puts the Group into a favourable position. It allows the Group to more actively and extensively engage in the long planned Shopping Centre upgrades. 1.3 This is expected to lead to better tenanting of retail space, increased attraction of consumers and inevitable higher property returns and linked capital growth. Nova Property Group Holdings Limited 2011/003964/ Club Avenue, Waterkloof Heights, Pretoria Dominique Haese Managing Director, Connie Myburgh Chairman, Rudi Badenhorst Financial Director, Dirk Koekemoer Operations Director

2 1.4 Whilst the Board is pleased with the above developments during 2015 and is pushing hard to implement, process and complete as many of the planned projects as possible, on an expedited basis, there is still a long road ahead and one must keep in mind that South African Retailers currently have their challenges. 1.5 Retailers performance is dependent on consumer spending! 1.6 Retailers performance in 2014/2015 mirrored South Africa s unfavourable economic situation. Macro and socio-economic factors such as the rising cost of utilities and fuel, labour unrest, coupled with falling exchange rate values of the South African rand, which all added to the 25 basis point interest rate increase in July 2015, contributed to the challenging economic environment. 1.7 As a result of the aforementioned factors, consumer income and spending remained under significant pressure, which clearly weighed heavily on retailers performance and impact directly on the sales and net cash flows within rental enterprises, such as the Group s Shopping Centres. 1.8 What is however of paramount importance to the Board, is the ability, under many uncertain conditions, to have found stability, and optimally manage the Group s various rental enterprises capacity, to maintain payment of standard operating costs, funding costs and various other obligations, and to possibly look at resuming payment of returns to Debenture Holders, where practicably possible, in the near future. 1.9 The Board is focusing heavily on its Retailers, negotiating favourable rental agreement terms for all parties, selecting strong anchor tenants and other significant Retailers who, amidst continuing socio-economic difficulties, such as inflation and rising utility costs, which are expected to continue to exert pressure on consumer spending, understand that retailing is as a consequence expected to continue its transition in order to maintain its appeal going forward. Retailers are expected to widen their product portfolios, to increase their value propositions and target more consumer groups in order to match consumers needs and expectations. 2

3 2. Property Specific Updates Individual property refurbishment and upgrading programmes are ongoing, aimed at enhancing the Group s rental returns, capital growth, and Debenture return payments and repayment capabilities when same fall due in terms of the projections relating thereto. Kindly refer to the individual property reports below for more detailed information in this regard. Athlone Park Shopping Centre Intercare has successfully resolved its outstanding issues, which now places them in a position to proceed with establishing the medical related facilities planned for the Centre. It has been agreed to finalise the matter this year and to commence with construction of the facilities at the beginning of 2016, subject to bank finance. The anchor tenant, Pick n Pay, asked for a substantial rental reduction, which was granted on condition that they renew their lease agreement for a further five years. Pick n Pay has not yet taken up this offer and we do not anticipate that they will. We are in the process of securing a replacement tenant. Benoni Hyper Alternative uses for the property, such as wholesale, cash and carry, storage, distribution, education etc, are currently being investigated and pursued, based on market demand. The property was shut down at the end of March 2015 in order to reduce operating costs. Carletonville Shopping Centre The refurbishment or redevelopment of the property, which was planned to commence in the 2015 / 2016 financial year, will proceed during the 2016 / 2017 financial year, subject to bank finance approval. Some success has been had in reducing vacancies, such as the placement of a 1,342m² health club, but we still maintain that the property will continue to underperform until such time as it has been either refurbished or redeveloped. 3

4 Carnival Centre The shopping centre (previously Range View) has experienced mixed fortunes with a high vacancy take up rate, but also a high turnover of tenants. The placement of tenants continues to be handled on a selective basis in order to achieve an optimum tenant mix for the Centre. Checkers Virginia Most lease agreements have now been renewed and we have strong interest in the property s one small vacancy. Checkers will be opening a Checkers LiquorShop and is currently in the process of obtaining the necessary approvals. Clicks has also recently confirmed their interest in establishing a dispensary in their store by mid Both of these additions will strengthen the property s offering and will increase customer support. De Marionette Shopping Centre & Shoprite Secunda De Marionette Shopping Centre continues to experience high demand from retailers and all vacancies are expected to be filled during the current financial year. Smaller retailers in Secunda remain under pressure due to a current oversupply of retail space in the area and this, in turn, will result in increased vacancies and will put pressure on achievable rentals for the foreseeable future. Flora Centre Two large tenants, occupying nearly 5,000m² and which were expected to be trading during the second half of 2015, will only commence trading during the first half of As previously reported, we expect that these tenants will have a very positive impact on overall occupancy levels. The placement of tenants continues to be handled on a selective basis in order to achieve an optimum tenant mix for the Centre. 4

5 Liberty Centre This Centre is in the process of a total redevelopment. The Centre has been renamed Amogela Mall. The Board is pleased to advise that the Local Authority has signed the servitude documents and that the servitude can now be registered in the property s name. The architects will now proceed with the submission of plans and the project should be in full swing by early 2016, with the supermarket occupying their premises by mid A comprehensive marketing campaign to secure tenants will commence shortly. Please take note of the redevelopment brochure of new Amogela Mall on Frontier s website. Lydenburg Pick n Pay (renamed to Town Square) A new retail development in the immediate vicinity has resulted in a number of movements within the shopping centre, such as the conversion of Ackermans to a PEP and the loss of Mr Price. The Board does not believe that there will be any long-term negative effects and, on the contrary, believe that this new development will serve to strengthen the node. A number of replacement tenants have been approached for the Mr Price premises and the response thereto has been good. The wall between the newly built small centre adjacent to Town Square Centre will be demolished and opened so that the two centres will look like one centre and all the traffic travelling through the new small centre must past through Town Square Centre. This will have a positive impact for the node and the current retailers in the Centre. The cosmetic upgrading of Town Square Centre was concluded by 30 September 2015 and the Pick n Pay is in the process of upgrading its store to new specifications. Magalieskruin Shopping Centre Pick n Pay has taken occupation of their premises and is currently busy with their store fit out. The necessary approvals from council, specifically relating to plans approval, have delayed the commencement of the tenant s fit out, which will now delay opening until latest mid November We have received numerous enquiries for space based on Pick n Pay s tenancy and will secure and place tenants on a selective basis. 5

6 Secunda Plaza The anchor tenant, Spar, will not be renewing their lease agreement and will vacate the premises in May We have secured Choppies as a replacement in terms of a new 10 year lease agreement. Smaller retailers in Secunda remain under pressure due to a current oversupply of retail space in the area and this, in turn, will result in increased vacancies and will put pressure on achievable rentals for the foreseeable future. The tenancy of Choppies may however serve as a positive, in attracting new tenants. Silverwater Crossing The Centre is trading very well and experiences a very high demand from tenants. We are currently investigating the replacement of some non-national tenants with national tenants. Tarentaal Centre Refurbishments have commenced and are expected to have a very positive impact on occupancy levels, which are currently low. The construction of the new High Court directly across the road from the Centre is having very positive spinoffs for the Centre and a number of enquiries for office space, particularly from the legal profession, are being received. The Village Shopping Centre The expansion of the anchor tenant, Spar, has been placed on hold until middle Office vacancies remain problematic and are expected to persist. The conversion of the office space into sectional title units is currently being investigated. Waterglen Shopping Centre Refurbishments which were expected to commence during 2015 have been placed on hold pending finance approval and if obtained the upgrade will commence during These refurbishments are expected to have a very positive impact on occupancy levels, which are currently low. The anchor tenant, Pick n Pay, has agreed to upgrade and enlarge their store when refurbishments take place. In the 6

7 interim, some success has been had in reducing vacancies, with approximately 1,300m² being taken up over the past few months. Witbank Centre Interest from retailers remains strong but the placement of tenants is being handled on a selective basis in order to achieve an optimum tenant mix for the shopping centre. The shopping centre needs to be upgraded in order to retain suitable existing tenants and attract suitable new tenants. The intention is to commence with the centre upgrade during 2016, subject to bank finance. Tshwane China Shopping Mall (previously known as Zambezi Mall) The shopping centre is tenanted by an Oriental City on a head lease basis. Extensive marketing of the Centre has been undertaken and footfall at the Centre has increased drastically. The road works to the main Zambezi road with its required traffic lights, and the Zambezi road access have been completed. This is having a hugely positive effect on the traffic flow in front of the Centre. The Moloto road upgrades will only commence once all relevant authority approvals have been obtained and until then the planned access from Moloto road will be closed and will continue to have a negative impact on the Centre s full trading potential and until this is finally addressed, the traffic flow to the Centre will remain a challenge. Disputes and substantial litigation is still ongoing with Capicol, which litigation deals with the overstatements discussed in the previous Communique, the amount due by Capicol to Zambezi, and the transfer of the remaining 50% undivided share to Zambezi. Debenture Holders and Shareholders will be kept advised of any significant further developments. 7

8 Villa Retail Park Disputes and substantial litigation is still ongoing with Capicol 1, which litigation deals with the overstatements referred to in the previous Communique, and the transfer of a further 50% undivided share to the Villa. Completion Villa Mall A solution for the recommencement and the ultimate completion of The Villa Retail Mall, as soon as practicably possible, continues to be actively sought, taking into account the above litigation, amongst other difficult circumstances and hurdles constantly being addressed by the Board. Debenture Holders and Shareholders will be kept advised of any significant developments in this regard. 3. Residential and Mixed Use Developments Several market researches were done on all historical residential projects to have a clearer view of the current market conditions for the type of projects as well as the current and future development potential, in order to receive the optimal mixture and the maximum yearly uptake of units, different types of units and obtainable prices. The lowest grading was 75% compared to the highest of 82%. The good grades show that all-important fundamentals for the successful development of residential developments on all the projects are present. The challenges for the projects are the current market conditions, approvals at municipalities, service suppliers and funding for the construction of the projects. 3.1 Whale Rock Margate The funds realised from the sold units have been used to reduce the current Nedbank bond over the properties. 8 units remained to be sold. Kindly refer to previous communiques in this regard, and specifically the 12 February 2014 letter to Whale Rock related Debenture Holders. We were approached by the bank to consider an auction of the remaining properties and the commercial section. This would be a full and final settlement of the outstanding bank facility, 8

9 which facility balance was in excess of the values of the remaining properties. The Board can now advise that all the units have been sold on auction at low values due, to the market being subdued in the South Coast region and that the units were transferred to the new owners during October This in turn means, that the bank has been settled in full. As a result, no excess over the bond settlement was achieved, and no repayment to Debenture Holders is possible. The Board is considering making available funding to assist the Whale Rock related Debenture Holders in receiving a repayment, however small, in respect of their Debentures. This will however not transpire in the short term. Whale Rock related Debenture Holders will be informed of anything further in this regard. 3.2 Stonewood Dullstroom The development in Dullstroom consists out of 75 erven, consisting of 74 full title erven and 1 erf of m², zoned for either a hotel or residential 2 development (townhouses). The development has the zoning and rights in place and the bulk of the service applications have been applied for 30 months ago at the municipality and we await their approval. The Dullstroom property market is currently stagnant and the Board intends to continue in the long-term with this project, with the focus point on the hotel and holiday market and not the normal residential market. 3.3 Mont Rouge Hartebeespoortdam All the roads and services at Mont Rouge have been completed. There is a Joint Venture Agreement (JV) in place with a residential developer who will handle the project together with the Group. The developer s planning for the show houses have been done and construction of the first show house has commenced, with the view to start marketing the new Mont Rouge in

10 3.4 Berg en Dal Heidelberg (Gauteng) The developer s planning has been done with the purpose of marketing it to the public. The launch of the project will only be during The development s entrance is currently being upgraded to a modern architectural design. As soon as all the relevant approvals from the municipality has been received, building work can commence of the show house units. 3.5 Waterfall Estate Rustenburg This development is situated next to the busy Rustenburg/Krugersdorp highway. SANRAL is currently busy with construction work to upgrade the Rustenburg/Krugersdorp road, which includes a double road in front of the development, with a traffic circle at the entrance of the development. The development s first phase of civil engineering services including the streets, storm water system, roads, water supply and sewerage that includes a sewerage pump station, has been completed in the relevant time span. The electrical services need to be completed, where-after proclamation can take place. The first show house has already been built and the land densification has been finalised. Much interest has already been shown on the first 36 free standing units. For the full potential of the development to be achieved, some of the rights need to be changed to increase, for example 143 of the 705 stands will have to be rezoned, to make provision for a shopping centre and a medical facility. 3.6 Theresa Park Pretoria The rezoning to change the rights to residential 3 (flats/apartments) is in process and will hopefully be completed by

11 3.7 Country View Montana, Pretoria This project is not going ahead as a retirement village and the application to change the zoning rights to residential 3 (flats/apartments) has been done. The rezoning process will take approximately 18 months to complete. 3.8 Steenbokpan Ellisras As soon as the necessary approvals have been received from the different municipality departments, development can be taken to the next phase. The different applications to change the zoning of the land will be focused on during October and November 2015 with the intention to submit the final zoning application to council in the first quarter of This remains a long-term project, with results expected only in the long-term. 3.9 The Bay Hartebeespoortdam The Bay is a 300 hectare development next to Hartebeespoortdam.The developers are not proceeding with a golf estate development but the focus has become densification of the property to cater for a large number of residential flats and residential town houses, with limited full title stands and market related retail and commercial rights with education related possibilities. 4. Annual Financial Statements and General Meeting 4.1 The Annual Financial Statements ( AFS ) of Nova Holdings, consolidating Nova Investments and all its subsidiaries, for the financial Year ended 28 February 2015, were finalised in August and lodged with CIPC. These AFS have also already been made available to all Shareholders of Nova Holdings ( Shareholders ) together with the Annual General Meeting Notices dispatched to all Shareholders early in October

12 4.2 A Shareholder may at any time, also request such AFS directly from the Company Secretarial Services Provider, Frontier, upon completion of the required Statutory Form. 4.3 Please note that the Annual General Meeting in respect of the affairs of Nova Holdings for the period ending 28 February 2015, will take place in November Fair Market Values of Properties as per the latest Annual Financial Statements In order for Debenture Holders to determine their relevant projected Debenture values, kindly find attached hereto, as Annexure A, a schedule reflecting the latest estimated and projected fair market values of all relevant properties as disclosed in the Annual Financial Statements of Nova Investments for the year ended 28 February Disposal of Shares and Debentures Following enquiries received in this regard, the Board clarifies that Shares in Nova Holdings and Debentures in Nova Investments are transferrable, should a Shareholder or Debenture Holder wish to dispose of his Shares and/or Debentures to any buyer identified by such Shareholder or Debenture Holder. Please note that the Nova Group does not buy and does not source potential buyers for Shareholders or Debenture Holders. This is simply not part of the business of the Nova Group. Although the Nova Group will, through its Company Secretarial Services Provider, Frontier, provide secretarial support with regard to the transfer process of Shares or Debentures, should Shares or Debentures be sought to be disposed of, the Nova Group will not and does not take any responsibility for, nor provide any advice in regard to, and will not be involved in any such disposal process, other than providing the secretarial related support referred to above. It at all times remains up to and the responsibility of individual Shareholders and Debenture Holders to look after their own interests in regard to any disposal of Shares or Debentures they wish to embark upon, to the exclusion of the Nova Group or any companies within the Nova Group. 12

13 7. Debenture Holder Repayments No decision has been taken regarding repayments in respect of Class O (Parkside Plaza) and Class S (Witbank Highveld) related Debenture Holders as projected for earliest repayment in 2016, as the most optimal values in the best interests of the Group in regard to the relevant properties have not yet been achieved. It remains premature for Carletonville and Berg en Dal related Debenture Holders to receive repayment, as optimal values for the relevant properties have not yet been achieved. The core focus and purpose of the restructuring process being implemented by the Nova Group, is to unlock the best possible value for Debenture Holders prior to Debenture repayments, not only per individual Class, but also for the Group as a whole. Even though an individual property might have reached a value equating to related historical investment, optimisation of the value of such property remains to be sought to be obtained in the best interests of the Group as a whole, in an endeavour to achieve the best possible success for all Classes of Debentures. Silverwater is a good example of such value creation. Retaining the property in the Group has enhanced the ability of the Group to achieve overall growth, in the best interests of the Group as a whole. 8. Shareholder Share Price and Dividend Returns 8.1 We ve had a number of enquiries from Shareholders regarding the price of Shares in Nova Holdings and when Dividends can be declared to Shareholders. 8.2 The Share Price is easily determined when looking at the Annual Financial Statements. All Shareholders are again referred to their AGM Notice packs, including detailed calculations of the current Share Price of Nova Holdings. 13

14 8.3 It is however imperative that Shareholders be aware, that under current circumstances, no Dividends will be declared by Nova Holdings until all Debenture Holders in Nova Investments have been repaid to the best possible extent. Please note that the English version of this Communiqué, as opposed to the translated Afrikaans version, is the official version of the Communiqué, as approved by the Board. Please note that this information will be available on the Company Secretarial Services Provider Frontier, website You are welcome to visit this website for regular updates and background information. Debenture Holders and Shareholders will be informed directly via sms of any communication placed onto the web. Kindly take note that the Nova Group intends communicating every four months, namely April, August and December of every year. The Board would like to point out the words intends to communicate used above. The Board will have good reason for extending, if so required, the time between Communiques. Often there is important information to be shared with you, which the Board would like to include in the Communique and the Board will hold over any Communique until such information becomes available. Please bear in mind that communicating to some Debenture Holders and Shareholders, many of whom cannot be reached by correspondence, is costly. Dispatching Communiques with significant, relevant, meaningful and up to date information, is of more importance to the Board, than merely trying to communicate four times a year. We would appreciate your consideration and understanding in this regard. 14

15 If you, as a Shareholder of Nova Holdings and/or Debenture Holder of Nova Investments, do not receive such communications from us, please contact Frontier, as invited below, and ensure your correct details are reflected on their system. Queries may be directly addressed by contacting the Frontier Client Services at or on (012) or ing admin@frontieram.co.za. Yours sincerely, The Nova Group Board 15

16 Annexure "A" Nova Property Group Fair Market Values of Debentures as at 28 February 2015 Ser Property Fair Market Value Capped at Syndication a b c Leeuwpoort Street Centurion Hazel (Full repayment made in 2014) Oxford Gate The Village (Full repayment made in Witbank Highveld Tarentaal (Full repayment made in 2013) Magalieskruin Flora Centre (Including bank bond of R ) Silverwater Crossing Waterglen Shopping Centre Carletonville Centre Shopmakers Village Benoni Hyper De Marionette Athlone Park Shopping Centre Parkside Plaza Centre Range View Liberty Mall Rivonia Square Shopping Mall Nelspruit Hyper Zambezi Retail Park The Villa Retail Park Whale Rock (Including bank bond of R ) 0 24 Mont Rouge Stonewood Berg & Dal Waterfall Country View The Bay Platinum 1 - Lydenburg (Including bank bond of R ) Platinum 2 - The Fern (Including bank bond of R ) Theresa Park Steenbok Crossing