TOWER PROPERTY FUND LIMITED - Acquisition of Clifton Place and cautionary announcement

Acquisition of Clifton Place and cautionary announcement

TOWER PROPERTY FUND LIMITED
(formerly Reftin 1004 Proprietary Limited)
(Registration number 2012/066457/06)
JSE share code: TWR ISIN: ZAE000179040
(Approved as a REIT by the JSE)
(“Tower”)


ACQUISITION OF CLIFTON PLACE AND CAUTIONARY ANNOUNCEMENT


1.   INTRODUCTION

     Tower has concluded an agreement (“acquisition agreement”) with Motifprops 77 Proprietary
     Limited (“the seller”) for the acquisition of the seller’s rental enterprise in respect of the property
     known as Clifton Place (“Clifton Place” or “the property”) which includes all of the issued shares in
     and claims against NIB 69 Share Block Proprietary Limited (“NIB 69 Share Block”), a share block
     company operating a share block scheme, and all the seller’s rights under leases with tenants of Clifton
     Place for an amount of R80 500 000 (“the acquisition”).

2.   RATIONALE FOR THE ACQUISITION

     The acquisition is in line with Towers’ strategy of targeting good quality, well located, medium-sized
     properties in major metropolitan areas.

     The property is located alongside the well known Musgrave Shopping Centre in Berea, Durban. Berea
     is an extremely densely populated area and these offices provide suitable office accommodation with
     access to the retail amenities provided by the adjacent Musgrave Shopping Centre. The location is
     convenient to staff from Amanzimtoti in the south to Umhlanga in the north. Save for 226 square
     metres which is vacant, the building is fully occupied and provides desirable space at competitive
     rentals.

3.   DETAILS OF THE PROPERTY

     Clifton Place (portion 49 of Erf 2242, Durban) is an A-grade 5 storey office block with a gross lettable
     area of approximately 6 340 square metres. There are 3 levels of basement parking providing 4 bays
     per 100 square metres. The weighted average rental per square metre of Clifton Place is R114.7.

     The building provides excellent security which is monitored by 16 CCTV cameras and 24 hour
     security guards. The building is in excellent condition and has a backup generator in the event of
     power failures.

     The South African Local Government Association occupies 1 400 square metres and a well-known
     firm of attorneys, JH Nicholson, occupies 660 square metres. Other tenants include blue chips such as
     Discovery Limited and the MMI Group Limited.

     The board is satisfied that the value of the property is in line with the purchase consideration being
     paid by Tower for the rental enterprise including the shares in and claims against NIB 69 Share Block.
     The directors of Tower 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.

4.   TERMS OF THE ACQUISITION

     4.1.     Tower will acquire Clifton Place with effect from (“the effective date”) the later of:

              4.1.1.    the last day of the month following the month during which the last of the
                        conditions precedent are fulfilled or waived; and

              4.1.2.    the date on which a first mortgage bond over the property has been registered.

     4.2.     Purchase consideration and rental guarantee

              4.3.1.    The purchase consideration of R80 500 000 (“purchase consideration”) will be
                        settled on the effective date and will be discharged as follows:

                        4.3.1.1.   R40 250 000 payable in cash; and

                        4.3.1.2.   the balance of R40 250 000 will be payable by crediting an interest-free
                                   loan account which will be settled by way of the allotment and issue of
                                   such number of Tower shares (“consideration shares”), at an issue price
                                   being the lower of R8.50 and the 30 day volume weighted average price
                                   per Tower share at the effective date, as equals R40 250 000 (“issue
                                   price”).

              4.3.2.    The seller will receive the distribution on consideration shares for the six month
                        period from 1 December 2013 to 31 May 2014 and accordingly will repay that
                        portion of the distribution relating to the period from 1 December 2013 to the
                        effective date (“undue amount”) to Tower within 5 business days of the payment
                        of the distribution.

              4.3.2.    The seller has agreed to indemnify Tower and NIB 69 Share Block against any
                        shortfall in the actual rental income of Clifton Place against the forecast gross
                        monthly rental up to a maximum amount of R1 699 042 (“rental guarantee”) for a
                        period of 24 months from the effective date (“rental guarantee period”).

              4.4       As security for the due and proper performance of the seller’s obligations in terms
                        of the acquisition agreement, including in respect of the repayment of the undue
                        amount and the rental guarantee, the seller has pledged to Tower a portion of the
                        consideration shares (“pledged shares”) that at the issue price equals the value of
                        the rental guarantee amount and the anticipated undue amount (“pledge”).

              4.5       The acquisition agreement provides for warranties and indemnities that are normal
                        for acquisitions of this nature.

5.   CONDITIONS PRECEDENT

     The acquisition is subject to the fulfilment or waiver of the following suspensive conditions:

     5.1.     that by no later than 17h00 on 15 February 2014, Tower secures a loan in an amount of
              R44 275 000 plus all related transaction costs, secured by a first mortgage bond over Clifton
              Place; and

     5.2.     that by no later than 17h00 on 15 February 2014, Tower receives written confirmation that
              certain lease agreements with tenants as specified in the acquisition agreement in respect of
              Clifton Place, remain valid.

6.   CATEGORISATION OF THE ACQUISITION

     The acquisition constitutes a category 2 transaction in terms of the JSE Listings Requirements and
     accordingly does not require approval by shareholders.

7.   FINANCIAL EFFECTS AND CAUTIONARY

     The financial effects of the acquisition will be published shortly. Shareholders of Tower are advised to
     exercise caution when dealing in their shares until the financial effects of the acquisition are
     announced.


11 February 2014


Corporate advisor and sponsor

Java Capital


Legal advisor

Cliffe Dekker Hofmeyr Inc.

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