TRANSCEND RESIDENTIAL PROPERTY FUND LIMITED - Termination of asset management agreement and conclusion of service level agreement with a related party

Termination of asset management agreement and conclusion of service level agreement with a related party

TRANSCEND RESIDENTIAL PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
Registration number 2016/277183/06
JSE Code: TPF ISIN: ZAE000227765
(Approved as a REIT by the JSE Limited)
(“Transcend” or “the Company”)


TERMINATION OF ASSET MANAGEMENT AGREEMENT AND CONCLUSION OF SERVICE LEVEL
AGREEMENT WITH A RELATED PARTY


1.     INTRODUCTION
       Transcend is an externally managed Real Estate Investment Trust whose asset management
       function is performed by International Housing Solutions (RF) Proprietary Limited (“IHS”) in
       terms of an asset management agreement (“the AMA”). IHS is also an associate of a material
       shareholder of Transcend and is, accordingly, a related party to Transcend.

       The board of directors of Transcend (“the Board”) is pleased to announce that, on 8 June 2023
       (“the Signature Date”), Transcend and IHS concluded two separate agreements in terms of
       which:
       -   the AMA has been terminated by mutual agreement with effect from 1 April 2023 (“the
           Effective Date”) for a cash consideration of R2 119 743 (“the Termination Fee”) (“the
           Termination Agreement”); and
       -   IHS will provide certain operational and administrative services to Transcend for a fixed 12-
           month period with effect from the Effective Date, in exchange for an aggregate cash
           consideration of R2 563 438 (“the Services Fee”) (“the Service Level Agreement”).

       Mr Myles Kritzinger and Mr Nicholas Watchorn (chief executive officer and chief financial officer
       of Transcend, respectively) (“Management”) were employed directly by Transcend from the
       Effective Date.

2.     RATIONALE
       The termination of the AMA and the effective internalisation of the asset management function
       aligns Transcend with industry best practice and improves the alignment of interests of
       Management with those of Transcend shareholders.

3.     SALIENT TERMS OF THE TERMINATION AGREEMENT
3.1.       Conditions precedent
           The Termination Agreement is subject to the condition precedent that the Board and the
           board of directors of IHS (“IHS Board”) have passed the necessary resolutions approving and
           ratifying the entering into of the Termination Agreement and the actions contemplated
           therein by no later than 17h00 on the fifth day after the Signature Date.
3.2.       Warranties and other significant terms
           The Termination Agreement contains representations and warranties by Transcend and IHS
           which are standard for an agreement of this nature.

4.     TERMS OF THE SERVICE LEVEL AGREEMENT
4.1.       Conditions precedent
          The Service Level Agreement is subject to the condition precedent that the Board and the
          IHS Board have passed the necessary resolutions approving and ratifying the entering into
          of the Service Level Agreement and the actions contemplated therein by no later than 17h00
          on the fifth day after the Signature Date.
4.2.      Duration
          The Service Level Agreement commences on the Effective Date and will continue for an initial
          period of 12 months (“the Initial Period”). Transcend may renew the Service Level
          Agreement after the Initial Period at its election, subject to compliance with the Listings
          Requirements of the JSE Limited (“JSE”) (“Listings Requirements”) at the date of signature of
          any such renewal.
4.3.      Payment of the Services Fee
          The aggregate Services Fee is payable in twelve instalments, monthly in arrears, within thirty
          days of the end of the relevant month, together with the applicable value added tax thereon.
4.4.      Warranties and other significant terms
          The Service Level Agreement contains representations and warranties by Transcend and IHS
          which are standard for an agreement of this nature.

5.     CATEGORISATION AND FAIRNESS OPINION
       In terms of paragraph 10.7 of the Listings Requirements and on an aggregated basis, the
       conclusion of the Termination Agreement and Service Level Agreement, and the resultant
       Termination Fee and the Services Fee (“the Transaction”), are deemed to be a small related
       party transaction and accordingly, the Board is required to provide the JSE with written
       confirmation obtained from an independent professional expert (“Fairness Opinion”)
       acceptable to the JSE, confirming that the Transaction is fair insofar as Transcend shareholders
       are concerned.

       In compliance with paragraph 10.7(b) of the Listings Requirements, written confirmation has
       been received from Questco Corporate Advisory (Pty) Ltd that the Transaction is fair to
       Transcend. A copy of the Fairness Opinion has been provided to the JSE as required.

       The Fairness Opinion will lie for inspection at Transcend’s registered office, 54 Peter Place Block
       C, Cardiff House, Peter Place Office Park, Bryanston, Johannesburg, 2191, and will be made
       available on the Company’s website www.transcendproperty.co.za, for a period of 28 days from
       the date of this announcement.

Bryanston

8 June 2023

Sponsor and Independent Expert
Questco Corporate Advisory Proprietary Limited

Date: 08-06-2023 03:44:00
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