BONATLA PROPERTY HOLDINGS LIMITED - Disposal of Property - Madeline Street Property

Disposal of Property - Madeline Street Property

BONATLA PROPERTY HOLDINGS LIMITED
(Registration number 1996/014533/06)
Share code: BNT ISIN: ZAE000013694
(”Bonatla” or “the Company”)


DISPOSAL OF PROPERTY – MADELINE STREET PROPERTY (MADELINE)


Shareholders are advised that a subsidiary of the Company, Madeline Street Properties
(Pty) Ltd (“the Seller”) entered into a disposal agreement with Fidelity Corporate Services
(Proprietary) Limited (“the Purchaser”) following the appointment of an auctioneer to sell the
property on behalf of the Company, in terms of which it will sell the property in Madeline
Street – Florida South.

The overriding rationale for the disposal is cash-flow based, the board being of the opinion
that the retention of this property will result in the Company incurring unnecessary losses,
holding costs and capital expenses. The disposal agreement contains normal warranties for
such a disposal.

Full details of each disposal are set out below:

1.     PROPERTY
       Madeline Street property – Florida South.

2.     TERMS OF THE DISPOSAL
       The Purchaser will acquire from the Seller the Madeline Street property, being the
       buildings, land and improvements thereon at Erf 2331, Units 1 – 6 Madeline 20,
       Florida, South Africa. The effective date will be the date of transfer of the property
       through the deeds office.

       The consideration for the disposal of the Madeline Street property is R10.5 million
       (“Madeline Disposal Consideration”), which amount is to be settled in cash on
       effective date.

       All other debts at the effective date will be settled on transfer.

       The agreement is subject to the provisions of the JSE Listings Requirements.

3.     RATIONALE FOR THE DISPOSAL
       The Madeline Street property is categorised as a C Grade property and extensive
       internal and external renovation is required in the offices and the underground
       parking at a cost of R4 million, the cost of which will not be able to be recovered
       through rental increases. Furthermore, the existing lease on the property had
       expired in 2010 and with month to month rentals being charged. The single tenant
       vacated the premises in June 2014. The lease rental level is expected to reduce by
       an estimated R6 per square metre and additional expenditure on tenant installation
       costs to upgrade the premises and letting commissions are likely to be incurred. The
       board is of the opinion that the exit yield (on the next 12 months forward market
       rental income from effective date) is approximately 14.0% (with the assumption that
       the property was let at market rental levels), which is acceptable for a non-
       institutional size, sectional title property investment in the absence of a lease
       agreement. The property was originally acquired on 21 June 2011.
      
       The sale price per bulk square meter is R3 633, including land with a gross rental of
       R50 per square meter. The property investment does not justify retention as well as
       there is a possibility of heavy holding costs and no opportunity to let the premises.

4.     PROPERTY SPECIFIC INFORMATION

        PROPERTY                      ADDRESS                 LOCATION               SECTOR
        NAME
        Madeline                      Erf 2331, Units 1 –     Florida, South         Offices
                                      5 and 6 Florida 20,     Africa
        
        WEIGHTED                      RENTABLE AREA           VALUATION              SELLING PRICE
        AVERAGE                       (M2)
        RENTAL PER M2
        R71.00                         2980 m2                R13 000 000            R10 500 000

5.     SUSPENSIVE CONDITIONS
       The agreement is subject to the Directors of the Seller resolving to approve the sale
       to the Purchaser by no later than 31 December 2014.

6.     FINANCIAL INFORMATION
       The carrying value of the Madeline Street property as at 30 June 2014, being the
       interim period end, was R13 000 000. The bond on the property is approximately
       R4 million, which will be settled from the proceeds on the disposal. Thus the selling
       price of R10.5 million will realise a loss on disposal of approximately R2 500 000
       before auctioneer costs of 10% of the selling price.

       The net profit before taxation arising from the property for the six months ended
       30 June 2014 was approximately R3 600 000 which includes a once-off recoupment
       of expenses of approximately R3 200 000 (year ended 31 December 2013: net profit
       before taxation of approximately R790 000 after the reversal of intercompany
       expenses of approximately R870 000).

7.     TENANT
       Vacant lease expired 30 October 2010 and the tenant who was on a monthly tenancy
       vacated the premises on 30 June 2014.

8.     EXIT INVESTMENT YIELD
       There is no exit yield as the tenant vacated on 30 June 2014.

9.     CATEGORISATION
       The disposal is categorised as a Category 2 transaction in terms of the amended
       JSE Listings Requirements which came into effect on 30 September 2014 and
       accordingly the sale will not require approval of Bonatla shareholders in general
       meeting.


By order of the board
11 November 2014


Sponsor
Arbor Capital Sponsors Proprietary Limited

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