ANNUITY PROPERTIES LTD - Proposed property acquisition

Proposed property acquisition

ANNUITY PROPERTIES LIMITED
(formerly Niqsha Beleggings CC)
(Incorporated in the Republic of South Africa)
(Registration Number 2011/145994/06)
Share code: ANP       ISIN: ZAE000165643
(“Annuity”)




PROPOSED PROPERTY ACQUISITION




A.   AVENG PROPERTY ACQUISITION

     Annuity is pleased to advise holders of Annuity linked units (“Linked unit
     holders”) that it has agreed terms with Salestalk 406 Proprietary Limited (the
     “Vendor”) to acquire a prime industrial warehouse and office building located
     within the well established light industrial node of Stormill, Johannesburg,
     and is exclusively tenanted by Aveng (Africa) Limited (“Aveng”), a subsidiary
     of Aveng Limited, (the “Aveng Property”) together with all leases and assets
     forming necessary parts of the letting enterprise (the “Aveng Letting
     Enterprise”) as a going concern (the “Acquisition”).

     The Aveng Property’s proximity to Johannesburg CBD, Roodepoort CBD, major
     arterial roads and the N1 highway place it in an extremely desirable industrial
     location. The cash flows from the Aveng Letting Enterprise are underpinned by a
     high quality blue chip tenant on a 10 year triple net lease, which escalates at
     a rate of 8.5%. Aveng has approximately 5 years and 6 months remaining on such
     lease, which terminates on 30 November 2018.

     This Acquisition is consistent with Annuity’s strategy to build a quality
     property portfolio that offers long-term distribution and capital growth
     underpinned by strong underlying contractual cash flows and also presents an
     opportunity for Annuity to increase its portfolio weighting within the
     industrial sector.

     The effective date of the Acquisition shall be the date of transfer of the
     Aveng Property into the name of Annuity, which is expected to take place by 1
     July 2013.

B.   INFORMATION RELATING TO THE AVENG PROPERTY

     The property specific information in relation to the Aveng Property is set out
     in the table below:

     Description of the property:       Erf 351 Stormill Extension 5 Township

     Location:                          1156 Leader Avenue, Stormill, Johannesburg

     Single or multi-tenanted:          Single tenanted

     Length of lease:                   10 years (approximately 5 years and 6 months
                                        is remaining on the lease)

     Weighted average lease expiry:     5.5 years

     Weighted average escalation:       8.50%

     Forward yield*:                    9.75%

     GLA (m2):                          Office component: 2,740m2
                                        Industrial component: 3,225m2
                                        Total GLA: 5,965 m2

     Weighted average net rental per
     square metre (R/m2):               Office component: R109.48/m2
                                        Industrial component: R52.66/m2
                                        Total GLA: R78.76/m2

     *The forward yield is based on the Aveng Letting Enterprise’s net property
     income for 12 months to 31 May 2014.

C.   PURCHASE CONSIDERATION AND INDEPENDENT VALUATION

     The purchase consideration for the Aveng Letting Enterprise amounts to
     R63,660,024 and is payable through cash or issuance of Annuity linked units or
     a   combination  thereof.   Accordingly,  Annuity   will  fund   the  purchase
     consideration utilising a combination of debt and/or the issue of new Annuity
     linked units.

     An independent valuation as at 1 June 2013 was carried out by Jones Lang
     LaSalle, a registered professional valuer in terms of the Property Valuers
     Profession Act, No. 47 of 2000, the outcome of which is slightly (2.3%) lower
     than the aforementioned purchase consideration for the         Aveng Letting
     Enterprise.

D.   CATEGORISATION OF THE ACQUISITION AND UNAUDITED PRO FORMA FINANCIAL EFFECTS

     The Acquisition constitutes a category 2 transaction in terms of the Listings
     Requirements of the JSE and accordingly does not require approval by Annuity
     linked unit holders.

     The Acquisition offers the opportunity to acquire a high quality value
     enhancing industrial property, with a blue chip tenant, strong lease covenants
     and above market escalations, at an attractive yield, which is expected to
     further enhance the earnings and growth prospects of Annuity. Linked unit
     holders are hereby advised the unaudited pro forma financial effects of the
     Acquisition on Annuity’s historical earnings, headline earnings and net asset
     value are not material and have therefore not been disclosed.

Illovo
14 May 2013

Lead Investment Bank and Transaction Sponsor to Annuity
Investec Bank Limited

Joint Investment Bank to Annuity
Sasfin Capital (A division of Sasfin Bank Limited)

Sponsor to Annuity
Rand Merchant Bank (A division of FirstRand Bank Limited)

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