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Acquisition of Residential Property Portfolio and Renewal of Cautionary
ARROWHEAD PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)
JSE share code: AWA ISIN: ZAE000158101
JSE share code: AWB ISIN: ZAE000158119
(Approved as a REIT by the JSE)
(“Arrowhead” or “the company”)
ACQUISITION OF RESIDENTIAL PROPERTY PORTFOLIO AND RENEWAL OF CAUTIONARY
1. Introduction
Linked unitholders are referred to the cautionary announcements released on SENS on 18 July 2013 and 30
August 2013 and are advised that Arrowhead has concluded an agreement for the acquisition of a residential
property portfolio from Jika Properties Proprietary Limited (the “vendor”) for an aggregate purchase
consideration of R406 million (the “acquisition”). The residential property portfolio to be acquired by
Arrowhead comprises the sold properties detailed below (the “sold properties”) and the entire issued share
capital of and claims against the property companies detailed below (the “sold property companies”) (the
“sold equity”), which own the immovable properties detailed below (the “property portfolio”).
Arrowhead remains focused on purchasing distribution enhancing acquisitions. The purchase of the
residential property portfolio falls within this strategy. The acquisition provides Arrowhead with an
opportunity to further diversify its property portfolio. Listed residential property comprises over 15% of the
total listed property market in developed economies such as the USA. In South Africa, it is under 1% and
Arrowhead believes that there exists an opportunity for further growth in this sector of the real estate market.
2. Terms of the acquisition and condition precedent
Arrowhead will acquire each of the sold properties with effect from the date of registration of transfer of the
applicable sold property into Arrowhead’s name (the “applicable transfer date”). In addition Arrowhead
will acquire the sold equity with effect from the first business day of the month following the month in which
50% of the sold properties are ready to be lodged at the relevant deeds office for the purpose of registration
of transfer (the “initial lodgement date”) (each applicable transfer date and the initial transfer date referred
to as the “closing date” hereinafter).
Assuming that each closing date is on or before 1 January 2014, the total purchase consideration payable by
Arrowhead in respect of the acquisition is R406 million (the “purchase price”). That portion of the
purchase price attributable to each of the immovable properties comprising the property portfolio shall
increase by an amount equivalent to approximately 0.67% of that portion of the purchase price attributable to
the relevant immovable property in respect of each month that the applicable closing date is delayed beyond
1 January 2014. The portion of the purchase price attributable to each of the sold properties and the sold
equity will be discharged in cash on the applicable closing date.
The acquisition remains conditional upon:
- the vendor delivering the 2011, 2012 and 2013 financial accounts for each sold property company to
Arrowhead;
- the vendor delivering the draft balance sheets in respect of each sold property company to Arrowhead;
- Arrowhead notifying the vendor that it is satisfied with the outcome of its due diligence investigation;
- Arrowhead delivering to the vendor written approval from its investment committee authorising the
acquisition;
- a property management agreement being entered into between Arrowhead and Citiq Property Services
Proprietary Limited;
- an agreement being entered into between Arrowhead and Citiq Meter Solutions Proprietary Limited
(“CMS”) in terms of which CMS agrees to provide pre-paid electricity metering services to
Arrowhead;
- an escrow agreement is entered into between the vendor, the conveyancing attorneys and Arrowhead in
terms of which the conveyancing attorneys establish and maintain an escrow account to facilitate
payment under the financial guarantee, as detailed below;
- the vendor delivering written confirmation to Arrowhead that the cession agreements entered into
between the vendor and the sold property companies have been terminated; and
- approval by the Competition Authorities;
The vendor has guaranteed that:
- during the first guarantee period (being the 12 month period commencing on the earlier of the initial
lodgement date or the first business day of the month following the expiry of a 60 day period after
receipt of written confirmation from the conveyancing attorneys that the seller has done all things
necessary for the conveyancing attorney to lodge for transfer) the property portfolio will earn an
achieved net yield of not less than 10%; and
- during the second guarantee period (being the 12 month period commencing on the first day after the
expiry of the first guarantee period) the property portfolio will earn an achieved net yield of not less
than 10.8%.
If the actual net yield achieved in respect of a guarantee period is less than the guaranteed yield for that
period the vendor shall pay Arrowhead an amount equal to the additional income that would be necessary to
increase the achieved net yield to the guaranteed yield, provided that the amount payable to Arrowhead
pursuant to the aforesaid financial guarantee in respect of each guarantee period shall not exceed 2.5% of the
purchase price.
To facilitate payment under the aforesaid financial guarantee the conveyancing attorneys shall retain in their
trust account an amount equivalent to 5% of the aggregate purchase price paid by Arrowhead as at the last
day of the guarantee period, which amount will be held under the terms of the escrow agreement to be
entered into between the vendor, the conveyancing attorneys and Arrowhead as a condition precedent to the
acquisition.
3. The property portfolio
The property specific information required in terms of the JSE Listings Requirements in relation to the
acquisition including property name and address, geographical location, rentable area, and weighted average
rental per square metre is set out below.
The sold properties
Property name and address Geographical Rentable Weighted
location Area Average
(m2) rental per
m2
Arvin Court, 22 Catherine Avenue, Berea Johannesburg 2 395 R48.70
Cathay Mansions, 79 Browning Street, Fairview Johannesburg 1 640 R47.61
Cedarmont, 152 De Villiers Street, Kenilworth Johannesburg 1 925 R40.29
Dukes Lodge, 4 Dukes Avenue, Windsor Johannesburg 1 058 R50.40
Frangipani, Oxford Street, Randburg Johannesburg 3 855 R55.61
Genoa Court, corner of Kenmere and Raliegh Street, Yeoville Johannesburg 1 209 R75.21
Glenor, corner of Grafton and Minnor Street, Yeoville Johannesburg 3 839 R32.15
Homelands, 20 Hendon Road, Yeoville Johannesburg 2 376 R59.61
Naleida Court, 109 High Street, Rosettenville Johannesburg 1 095 R47.56
Sefton Court, 76 Joubert Street, corner of Plein and Joubert Street, Johannesburg 2 480 R133.69
Johannesburg
Southwold, 162 Prairie Street, Rosettenville Johannesburg 985 R28.14
Stamford Square, 66 Stamford Street, Forest Hill Johannesburg 762 R40.55
Toronto Heights, 110 President Street, Johannesburg Johannesburg 9 466 R14.26
Villa Borghese, 81 Viscounts Avenue, Windsor Johannesburg 582 R72.42
Whitley Court, 41 Chambers Street, Booysens Johannesburg 1 042 R38.81
The sold property
companies
Company Name Property name and address Geographical Rentable Weighted
location Area Average
(m2) rental per
m2
Aloegate Proprietary Balnagask, 144 Banket Street, Johannesburg 11 403 R57.90
Limited Hillbrow
Aptotrim Proprietary Selwood, O’Reilly street, Berea Johannesburg 3 545 R68.91
Limited
Barvicarl Investments Caribbean Court, 31 Mons Road, Johannesburg 719 R44.41
Proprietary Limited Bellevue
Dalem Investments Delham Mews, Princess Avenue, Johannesburg 1 282 R46.52
Proprietary Limited Windsor East
Dalem Investments Margedale 55 Princess Avenue, Johannesburg 1 794 R52.11
Proprietary Limited Windsor East
Helen Joy Holdings Avril Gardens, 36 Dukes Avenue, Johannesburg 1 342 R53.48
Proprietary Limited Windsor East
Helen Joy Holdings Karen Place, 38 Duchesses Avenue, Johannesburg 1 342 R51.86
Proprietary Limited Winsor East
Helen Joy Holdings Kevrab Manor, 61 Viscounts Avenue, Johannesburg 744 R42.55
Proprietary Limited Windsor East
Helen Joy Holdings Lana Lee, 58 Princesses Avenue, Johannesburg 1 072 R56.05
Proprietary Limited Windsor East
Helen Joy Holdings Mount Bradley, 51 Dukes Avenue, Johannesburg 715 R46.90
Proprietary Limited Windsor East
Helen Joy Holdings Prince Allan, 54 Princesses Avenue, Johannesburg 715 R47.81
Proprietary Limited Windsor East
Helen Joy Holdings Selwyn Hall, 55 Dukes Avenue, Johannesburg 2 028 R54.84
Proprietary Limited Winsor East
Houghton Mansions Houghton Mansions, Louis Botha Johannesburg 1 305 R43.59
Proprietary Limited Avenue, Bellvue
Monk’s Court Monks Court, Monks street, Johannesburg 1 932 R33.67
Proprietary Limited Townsview
NDF Investment and Ilanga, 49 Duchesses Avenue, Johannesburg 543 R61.73
Trading Proprietary Windsor East
Limited
NDF Investment and Kingston, 44 Kings Avenue, Windsor Johannesburg 947 R68.05
Trading Proprietary East
Limited
NDF Investment and Rosdin, corner of Princes Avenue and Johannesburg 1 414 R46.26
Trading Proprietary Alexander Street, Windsor West
Limited
Park Chambers Share Park Chambers, 56 Plein Street, Johannesburg 1 636 R88.52
Block Proprietary Joubert Park
Limited
Pondos Investments Franshoek, 33 Hill Street, Surrey Johannesburg 2 881 R42.10
Proprietary Limited Avenue, Randburg
Sunnyshore Investments Goldfield Protea Glen, Erd 7496 Johannesburg 6 304 R62.43
and Trading Proprietary Protea Glen
Limited
Erf 737 Rosettenville Kildare, 164 Mabel Street, Johannesburg 690 R51.65
Proprietary Limited Rosettenville
No independent valuation has been carried out and the board of Arrowhead is of the view that the purchase price of
R406 million represents the value of the immovable properties as at the closing date.
4. Categorisation of the acquisition
The acquisition is classified as a Category 2 transaction in terms of the JSE Listings Requirements. Accordingly it is
not subject to approval by Arrowhead’s linked unitholders.
5. Financial effects and renewal of cautionary
The financial effects of the acquisition are still in the process of being finalised and will be published in due course.
Unitholders of Arrowhead are advised to continue to exercise caution when dealing in their linked units until the
financial effects of the transaction are announced.
16 October 2013
Sponsor
Java Capital
Date: 16/10/2013 09:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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