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Acquisition of various residential properties
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 VARIOUS RESIDENTIAL PROPERTIES
A. ACQUISITION OF JIKA PROPERTIES PROPRIETARY LIMITED
1. Introduction
Linked unitholders are advised that Arrowhead Residential Limited (“Arrowhead Residential” or the
“purchaser”), being a wholly owned subsidiary of the company has, subject to certain conditions
precedent, concluded an agreement (the “agreement”) with Citiq Proprietary Limited (“Citiq”) and
Amber Falcon Properties 185 Proprietary Limited (“Amber Falcon”) (each a “seller” and jointly the
“sellers”) for the acquisition of all the shares in (“sold shares”) and claims against (“sold claims”)
(collectively, the “sold equity”) Jika Properties Proprietary Limited (“Jika”) (the “Jika II
acquisition”). Jika owns a portfolio of residential properties comprising immovable properties (the
“Jika II properties”) and property companies (the “subsidiaries”) which own the properties
(collectively, the “Jika II property portfolio”).
2. Rationale
As announced on SENS on 16 October 2013, Arrowhead Residential acquired a portfolio of 29
residential properties and property owning companies from Jika (“Jika I acquisition”). The Jika II
acquisition will be complimentary to the portfolio of properties already owned by Arrowhead
Residential and will be distribution enhancing acquisitions.
The Jika II acquisition provides Arrowhead with an opportunity to further grow and diversify its
property portfolio. Listed residential property comprises over 15% of the total listed property market
in developed economies such as the United States of America. In South Africa, it is under 2% and
Arrowhead believes that there exists an opportunity for further growth in this sector of the real estate
market.
3. Details of the Jika II property portfolio
Details of the Jika II property portfolio, including property name, geographical location, gross lettable
area (“GLA”), weighted average rental per square metre and the purchase considerations and
estimated net income attributed to the Jika II properties, all of which are residential, are as follows:
Weighted
average
rental per Average
square rental No. of Proposed Estimated
Property Geographical metre per unit residential purchase net income
name location GLA (m2) (R/m2) (R) units price (R) (R)
Adelphi Rosettenville,
Court Johannesburg 414 44 3 016 6 1 905 901 192 496
Windsor,
Agatha Randburg 884 72 3 958 16 6 293 166 635 610
Airesdale Rosettenville,
Court Johannesburg 930 39 3 339 11 3 623 422 365 966
Windsor,
Albaro Randburg 584 52 5 105 6 2 990 515 302 042
Amanda Rosettenville,
Villa Johannesburg 381 38 2 899 5 1 464 594 147 924
SS Annlin Sinoville, Pretoria 6 131 64 4 644 84 39 520 791 3 991 600
Annop Turffontein,
Court Johannesburg 513 49 4 224 6 2 616 503 264 267
SS Arvin Berea,
Court Johannesburg 2 449 58 3 098 46 14 281 609 1 442 443
Forest Hill,
Bettenkeep Johannesburg 1 003 35 3 948 9 3 397 078 343 105
Seventh Bez Valley,
Avenue Johannesburg 455 29 4 360 3 1 365 072 137 872
Cedarmont Kenilworth,
Court Johannesburg 1 925 40 2 186 35 7 713 581 779 072
Ebenhauzer Rosettenville,
Court Johannesburg 652 42 3 028 9 2 739 712 276 711
Turffontein,
Eendracht Johannesburg 1 279 39 3 549 14 5 033 858 508 420
Elizabeth Windsor,
Gardens Randburg 513 60 4 422 7 3 064 952 309 560
Rosettenville,
Elrit Court Johannesburg 2 167 45 6 052 16 9 674 613 977 136
SS En Gedi Rynfield, Benoni 3 762 82 4 420 70 30 608 662 3 091 475
Yeoville,
Fanrael Johannesburg 496 44 3 652 6 2 259 248 228 184
Glenhurst Rosettenville,
Court Johannesburg 1 992 39 4 907 16 6 734 646 680 199
Rosettenville,
Hans Court Johannesburg 286 70 3 316 6 2 041 456 206 187
Berea,
SS Highrise Johannesburg 4 213 62 2 918 90 24 369 178 2 461 287
SS Berea,
Hillandale Johannesburg 2 431 47 4 255 27 10 857 920 1 096 650
Hilton Forest Hill,
Heights Johannesburg 688 48 3 633 9 3 169 460 320 115
Yeoville,
Homelands Johannesburg 2 376 59 3 275 43 13 255 972 1 338 853
Windsor,
Janin Randburg 924 65 5 014 12 6 292 685 635 561
Khaya Windsor,
Square Randburg 2 382 60 8 404 17 14 618 834 1 476 502
Windsor,
Lionsgate Randburg 1 380 49 5 224 13 6 837 191 690 556
Lorelei Windsor,
Rock Randburg 442 52 5 777 4 2 300 218 232 322
Magdalena Regents Park 908 37 3 342 10 3 320 482 335 369
Marvin Turffontein,
Court Johannesburg 848 45 2 532 15 3 927 551 396 683
Mayburne Bellevue,
Crest Johannesburg 2 905 47 2 664 51 12 452 475 1 257 700
Hillbrow,
Monsmeg Johannesburg 3 472 61 3 767 56 20 454 821 2 065 937
Bellevue,
Mountjoy Johannesburg 1 550 46 3 964 18 6 599 806 666 580
Bellevue,
Myra Court Johannesburg 2 343 31 3 478 21 7 018 454 708 864
Naleida Rosettenville,
Court Johannesburg 1 388 40 3 713 15 5 686 337 574 320
Windsor,
Neilsway Randburg 1 380 46 5 296 12 6 388 667 645 255
Hillbrow,
Northways Johannesburg 4 340 34 3 910 38 13 949 366 1 408 886
SS Park
Crescent Orchards, Pretoria 366 63 3 268 143 45 974 951 4 643 470
SS
Philwade Windsor,
Manor Randburg 605 51 5 123 6 3 235 086 326 744
Windsor,
Rinanda Randburg 561 56 5 268 6 3 134 101 316 544
Nourse
Street Troyeville,
Cottages Johannesburg 680 48 4 047 8 3 333 648 336 698
SS Ronivan Rouxville,
Court Johannesburg 2 313 52 3 028 40 11 485 061 1 159 991
Sable Windsor,
Antelope Randburg 280 77 5 357 4 2 129 295 215 059
SS San Windsor,
Marie Randburg 813 43 5 777 6 3 566 453 360 212
SS Seswick Berea,
Court Johannesburg 3 540 32 3 608 31 11 033 390 1 114 372
SS Bellevue,
Silverdale Johannesburg 522 45 5 859 4 2 401 695 242 571
Sixty One Windsor,
Contesses Randburg 780 100 5 203 15 8 174 415 825 616
Bellevue,
Saint Peters Johannesburg 1 006 27 9 102 3 2 690 071 271 697
Sue Mark Berea,
Court Johannesburg 3 601 39 2 975 47 13 238 813 1 337 120
SS Summer Kosmosdal,
Place Centurion 3 025 96 4 815 60 25 242 300 2 549 472
SS Sylray Berea,
Mansions Johannesburg 1 108 42 2 897 16 4 293 570 433 651
Toronto
Heights Johannesburg 2 976 63 3 895 48 17 469 290 1 764 398
Windsor,
Treetops Randburg 379 61 3 879 6 2 398 830 242 282
Rosettenville,
Triaid Court Johannesburg 2 336 35 3 513 23 7 990 312 807 021
Turffontein,
Turf Centre Johannesburg 1 769 41 4 779 15 6 070 502 613 121
Violet Rosettenville,
Court Johannesburg 930 40 3 385 11 3 748 277 378 576
Wendy Brixton,
Court Johannesburg 971 60 4 168 14 5 888 267 594 715
SS Karenpark,
Wonderpark Pretoria 5 940 89 2 930 180 49 437 091 4 993 146
Oaklane
Estates Brakpan 3 290 83 6 227 44 25 814 906 2 607 306
Windsor,
Earls Den Randburg 2 310 50 5 752 20 11 579 508 1 169 530
Windsor,
Kenwyn Randburg 1 320 44 4 465 13 5 644 192 570 063
Windsor,
Marwyn Randburg 1 320 45 4 557 13 6 059 704 612 030
Dalem Windsor,
Mews Randburg 1 282 45 4 796 12 5 770 167 582 787
Windsor,
Margedale Randburg 1 812 49 4 704 19 9 032 455 912 278
Total 113 621 55 3 837 1 629 605 665 147 61 172 180
4. Terms of the Jika II acquisition
4.1. The effective date of the Jika II acquisition is the first day of the calendar month following the
calendar month in which the agreement becomes unconditional or, if the agreement becomes
unconditional within ten business days before the end of a calendar month, then the first
business day of the month following the month in which the effective date would otherwise
have occurred (the “effective date”).
4.2. Prior to the effective date, Citiq will conclude agreements with Jika in a form approved by
Arrowhead Residential in writing, for the acquisition by Citiq of certain properties owned by
Jika and/or its subsidiary companies but excluding such properties comprising the Jika II
property portfolio (the “excluded properties”) (the “excluded properties sale agreement”).
The excluded properties sale agreement will be effective from a date prior to the effective date.
4.3. The aggregate purchase consideration payable by the purchaser to the sellers in respect of the
sold equity is approximately R605 665 147 (the “purchase consideration”) and will be
allocated as to the face value of the sold claims and the balance to the sold shares.
4.4. For purposes of calculating the purchase consideration, any assets and liabilities relating to the
excluded properties, any assessed loss of Jika, any amount attributable to a VAT dispute and
the interest bearing borrowings of Jika and its subsidiaries have been excluded and, it is
assumed that the value of each property comprising the Jika 2 property portfolio is valued at
the corresponding amount reflected in the table in paragraph 3 above.
4.5. The purchase consideration will be funded through debt.
4.6. The sellers have guaranteed that –
4.6.1. during the first guarantee period (being the 12 month period commencing on the
effective date) the net yield attributable to the Jika II property portfolio will be not
less than 10,1%; and
4.6.2. during the second guarantee period (being the 12 month period commencing on
the first day after the expiry of the first guarantee period) the net yield attributable
to the Jika II property portfolio will be not less than 10,9%.
4.7. If the actual net yield achieved in respect of a guarantee period is less than the guaranteed yield
for that period then the sellers shall pay to Arrowhead Residential 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 Residential pursuant to the aforesaid
financial guarantee in respect of each guarantee period shall not exceed 2,5% of the purchase
price.
4.8. To facilitate payment under the financial guarantee the conveyancing attorneys shall retain in
their trust account an amount equivalent to 5% of the purchase price paid by Arrowhead
Residential for the Jika II property portfolio.
5. Suspensive conditions
The agreement is subject to the fulfilment or waiver, as the case may be, of the following suspensive
conditions:
5.1. within fifteen business days of the signature date of the agreement (the “signature date”), the
board of directors of each of the sellers passing a resolution approving the disposal of the sold
equity and authorising a named individual/s to sign the agreement on its behalf;
5.2. within fifteen business days of the signature date the shareholders of each seller passing a
special resolution approving the disposal of the sold equity in Jika to the purchaser;
5.3. within fifteen business days of the signature date the seller providing the purchaser with the
consolidated financial statements of Jika for the financial years ended 2011, 2012 and 2013;
5.4. within fifteen business days of the signature date, Citiq, Jika and the purchaser signing an
unconditional deed of assignment in terms of which Jika cedes and delegates to Citiq, subject
to and with effect from the effective date, all Jika’s remaining rights and obligations under the
Jika I sale agreement;
5.5. the purchaser notifying the sellers in writing before the close of business on the third business
day following the conclusion of the due diligence investigation that it is satisfied with the
outcome of the investigation;
5.6. within fifteen business days after the expiry of the due diligence investigation, Arrowhead
Residential delivering to each seller written approval from its investment committee
authorising the purchaser to enter into the agreement and a named individual to sign the
agreement;
5.7. within fifteen business days after the signature date the property management agreement
between Jika and Citiq Property Services Proprietary Limited being executed and becoming
unconditional;
5.8. within fifteen business days after the signature date the pre-paid metering agreement between
Jika and Citiq Meter Solutions Proprietary Limited being executed and becoming
unconditional;
5.9. within fifteen business days after the date of satisfactory compliance of the due diligence
investigation, the escrow agreement between the sellers, the purchaser and Couzyns Inc being
executed and becoming unconditional;
5.10. within fifteen business days after the signature date the sellers, Jika and the purchaser
submitting an application to the Competition Authorities requesting approval of the
acquisition;
5.11. within thirty business days after the date of satisfactory completion of the due diligence
investigation, the purchaser obtaining, to the extent necessary, the requisite approvals from its
linked unitholders and the JSE for the implementation of the Jika II acquisition;
5.12. within thirty business days after the date of satisfactory completion of the due diligence
investigation, Citiq and the purchaser each obtaining, to the extent necessary, a compliance
certificate from the Takeover Regulations Panel in accordance with the relevant provisions of
the Companies Act, 2008 or is exempted from compliance with the Takeover Regulations in
terms of section 119(6) of the Companies Act, 2008 in respect of the disposal of the sold
equity;
5.13. within twenty business days after the expiry of the due diligence investigation, the excluded
properties sale agreement being executed and becoming unconditional;
5.14. within thirty business days from the signature date, Jika obtaining the written consent from its
external funders to the early settlement of any interest bearing debt due by Jika; and
5.15. the Competition Authorities providing written approval for the implementation of the Jika II
acquisition, either on an unconditional basis or subject to such conditions as the purchaser, the
seller and Jika confirm in writing are acceptable.
6. Valuation
The board of directors of Arrowhead is satisfied that the aggregate value attributed to the Jika II
property portfolio is in line with the aggregate purchase consideration being paid by the purchaser.
The directors of the company 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.
7. Categorisation
The Jika II acquisition is a category 2 transaction in terms of the JSE Listings Requirements and
accordingly does not require approval by linked unitholders.
B. UPDATE ON OTHER RESIDENTIAL ACQUSITIONS BY ARROWHEAD RESIDENTIAL
Arrowhead Residential has concluded various agreements for the following acquisitions:
1. The Amberfield Village acquisition
Arrowhead Residential has completed the acquisition of a portion of a sectional title scheme
known as Amberfield Village, together with an undivided share in the common property (the
“property”) from Propsky 2 Properties Proprietary Limited (“Propsky”) (the “Amberfield
Village acquisition”). The property is situated in Vanderbijlpark, Gauteng, comprises 102
residential units in a sectional title complex and is leased to the Vaal University of Technology
for student housing for a period of 3 years expiring on 31 December 2016. The tenant has an
option to renew the lease agreement for a further period of 3 years. Transfer of the property into
the name of Arrowhead Residential was registered on 15 October 2014.
2. The Park Village acquisition
Arrowhead Residential has acquired the properties in a sectional title scheme known as Park
Village, together with an undivided share in the common property (the “property”) from
Propsky (the “Park Village acquisition”). The property is situated at in Vanderbijlpark,
comprises 116 residential units and is leased to the Vaal University of Technology and North-
West University for student housing for a period of 3 years, with leases on 93 units expiring on
31 December 2016 and the remaining units expiring on 31 December 2015. The Vaal University
of Technology has an option to renew the lease agreement for a further period of 3 years.
Transfer of the property into the name of Arrowhead Residential is expected to be registered
during December 2014.
3. The Bree Street acquisition
Arrowhead Residential Limited has acquired the property letting enterprises conducted in
respect of and including certain properties and buildings (collectively, the “properties”) from
Consolidated Urban Acquisitions 1 CC and Sapphire Cove INV 17 CC (the “Bree Street
acquisition”). The properties comprise Globakeries, Cheryl Court, USave, Film Trust House,
Bree City Mall and 320 Bree Street.
Globakeries is situated in Johannesburg CBD, Gauteng and comprises a bakery, ground floor
retail and a creche. Transfer of Globakeries into the name of Arrowhead Residential is expected
to be registered during December 2014.
Cheryl Court is situated in Johannesburg CBD, Gauteng, comprises 30 affordable residential
units and ground floor retail. Transfer of Cheryl Court into the name of Arrowhead Residential is
expected to be registered during December 2014.
USave is situated in Johannesburg CBD, Gauteng and is a retail centre. Transfer of USave into
the name of Arrowhead Residential is expected to be registered during December 2014.
Film Trust House is situated in Johannesburg CBD, Gauteng and is a retail centre. Transfer of
Film Trust House into the name of Arrowhead Residential is expected to be registered during
December 2014.
Bree City Mall is situated in Johannesburg CBD, Gauteng and is a retail centre. Transfer of Bree
City Mall into the name of Arrowhead Residential is expected to be registered during December
2014.
320 Bree Street is situated in Johannesburg CBD, Gauteng, comprises 90 residential units and is
affordable rental housing. Transfer of 320 Bree Street into the name of Arrowhead Residential is
expected to be registered during December 2014.
The Bree Street acquisition is subject to the sale of the properties being advertised in terms of
section 34 of the Insolvency Act 24 of 1936 (the “Insolvency Act”) for a period of thirty days.
The transfer of the properties must occur not less than thirty and not more than sixty days from
the date on which the advertisement is published (the “period”). If the transfer of the properties
does not occur during the period, Arrowhead Residential will re-advertise in terms of section 34
of the Insolvency Act so as to ensure that the transfer date occurs during the period.
4. The Highveld View Estate acquisition
Arrowhead Residential has acquired the immovable property known as Highveld View Estate
(the “property”) from Zotec Developments Proprietary Limited (the “seller”) (the “Highveld
View Estate acquisition”). The property is situated in Emalahleni, Mpumalanga and comprises
450 residential units. Transfer of the property into the name of Arrowhead Residential is
expected to be registered during February 2015.
The Highveld View Estate acquisition is subject to the fulfilment or waiver, as the case may be,
of the following conditions precedent:
4.1 Arrowhead Residential conducting a full due diligence investigation and providing the
seller, within 45 business days after 21 November 2014 (the “signature date”), with
written confirmation that it is satisfied with the results of the due diligence investigation
and wishes to proceed with the acquisition;
4.2 within 15 business days after the fulfilment or waiver of the condition precedent set out in
paragraph 4.1 above, Arrowhead Residential securing the written approval of its
investment committee to the conclusion and implementation of the Highveld View Estate
acquisition agreement;
4.3 within 30 business days from the signature date, Arrowhead Residential securing finance
in order to proceed with the purchase of the immoveable property;
4.4 within 45 business days after the fulfilment of the condition precedent set out in paragraph
4.1 above, the directors of the seller passing a resolution approving the sale of the property
to Arrowhead Residential;
4.6 within 15 business days after the signature date, the management agreement between
Arrowhead Residential and CSI Rentals Proprietary Limited being executed and becoming
unconditional;
4.7 within 15 business days after the signature date, the escrow agreement between Arrowhead
Residential, the seller and Couzyns Incorporated being executed and becoming
unconditional;
4.8 within 10 business days after the fulfilment or waiver of the condition precedent set out in
paragraph 4.1 above, to the extent necessary, any third party enjoying any pre-emptive or
similar rights over the property waiving such pre-emptive rights;
4.9 the sale of the property being advertised in terms of section 34 of the Insolvency Act,
1936.
5. Purchase consideration and acquisition yield
The following are the purchase considerations payable by Arrowhead Residential, as well the
acquisition yields, in respect of each acquisitions set out above:
Acquisition Purchase consideration Acquisition yield
Amberfield Village R46 583 186 11.50%
Park Village R85 263 828 11.25%
Bree Street R55 700 000 11.50%
Highveld View Estate R286 500 000 10.25%
Total R474 047 014 10.7%
None of the above acquisitions are categorisable in terms of the JSE Listings Requirements and this
section B of the announcement is for information purposes only. The company intends to fund the
above acquisitions comprising the Jika II acquisition, the Highveld View Estate acquisition, the Bree
Street acquisition and the Park Village acquisition from available debt facilities, the sale of
underperforming properties and the repayment of the loan by the Arrowhead Charitable Trust.
27 November 2014
Sponsor
Java Capital
Date: 27/11/2014 04:45:00 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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