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Connaught 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”)
CONNAUGHT PROPERTIES
1. Introduction and rationale
Linked unitholders are referred to the previous announcements in relation to the listing of Indlupace Properties
Limited (“Indluplace”), a subsidiary of Arrowhead, as a stand-alone Residential REIT.
In order to avoid delays to the Indluplace listing it was necessary to put potential acquisitions by Indluplace on
hold. However the Arrowhead group is continually considering acquisition opportunities including, in
particular, in the residential space where there is a significant potential acquisition pipeline. One of the
potential residential acquisitions reached the stage where, in order to secure the opportunity, it was necessary to
conclude an agreement with the seller.
In this regard, linked unitholders are advised that Arrowhead has concluded an agreement with Connaught
Properties Proprietary Limited (“Connaught”), in terms of which Connaught has agreed to sell its R420 million
residential property portfolio (“the Connaught portfolio”) to either Indluplace or, if Indluplace does not agree
to become bound as purchaser under the agreement by 30 June 2015, Arrowhead (“the purchaser”).
2. The Connaught portfolio
The Connaught portfolio comprises a portfolio of 1 182 residential units in 9 high rise buildings located in
Joubert Park and Hillbrow together with a small component of ancillary retail*. Based on the estimated net
income figures set out below, the portfolio will be acquired at an average forward yield of 10.5%.
Details of the properties, including property name, geographical location, gross lettable area (“GLA”), weighted
average rental per square metre as at 31 May 2015, the average residential rental per unit, the purchase
considerations and estimated net income attributed to the properties, all of which are residential, are as follows:
Weighted
average rental Average Purchase Estimated
Geographical per square metre residential rental consideration net income
Property name location GLA (m2) (R/m2) per unit (R) (R’000) (R’000/annum)
Blaauwberg Gauteng 8 768 65 5 497 44 000 4 620
Curzon Court Gauteng 1 877 74 3 839 10 250 1 076
Geraldine Court Gauteng 4 800 66 3 995 22 500 2 363
Kings Ransom Gauteng 20 033 78 4 919 117 000 12 285
Matroosberg Gauteng 10 599 66 4 836 56 250 5 900
Midhill Gardens Gauteng 4 149 76 3 936 25 000 2 625
Morgenster Gauteng 2 782 63 4 472 13 000 1 365
Park Mews Gauteng 3 768 79 3 080 23 000 2 415
Sentinel Gauteng 21 115 71 4 293 109 000 11 445
Total 77 892 72 4 474 420 000 44 100
*The Connaught portfolio comprises a small retail component consisting of 38 shops with a weighted average rental of R94/m 2 and a GLA of 3183m2
Details of the Connaught portfolio as at 31 May 2015 based on unit type, average rental, number of units,
percentage of units, number of vacant units and percentage of vacant units are set out in the table below:
Average rental Percentage of Number of vacant Vacancy
Unit Type (R/month) Number of units units (%) units (%)
Bachelor 2 954 332 28 7 2
One bedroom 3 727 144 12 3 2
Two bedroom 4 638 256 22 5 2
Three bedroom 5 355 315 27 6 2
Other 6 645 135 11 3 2
Total 4 474 1 182 100 24 2
The board of directors of the Arrowhead is satisfied that the aggregate value attributed to the Connaught
portfolio is in line with the aggregate purchase consideration payable. The directors 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.
3. Terms of the acquisition
3.1. The effective date of the acquisition is the date of registration of transfer of ownership of each of the
properties in the Connaught portfolio into the name of the purchaser (the “transfer date”), from which
date all risk and benefit attaching to the properties will vest in the purchaser.
3.2. The aggregate purchase price of R420 000 will be paid as follows:
3.2.1. R399 000 000 in cash; and
3.2.2. R21 000 000 by the allotment and issue to the seller of 2 100 000 Indluplace shares at an
issue price of R10.00 per share (or 1 086 956 Arrowhead A linked units at an issue price
of R9.60 per A linked unit and 1 086 956 Arrowhead B linked units at an issue price of
R9.72 per B linked unit or, in the event that Arrowhead is the purchaser), which shares or
linked units, as the case may be, are to be held in escrow for a period of 18 months as
security for any claim which the purchaser may have.
3.3. Should any of the properties in the Connaught portfolio not be registered in the purchaser’s name by 28
September 2015, then the purchase consideration in respect of such properties will increase by 0.5% per
month (6% per annum) from 29 September 2015 to the transfer date and this increase will be payable in
cash.
3.4. The agreement is subject to the fulfilment or waiver of the following conditions:
3.4.1. Connaught providing the purchaser with approved building plans in respect of the
properties;
3.4.2. the purchaser securing the written approval of its investment committee to the conclusion
and implementation of the agreement;
3.4.3. the purchaser securing finance in order to proceed with the acquisition;
3.4.4. Connaught and the purchaser concluding an escrow agreement in terms of which, as
security for any claim which the purchaser may have against the seller arising out of the
agreement, 2 100 000 Indluplace shares or should the purchaser be Arrowhead, 1 086 956
A linked units and 1 086 956 B linked units, which will be issued by the purchaser in part
settlement of the purchase price, will be held in escrow;
3.4.5. all the requisite approvals from any regulatory authorities including, but not limited to, the
Competition Authorities;
3.4.6. to the extent that any third party enjoys any pre-emptive or similar rights over the
properties, such person waiving such pre-emptive rights; and
3.4.7. as soon as practically possible after the date of fulfilment of the last of the conditions
precedent set out above, the acquisition being advertised in terms of section 34 of the
Insolvency Act, 24 of 1936.
3.5. The agreement provides for warranties and indemnities that are normal for an acquisition of this nature.
4. Categorisation
If Indluplace does not elect to purchase the Connaught portfolio and Arrowhead is the purchaser, then the
acquisition will be a category 2 transaction for Arrowhead in terms of the JSE Listings Requirements. If
Indluplace elects to purchase the Connaught portfolio, it is anticipated that the acquisition will be a category 2
transaction for Indluplace in terms of the JSE Listings Requirements.
5 June 2015
Sponsor
Java Capital
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