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Acquisition of the Connaught Portfolio
Indluplace Properties Limited
(previously Arrowhead Residential Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2013/226082/06)
(JSE share code: ILU)
(ISIN: ZAE000201125)
(“Indluplace” or “the company”)
ACQUISITION OF THE CONNAUGHT PORTFOLIO
1. Introduction
Indluplace shareholders are referred the Indluplace announcement released on SENS on 25 June 2015
where shareholders were advised that Arrowhead Properties Limited (“Arrowhead”) had concluded
an agreement with Connaught Properties Proprietary Limited (“Connaught”), in terms of which
Connaught had agreed to sell a R420 million residential property portfolio (“the Connaught
portfolio”) to either Indluplace or, if Indluplace did not agree to become bound as purchaser under the
agreement by 30 June 2015, to Arrowhead (“the acquisition”).
Shareholders are advised that Indluplace has, on 30 June 2015, agreed to be bound as purchaser under
the agreement.
2. Rationale for the acquisition
The acquisition is in line with the company’s strategy to grow its residential portfolio aggressively
through acquiring yield enhancing properties and portfolios that provide income from the first day of
acquisition. The Connaught portfolio, which consists of residential high rise buildings situated in
central Johannesburg is in line with the company’s strategy to invest in residential rental properties,
with the focus being on affordable housing, in larger urban centres close to work opportunities and
transport infrastructure. The acquisition will increase Indluplace’s total number of assets from 95 to
104 properties with 4 870 individual residential rental units.
3. The Connaught portfolio
The Connaught portfolio comprises a portfolio of 1 180 residential units in 9 high rise buildings
located in Joubert Park and Hillbrow together with a small ancillary retail component*. 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 Connaught portfolio, 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 consideration and estimated net income attributable to the properties, all of
which are residential, is 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 3 183m2
Details of the Connaught portfolio as at 31 May 2015 based on unit type, average monthly 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 6 645 133 11 3 2
Total 4 474 1 180 100 24 2
The board of directors of Indluplace are 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.
4. Terms of the acquisition
4.1. 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 Indluplace (the “transfer date”),
from which date all risk and benefit attaching to the properties will vest in Indluplace.
4.2. The aggregate purchase consideration (“purchase consideration”) will comprise:
4.2.1. R399 000 000 in cash; and
4.2.2. 2 100 000 Indluplace shares, which shares are to be held in escrow for a period of
18 months as security for any claim which Indluplace may have.
4.3. Should any of the properties in the Connaught portfolio not be registered in Indluplace’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.
4.4. The agreement is subject to the fulfilment or waiver of the following conditions:
4.4.1. Connaught providing Indluplace with approved building plans in respect of the
properties;
4.4.2. Indluplace securing finance in order to proceed with the acquisition;
4.4.3. Connaught and Indluplace concluding an escrow agreement in terms of which, as
security for any claim which Indluplace may have against Connaught arising out
of the agreement, 2 100 000 Indluplace shares, which will be issued by the
Indluplace in part settlement of the purchase price, will be held in escrow;
4.4.4. all the requisite approvals from any regulatory authorities including, but not
limited to, the Competition Authorities; and
4.4.5. 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.
4.5. The agreement provides for warranties and indemnities that are normal for an acquisition of
this nature.
5. Categorisation
The acquisition is a category 2 transaction in terms of the JSE Listings Requirements and accordingly
does not require approval by Indluplace shareholders.
30 June 2015
Sponsor
Java Capital
Date: 30/06/2015 03:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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