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Acquisition of a portfolio of residential properties from South African Workforce Housing Fund and related companies
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
(Approved as a REIT by the JSE)
(“Indluplace” or “the company”)
ACQUISITION BY INDLUPLACE OF A PORTFOLIO OF RESIDENTIAL PROPERTIES FROM THE
SOUTH AFRICAN WORKFORCE HOUSING FUND AND RELATED COMPANIES WITHIN THE GROUP
(“SAWHF”)
1. INTRODUCTION
Shareholders are referred to the Indluplace announcement released on SENS on 19 October 2015 regarding the
potential acquisition by Indluplace of a portfolio of properties from SAWHF and are advised that Indluplace has,
subject to certain conditions precedent, concluded an agreement (“the agreement”) with SAWHF, a fund
managed by the International Housing Solutions Group, for the acquisition of a R707 million portfolio of
residential properties comprising certain completed immovable properties (“completed immovable properties”)
and developments (“developments”) together with any lease agreements (collectively, “the residential property
portfolio”) (“the acquisition”).
2. RATIONALE
The acquisition is in line with the company’s strategy to grow its existing residential portfolio aggressively
through acquiring yield enhancing properties and portfolios that provide income from the first day of acquisition.
The acquisition will enhance the company’s current portfolio with good quality suburban, newly built townhouse
type developments which complements Indluplace’s current portfolio of suburban and central business district
residential properties and will additionally expand the company’s national footprint.
The residential property portfolio consists of about 1 275 units (“the units”) located in Western Cape (26%),
Mpumalanga (25%) and the remainder in Gauteng.
3. THE RESIDENTIAL PROPERTY PORTFOLIO
The residential portfolio comprises of 1 275 residential units in 9 newly built suburban low rise developments.
About a third of the portfolio is currently under construction to be completed early in 2016; these developments
will only be taken over when fully complete. The portfolio consists of 95% two bedroom and 5% one bedroom
units.
Details of the residential property portfolio, including property name, geographical location, gross lettable area
(“GLA”), weighted average rental per square metre and the average residential rental per unit as at
30 November 2015, the purchase consideration and estimated net income attributable to the properties, all of
which are residential, is as follows:
Weighted
average
rental per Average
square monthly Purchase * Estimated
Property Geographical GLA metre Number rental consideration net income
No. name location (m2) (R/m2) of units per unit (R) (R) (R’m/annum)
Aurora
1. Villas Western Cape 2 520 101 56 4 555 29 608 653.61 2.43
2. 67 on 7th Gauteng 9 135 97 164 5 400 109 462 274.60 8.98
3. Vanguard
Residential
Village 2
Vanguard
Residential
Village 3 Western Cape 4 224 108 96 4 732 52 283 729.13 4.29
Theresa
4. Park Estates Gauteng 12 432 77 242 3 935 116 271 256.07 9.53
Jackleberry
5. Close Gauteng 11 316 93 209 5 050 125 647 699.40 10.30
Alpine
6. Mews Western Cape 4 005 83 90 3 682 38 241 003.60 3.14
Spring
Valley, Ext
7. 16 – Phase 1 Mpumalanga 9 476 79 170 4 388¹ 86 919 543.10 7.56
Spring
Valley, Ext
8. 16 – Phase 2 Mpumalanga 8 416 81 155 4 406¹ 79 575 264.00 6.92
9. Dune Crest Western Cape 5 580 116 93 7 000² 69 658 030.43 6.06
Total 67 104 90 1275 4 717 707 667 453.94 59.16
¹ Under construction, current rental
² To be constructed, projected rental on completion
*Based on the projected net income for the 12 months ending 30 November 2016
The board of directors of Indluplace are satisfied that the aggregate value attributed to the residential property
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 in respect of the completed immovable properties, comprising properties numbered 1 to
6 in the table above, is the first calendar day of the month following the fulfilment of the last of the
conditions precedent set out in paragraph 5 below; and the effective date in respect of each development,
comprising properties numbered 7 to 9 in the table above, is the first calendar day of the month in which
final completion takes place (“the effective date”).
4.2 All risk and benefit attaching to the residential property portfolio will vest in Indluplace with effect from
the effective date.
4.3 The aggregate purchase consideration payable in cash on the effective date by Indluplace to the SAWHF
for the residential property portfolio is R707 667 453.94 (“the purchase consideration”).
4.4 SAWHF have concluded agreements with end-user purchasers (“the end-user purchase agreements”) in
respect of certain other units (“the other units”) situated within the sectional title schemes forming part of
the completed immovable properties, which other units, as at the signature date of the agreement, have
been excluded from the residential property portfolio. Should the end-user agreements fail for any reason,
then Indluplace and SAWHF will amend the agreement to include the other units in the residential
property portfolio and amend the relevant purchase consideration per unit and the aggregate purchase
consideration payable for all the units in that sectional title scheme.
4.5 SAWHF have provided Indluplace with a rental income guarantee (“the rental guarantee”) in respect of
the units of which it is the owner and which are vacant on the effective date. The rental guarantee is
subject to the conclusion of a management agreement in terms of which IHS Property Management
Proprietary Limited (“IHSPM”) will be the exclusive manager of the units and have an exclusive mandate
to procure tenants for the units.
4.6 The rental guarantee will expire, on a per unoccupied unit basis in respect of each unoccupied unit, when a
lease agreement entered into between Indluplace and a tenant becomes unconditional or on
30 October 2017, whichever comes first (“the expiry date”). To secure payment under the rental
guarantee, Indluplace’s attorney will establish a trust account for SAWHF and keep in such trust account a
maximum of 3% of the purchase consideration, the balance of which (if any) will be released to SAWHF
or the Indluplace, as the case may, within two business days after the expiry date.
4.7 The agreement provides for warranties and indemnities that are normal for an acquisition of this nature.
5. CONDITIONS PRECEDENT
The agreement is subject to the fulfilment or waiver, as the case may be of the following conditions precedent:
5.1 Indluplace conducting a full due diligence investigation and furnishing the seller with written confirmation
that it is satisfied with the results of the due diligence and that it wishes to proceed with the acquisition;
5.2 Indluplace securing the written approval of its investment committee to the conclusion and
implementation of the agreement;
5.3 SAWHF securing the written approval of its investment committee to the conclusion and implementation
of the agreement;
5.4 Indluplace and IHSPM executing an unconditional management agreement;
5.5 Indluplace obtaining, to the extent necessary, the requisite approvals from any regulatory authorities,
including, but not limited to, the Competition Authorities for the implementation of the acquisition;
5.6 Indluplace securing finance to proceed with the acquisition;
5.7 the shareholders of SAWHF passing the necessary resolutions approving the acquisition; and
5.8 an escrow agreement being executed.
6. CATEGORISATION AND DOCUMENTATION
The acquisition is a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not
require approval by Indluplace shareholders.
2 December 2015
Corporate advisor and sponsor
Java Capital
Date: 02/12/2015 12:55:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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