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PUTPROP LIMITED - Acquisition of the CAVI Rental Enterprise

Release Date: 27/10/2016 15:45
Code(s): PPR     PDF:  
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Acquisition of the CAVI Rental Enterprise

PUTPROP LIMITED
Incorporated in the Republic of South Africa
(Registration number 1988/001085/06)
Share code: PPR ISIN: ZAE000072310
(“Putprop” or “the Company” or “the Group”)


ACQUISITION OF THE CAVI RENTAL ENTERPRISE


1. INTRODUCTION

   The board of directors of Putprop (“the Board”) wishes to inform shareholders that on 26 October 2016,
   (“Agreement Date”) Putprop entered into a sale of rental enterprise agreement (“Sale Agreement”) with
   CAVI Prop Co Proprietary Limited (“the Seller” or “CAVI”), in terms of which, subject to the fulfilment or
   waiver of the conditions precedent set out in paragraph 2.4 below (“Conditions Precedent”), Putprop
   will acquire the enterprise of letting the “CAVI Property”, being the property known as Section Number
   1, as shown and more fully described on Sectional Plan Number SS 130/2015, in the sectional title
   scheme known as Oakhurst (“the CAVI Rental Enterprise”) (“the Acquisition”).

2. THE ACQUISITION

   2.1   Details of the CAVI Rental Enterprise

         The CAVI Rental Enterprise is situated on portions 1 and 2 of Erf 915, Parktown, and, together with
         the buildings and improvements thereon, measures 4 666 square metres. The gross lettable area
         (GLA) of the CAVI Rental Enterprise is 4 666 square metres (all attributable to the commercial
         sector) and the weighted average rental per square metre is currently R152.90.

   2.2   Purchase Consideration
         The purchase consideration is an amount of R90 260 000 (ninety million, two hundred and sixty
         thousand rand), which amount is to be settled in cash.

   2.3   Rationale for the Acquisition
         The Board has been pursuing its strategic decision to increase Putprop’s exposure in the
         commercial segment. The Acquisition provides an ideal opportunity for the Group to substantially
         increase its holding in the commercial segment and reduce its weighting in the industrial segment.
         In addition, the Acquisition is linked to the CAVI head lease agreement, being the written
         agreement of head lease to be concluded between the Company (as landlord) and the Seller in
         terms of which the Company lets the CAVI Property to the Seller (as lessee) (“CAVI Head Lease
         Agreement”), which provides for a ten year fully repairing leaseback at favourable rates, allowing
         for stable contractual rental flows going forward.

   2.4   Conditions Precedent and effective date

         2.4.1 The Acquisition is subject to the fulfilment or waiver, as the case may be, of, inter alia, the
               following conditions precedent, by no later than:
                2.4.1.1.   23 December 2016:
                           2.4.1.1.1 the Company (to the extent required), complying with all such
                                     provisions of the JSE Listings Requirements (“Listings
                                     Requirements”) and any other regulatory authorities which relate to
                                     the Acquisition (being classified as a Category 1 transaction), including
                                     the distribution of a circular to shareholders of Putprop (“Circular”) and
                                     obtaining shareholder approval of the Acquisition;
                2.4.1.2.   15 (fifteen) business days from the Agreement Date:
                           2.4.1.2.1. the Board adopting an ordinary resolution in terms of which they
                                      approve and ratify the Acquisition and the conclusion of the Sale
                                      Agreement;
                           2.4.1.2.2. the Company obtaining “in principle” loan finance, as evidenced by a
                                      letter of “in principle funding” addressed by the relevant bank (or
                                      financial institution) to the Company, with a copy thereof to the Seller;
                2.4.1.3.   20 (twenty) business days from the Agreement Date:
                           2.4.1.3.1. the shareholders of the Seller passing a special resolution (as
                                      contemplated in sections 112 and 115 of the Companies Act, (Act 71 of
                                      2008), as amended) approving the sale of the CAVI Rental Enterprise
                                      and the conclusion of the Sale Agreement by the board of directors of
                                      the Seller (if applicable);
                           2.4.1.3.2. the board of directors of the Seller approving and ratifying the sale of
                                      the CAVI Rental Enterprise and the conclusion of the Sale Agreement;
                                      and
                           2.4.1.3.3. the CAVI Head Lease Agreement, being concluded between the
                                      parties on terms and conditions to be agreed upon, including (but not
                                      limited to) provision for: (i) the initial period of the lease shall endure for
                                      a period of 10 (ten) years; (ii) the lease shall commence within 5 (five)
                                      business days after the registration date; (iii) the annual net income for
                                      the initial period of the lease shall be an amount of R8 017 290 (eight
                                      million, seventeen thousand, two hundred and ninety rand) for the first
                                      year (excluding VAT) and thereafter increasing at an escalation rate of
                                      8% (eight percent); and
                2.4.1.4.   25 (twenty five) business days from the Agreement Date:
                           2.4.1.4.1. the Company obtaining final approval of the loan finance, as evidenced
                                      by a signed letter of grant addressed by the relevant bank (or financial
                                      institution) to the Company with a copy thereof to the Seller.
     
         2.4.2. The Conditions Precedent referred to in clause/s:
                2.4.2.1.    2.4.1.2.1, 2.4.1.2.2, 2.4.1.3.1, 2.4.1.3.2, 2.4.1.3.3 and 2.4.1.4.1 are imposed for
                            the benefit of both of the parties and may not be relaxed or waived other than by
                            written agreement between the parties; and
                2.4.2.2.    2.4.1.1 (to the extent applicable), is a requirement in terms of the Listings
                            Requirements and may not be waived or relaxed;
    
         2.4.3. The due date for the fulfilment (or waiver) of any one or more of the Conditions Precedent
                may be extended by the parties by agreement in writing to such further date or dates as the
                parties may determine.

    The effective date of the Acquisition shall be the date of fulfilment or waiver, as applicable, of the
    last of the Conditions Precedent.

   2.5 The value of, and profits attributable to the CAVI Property
       A valuation of the CAVI Property was performed on 25 October 2016 by Peter Parfitt, representing
       Quadrant Properties Proprietary Limited, who is independent and is registered as a professional
       valuer in terms of the Property Valuers Profession Act, 2000 (Act 47 of 2000). The CAVI Property
       was valued at an amount of R94 million. The valuation report will be included in the Circular.

       The profit after tax attributable to the net assets that are the subject of the Acquisition for the year
       ended 31 December 2015 was R144 499 (one hundred and forty four thousand four hundred and
       ninety nine rand).
   
   2.6 Irrevocable Support
       At the date of this announcement, Putprop has received irrevocable support of 62.99% for the
       Acquisition from Shareholders.

   2.7 Classification of the Acquisition
       The Acquisition is classified as a Category 1 transaction in terms of the Listings Requirements.

   2.8 Circular to Shareholders
       Shareholders are advised that the Circular, incorporating inter alia, full details of the Acquisition
       and a notice convening a general meeting, will be posted to Shareholders on or about
       18 November 2016.



Johannesburg
27 October 2016

Sponsor and Corporate Advisor
Merchantec Capital

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