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Acquisition Of 2 Long Street Cape Town And Cautionary Announcement
Spear REIT Limited
(previously known as Arrow 2 Investments Proprietary Limited)
Incorporated in the Republic of South Africa
(Registration number: 2015/407237/06)
Share code: SEA
ISIN: ZAE000228995
(“Spear” or “the Company”)
ACQUISITION OF 2 LONG STREET CAPE TOWN AND CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
1.1. Shareholders of the Company are hereby advised that the
Company, through its subsidiary, Spear One Proprietary
Limited (“Spear One”), entered into an agreement (“Sale of
Letting Business Agreement”) with Capital Propfund 1
Proprietary Limited (“Seller”) to acquire, as a going
concern, the letting enterprise operated by the Seller
(“Letting Enterprise”) on the property on Erf 9363 Cape Town,
City of Cape Town, Western Cape, situated at 2 Long Street,
Cape Town, Western Cape (“Property”) (“Acquisition”).
1.2. The effective date of the Acquisition shall be the date of
registration of transfer of ownership of the Property to
Spear (“Effective Date”), which is expected to occur on or
about 1 July 2017.
1.3. Spear will hold a 70% interest in Spear One on the Effective
Date, with the balance being held by acquisition partners.
2. RATIONALE FOR THE ACQUISITION
The Acquisition is in line with Spear’s strategy to increase
its investments in high quality Western Cape real estate and
in this instance the Cape Town central business district.
Management is of the opinion that the demand for commercial
office accommodation within the Cape Town central business
district will continue to grow, given that marginal vacancy
reductions in the Cape Town central business district have
commenced and are anticipated to continue. The Acquisition is
at a yield that is accretive to shareholders.
3. PURCHASE CONSIDERATION
3.1. The purchase consideration for the Acquisition is
R395 000 000, which includes VAT at the rate of 0% (“Purchase
Consideration”), payable on the Effective Date.
3.2. The Purchase Consideration shall be settled in cash and shall
be funded in the manner stated below –
3.3.1 R217 000 000 will be funded by loan funding (“Loan
Funding”); and
3.3.2 the balance of the Purchase Consideration will be settled
through a vendor placement.
3.3. Spear shall be entitled to raise additional equity to pay
down the Loan Funding by way of a vendor placement.
3.4. If the registration of transfer of ownership of the Property
occurs after 30 June 2017, interest will accrue on the
Purchase Consideration (excluding VAT) at a rate of 0.67%
per month from 1 July 2017 to the date on which the transfer
of ownership of the Property is registered, calculated daily
and compounded monthly in arrears.
4. THE PROPERTY
Details of the Property are as follows:
Property Name Geographical Sector GLA Weighted
and Address Location (m2) Average
Gross
Rental/m2
(R/m2)
2 Long Street, 2 Long Street, Retail 23,671 120.3
Erf 9363, Cape Cape Town,
Town, Western Western Cape
Cape
5. PROPERTY SPECIFIC INFORMATION
Details regarding the Acquisition, as at the expected Effective
Date, are set out below:
Property Name Weighted Lease Vacancy
and Address Average Duration % by GLA
Escalation (years)
2 Long Street, 8% 2 13%
Erf 9363, Cape
Town, Western
Cape
Notes:
a) The costs associated with the Acquisition of the Property
are estimated at R3,500,000.
b) The cost of the Property is considered to be its fair market
value, as determined by the directors of the Company. 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.
6. FINANCIAL INFORMATION IN RESPECT OF THE ACQUISITION
The financial information relating to the Acquisition is still
being prepared and will be published in due course.
7. CONDITIONS PRECEDENT
7.1. The Acquisition is subject to fulfilment of the following
conditions precedent –
7.1.1. Spear confirms in writing to the Seller that it is satisfied
with the results of the due diligence investigation by
Wednesday, 15 March 2017;
7.1.2. Spear resolves to approve the implementation of the
Acquisition and delivers a copy of the resolution to this
effect to the conveyancers and the Seller by Friday, 7 April
2017;
7.1.3. Spear procures written confirmation from a financial
institution that it has been granted loan funding for no
less than R217 000 000, by Tuesday, 18 April 2017;
7.1.4. the Seller resolves to approve the conclusion and
implementation of the Acquisition by Wednesday, 22 March
2017;
7.1.5. the Competition Commission or the Competition Tribunal, if
applicable, unconditionally approves the implementation of
the Acquisition, evidenced by a merger clearance
certificate, by Wednesday, 31 May 2017; and
7.1.6. Spear notifies the Seller that the balance of the Purchase
Consideration has successfully been procured through a
vendor placement and delivers confirmation to the Seller
and the conveyancers confirming that all the regulatory
approvals, including any approvals required by the JSE
Limited in respect of such vendor placement, have been
obtained, by Wednesday, 7 June 2017.
7.2. Certain conditions precedent are capable of waiver by either
the Spear or the Seller, as the case may be.
7.3. The parties to the Acquisition may extend the date for
fulfilment of any of the conditions precedent to such further
date/s as they may, in writing, agree. In respect of the
condition precedent in paragraph 7.1.5, should the required
approval not be obtained by 31 May 2017, the period for
fulfilment of such condition precedent shall automatically
be extended by an additional 30 days.
8. RENTAL GUARANTEE
The Seller has provided Spear with a rental undertaking in
respect of certain vacant premises within the Property. The
undertaking is limited to R110 per square meter gross rental
per month, excluding VAT for a maximum period of 18 months from
the Effective Date.
9. OTHER TERMS OF THE SALE OF LETTING BUSINESS AGREEMENT
The Seller has provided the Company with limited warranties in
relation to the transfer of the Property.
10. CATEGORISATION
The Acquisition qualifies as a Category 2 acquisition for the
Company in terms of the JSE Listings Requirements.
11. CAUTIONARY
As indicated above, the financial information relating to the
Acquisition is still being prepared and will be published in
due course. Accordingly, shareholders are advised to exercise
caution when dealing in Spear’s securities until the financial
information relating to the Acquisition is published.
3 March 2017
Cape Town
Sponsor and Corporate Advisor
PSG Capital
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