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INDLUPLACE PROPERTIES LIMITED - Acquisition of Diluculo Properties and withdrawal of cautionary announcement

Release Date: 16/03/2017 13:18
Code(s): ILU     PDF:  
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Acquisition of Diluculo Properties and withdrawal of cautionary announcement

INDLUPLACE PROPERTIES 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 OF DILUCULO PROPERTIES AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


INTRODUCTION AND RATIONALE

Shareholders are referred to the cautionary announcement released on 26 January 2017. Indluplace is pleased to announce that it
has concluded an agreement (the “acquisition agreement”) to acquire the entire issued share capital of and claims against
Diluculo Properties Proprietary Limited (“Diluculo”) (the “sale equity”) from Diluculo Investments Proprietary Limited (“the
seller”) for an aggregate purchase consideration of R475 000 000 (the “transaction”). Diluculo owns a portfolio of 1 319
residential units with 2 147 sqm of associated retail situated in Gauteng (95%) and the Free State (5%).

The transaction is in line with the Company’s investment strategy to grow its residential property portfolio through the acquisition
of yield enhancing properties. The Diluculo properties will complement the current Indluplace portfolio as it is similarly diverse
in location, building type and value for money offering.

SALIENT TERMS OF THE TRANSACTION

Indluplace will acquire the sale equity from the seller with effect from the last day of the month in which the last suspensive
condition to the transaction is fulfilled or waived (the “closing date”). The initial purchase consideration will be paid in cash on
the second day after the closing date. The final purchase consideration will be adjusted up or down depending on the current
assets and liabilities of Diluculo as at the closing date.

Diluculo has previously concluded an agreement to sell certain residential properties situated in Pennyville, the transfer of which
has been delayed (the “Pennyville sale”). The proceeds of the Pennyville sale do not form part of the assets to be acquired by
Indluplace in terms of the transaction. Prior to the implementation of the transaction, Diluculo will sell the Pennyville receivables
to the seller. Diluculo has indemnified Indluplace against any losses arising from the Pennyville sale.

Diluculo Guarantee SPV Proprietary Limited and the Diluculo Guarantee SPV Owner Trust were established as part of an SPV
structure to hold security in respect of certain loans granted to Diluculo by Absa Bank and to issue a guarantee in respect of such
loans (the “Diluculo SPV structure”). These loans have been repaid.

The seller has provided Indluplace with an indemnity in respect of:

-      part of the amount claimed from Diluculo pursuant to a zoning dispute; and
-      any amounts owing to SARS pursuant to certain VAT and income tax returns.

The acquisition agreement includes warranties, undertakings and indemnities which are normal for a transaction of this nature.

SUSPENSIVE CONDITIONS

The acquisition agreement remains conditional upon:

-      approval of the transaction by the Competition Authorities;
-      approval by the shareholders of the seller approving the transaction in terms of sections 112 and 115 of the Companies Act
       71 of 2008;
-      approval of the transaction by the boards of directors of Indluplace and the seller respectively;
-      the agreement in respect of the Pennyville receivables being signed and becoming unconditional;
-      the seller delivering to Indluplace a copy of the audited annual financial statements of Diluculo for the 12 months ended 31
       December 2016;
-      the holding company of the seller issuing a letter of comfort in favour of Indluplace in respect of the obligations of the
       seller in terms of the acquisition agreement;
-      the parties implementing certain transitional arrangements in respect of IT and property management systems;
-      an agreement transferring the Diluculo SPV structure to Indluplace being concluded and Absa Bank and the seller being
       released from the security granted pursuant to the Diluculo SPV structure; and
-      the seller delivering to Indluplace a copy of the written notification of the transaction to the South African Reserve Bank.

DETAILS OF THE PROPERTY PORTFOLIO

Diluculo owns the properties listed in the table below.
 
                                                                        Average      Total         Net
                                                                    residential     retail      retail  Net operating
               Geographical                        Residential      rental/unit        GLA      rental         income    Purchase price
Property name  location             Category        units (no)        (R/month)       (m2)        (m²)       (R 000s)          (R 000s)
Willowbrook    Centurion,           Townhouse
               Gauteng              complex                100            5 253          -           -          4 633            46 332
Stone Arch     Germiston,           Townhouse
               Gauteng              complex                222            4 738          -           -          9 135            91 327
Jozi House     Johannesburg         Highrise CBD                                                                                 82 546
               CBD, Gauteng                                243            3 469       1150         178          8 915
Fasser House   Pretoria CBD,        Highrise CBD                                                                                 53 180
               Gauteng                                     152            3 749        702         120          5 770
Parnon Court   Bloemfontein,        Suburban
               Free State           block                   71            3 728          -           -          2 396            22 183
Frederick      Johannesburg         Highrise CBD
House          CBD, Gauteng                                138            3 878        295         143          5 207            47 338
Quagga         Pretoria,            Townhouse
               Gauteng              complex                247            3 554          -           -          7 746            71 064
Syringa        Kempton Park,        Townhouse
               Gauteng              complex                146            4 739          -           -          6 103            61 030
Total                                                    1 319            4 063      2 147         154         49 905           475 000

The value of the property assets is R475 000 000. No independent valuations have been carried out on the individual properties.
The board of directors of Indluplace is satisfied that the value attributable to the property portfolio is in line with the purchase
consideration payable in respect of the sale equity. The board of directors of Indluplace is not an independent valuer and is not
registered as professional valuer in terms of the Property Valuers Professional Act 47 of 2000.

Details of the property portfolio 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             Vacancy
   Unit Type                            (R/month)   Number of units            units (%)        vacant units                 (%)
   Bachelor                                 3 182               134                   10                   3                 2.2
   One bedroom                              3 782               443                   34                  10                 2.3
   Two bedroom                              4 385               736                   56                  20                 2.7
   Other                                    5 150                 6                    0                   -                   -
   Total                                    4 063             1 319                  100                  33                 2.5

CATEGORISATION

The transaction is classified as a category 2 transaction in terms of the JSE Listings Requirements and accordingly will not require
the approval of the Company’s shareholders.

WITHDRAWAL OF CAUTIONARY

Following the release of this announcement, the cautionary announcement released on 26 January 2017 is withdrawn and caution
is no longer required to be exercised by shareholders dealing in their Indluplace shares.

16 March 2017


Sponsor
Java Capital

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