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Acquisition Of Mega Park Rental Enterprise
SPEAR REIT LIMITED
(previously 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 MEGA PARK RENTAL ENTERPRISE
1. INTRODUCTION
Shareholders are hereby advised that the Company and its
subsidiary, Spear Holdco Proprietary Limited (“Spear Holdco”),
have entered into sale of letting enterprise agreement and share
sale agreements (“the Agreements”) with Mega Park Investments
Proprietary Limited (“Seller”). In terms of the Agreements, the
Spear Holdco will acquire the property situated on Erf 40247
Bellville, City of Cape Town, known as Mega Park (“the Property”)
and the letting enterprise conducted by the Seller as a going
concern (“Letting Enterprise”) in respect of the Property (“the
Acquisition”).
2. RATIONALE FOR THE ACQUISITION
The Acquisition is in line with Spear’s strategy to invest into
high quality assets within the Western Cape and to furthermore
increase its industrial assets in Cape Town.
3. PURCHASE CONSIDERATION
3.1. In terms of the Agreements, the purchase price for the Letting
Enterprise is R379 157 000 (“Purchase Consideration”).
3.2. The Purchase Price will be settled on the date of transfer of
the Property into the name of the Spear Holdco, following the
fulfilment or waiver of the conditions precedent (“Transfer
Date”).
3.3. In terms of the Agreements:
3.3.1. the Purchase Price will be settled by Spear Holdco assuming
certain liabilities of the Seller owing to its lenders
(“Lenders”), equal to a maximum aggregate amount of
R219 177 468 (“Assumed Liabilities”), with effect from the
Transfer Date, and by way of the allotment and issue by the
Spear Holdco of such number of its ordinary shares to the
Seller at an issue price of R10 per share, as is equal to the
Purchase Consideration less the Assumed Liabilities on the
Transfer Date (“Consideration Shares”), on an asset-for-share
basis in terms of section 42 of the Income Tax Act, No 58 of
1962 (“the Income Tax Act”); and
3.3.2. on the Transfer Date and immediately after the Consideration
Shares have been issued to the Seller, Spear shall acquire
the Consideration Shares from the Seller in exchange for the
allotment and issue of listed ordinary shares in Spear (“Spear
Shares”), at an issue price of R10 per Spear Share, on a
share-for-share basis in terms of section 42 of the Income
Tax Act.
4. CONDITIONS PRECEDENT
4.1. The Acquisition is subject to the fulfilment or waiver of the
following outstanding conditions precedent, namely that:
4.1.1. within a period of 21 business days following the signature
date of the Agreements, the Spear Holdco confirms in writing
that it is satisfied with its due diligence investigation of
the Letting Enterprise, in its sole discretion;
4.1.2. within a period of 5 business days after the fulfilment of
the condition precedent in paragraph 4.1.1 above, the
investment committee of the board of directors of Spear,
approves the Acquisition on the terms and conditions set out
in the Agreements;
4.1.3. within a period of 20 business days after the fulfilment of
the condition precedent in paragraph 4.1.1 above, the Lenders
agree in writing, in terms reasonably acceptable to the Spear
Holdco, to the assumption by the Spear Holdco of the Assumed
Liabilities, with effect from the Transfer Date;
4.1.4. within a period of 21 business days after the fulfilment of
the condition precedent in paragraph 4.1.1 above, the Spear
Holdco obtains a loan from a bank or financial institution
in an amount of not less than R211 000 000 (being an amount
approximately equal to the Assumed Liabilities on the
Transfer Date) against security of a mortgage bond over the
Property; and
4.1.5. within a period of 120 days after the signature date of the
Agreements, the Acquisition is approved unconditionally by
the competition authorities in terms of the Competition Act,
No 89 of 1998 or, in the event of a conditional approval, on
terms acceptable to the parties to the Acquisition.
5. EFFECTIVE DATE
The Acquisition will become effective on the Transfer Date.
6. RENTAL GUARANTEE
6.1. In terms of the Agreements, the Seller guarantees the gross
amount of rentals, storage income, tenant operating cost
contributions and other recoveries (“Income”) that the Spear
Holdco will receive in respect of the Letting Enterprise
pursuant to the implementation of the Acquisition (“Rental
Guarantee”), for a period of 24 months commencing on the
Transfer Date (“Guarantee Period”).
6.2. In the event that the Income actually received by the Spear
Holdco during the Guarantee Period:
6.2.1. is less than the amount guaranteed by the Seller, the Seller
shall pay the Spear Holdco an amount equal to the shortfall;
and
6.2.2. exceeds the amount guaranteed by the Seller, the Spear Holdco
shall pay the Seller an amount equal to the excess.
6.3. As security for its obligations in terms of the Rental
Guarantee, the Seller cedes all its right to receive any
distributions paid in respect of 10 222 222 Spear Shares, with
effect from the Transfer Date.
7. WARRANTIES AND OTHER TERMS
7.1. The Agreements contain representations and warranties by the
Seller in favour of the Spear Holdco which are standard for a
transaction of this nature.
7.2. Subject to such warranties, the Letting Enterprise is sold
“voetstoots”.
8. THE PROPERTY
8.1. Details of the Property are as follows:
Property Geographical Sector Gross Weighted
Name and Location Lettable Average
Address Area Gross
(m2) Rental/m2
Mega Park, Bellville, Industrial 85 748 R41.10
Corner of City of Cape
Mill & Town
Peter
Barlow
Road
8.2. Details regarding the Property, as at the anticipated Transfer
Date, are set out below:
Purchase Weighted Weighted Vacancy % by
Yield Average Average Lease Gross
Attributable Escalation Duration Lettable Area
to (years)
Shareholders
9.30% 9% 1.5 6%
Notes:
a) The costs associated with the Acquisition are estimated at
R3 200 000.
b) The Purchase Consideration payable in respect of the
Letting Enterprise (which includes the Property) is
considered to be its fair market value, as determined by
the directors of Spear. The directors of Spear 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.
9. FORECAST FINANCIAL INFORMATION OF THE ACQUISITION
The forecast financial information relating to the Acquisition
for the financial periods ending 28 February 2018 and
28 February 2019 are set out below. The forecast financial
information has not been reviewed or reported on by a reporting
accountant in terms of section 8 of the JSE Listings Requirements
and is the responsibility of Spear’s directors.
Forecast for Forecast for
the the
9-month period 12-month period
ending 28 ending
February 2018 28 February
(R) 2019 (R)
Revenue 32 114 139 45 462 697
Straight-line rental accrual (47 356) (58 612)
Gross revenue 32 066 782 45 404 085
Property expenses (4 962 275) (6 963 726)
Net property income 27 104 507 38 440 359
Administrative expenses (990 000) (1 389 300)
Operating profit 26 114 507 37 051 059
Finance cost (15 081 812) (20 164 327)
Profit before taxation 11 032 696 16 886 732
Taxation 0 0
Net profit after taxation 11 032 696 16 886 732
Adjusted For:
Straight-line rental accrual 47 356 58 612
Distributable profit 11 080 052 16 945 344
Notes:
a) Revenue includes gross rentals and other recoveries, but
excludes any adjustment applicable to the straight-lining of
leases.
b) Property expenses include all utility and council charges
applicable to the Property.
c) The forecast information for the 9-month period ended
28 February 2018 has been calculated from the anticipated
Transfer Date, being on or about 01 June 2017.
d) Contractual rental revenue constitutes 64% of the revenue for
the 9-month period ended 28 February 2018 and 31% of the
revenue for the 12-month period ended 28 February 2019.
e) Uncontracted revenue constitutes 2% of the revenue for the
9-month period ended 28 February 2018 and 2% of the revenue
for the 12-month period ended 28 February 2019.
f) Near-contracted revenue constitutes 34% of the revenue for
the 9-month period ended 28 February 2018 and 67% of the
revenue for the 12-month period ended 28 February 2019.
g) Leases expiring during the forecast period have been assumed
to renew at the future value of current market related rates.
10. CATEGORISATION
The Acquisition constitutes a Category 2 transaction in terms of
the JSE Listings Requirements.
Cape Town
31 March 2016
PSG Capital Proprietary Limited: Transaction Adviser and Sponsor
Cliffe Dekker Hofmeyr: Legal Advisor
Date: 31/03/2017 05:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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