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INDLUPLACE PROPERTIES LIMITED - Acquisition of various portfolios of residential properties, and withdrawal of cautionary announcement

Release Date: 20/06/2017 11:50
Code(s): ILU     PDF:  
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Acquisition of various portfolios of residential 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 VARIOUS PORTFOLIOS OF RESIDENTIAL PROPERTIES, AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT


1.   INTRODUCTION AND RATIONALE

     Further to the cautionary announcement released on 12 June 2017, the board of directors of Indluplace (the “Board”) is pleased
     to announce that Indluplace and its wholly owned subsidiary Friedshelf 1781 Proprietary Limited (“Subco”) have concluded
     agreements (the “transaction agreements”) with multiple vendors (collectively “the vendors”), some of whom are members
     of or affiliated to the Buffet group of entities ("the Buffet group"), to in effect acquire, through a variety of transaction
     mechanisms, three residential property portfolios comprising approximately 2 900 residential units ("the portfolios"), for an
     effective transaction consideration of approximately R1.4 billion (the “transaction consideration”) (“the transactions”).

     The transactions are in line with the Company’s strategy to grow its residential portfolio through acquiring yield enhancing
     properties and portfolios that provide income from the first day of acquisition. The proposed transactions will enhance the
     Company’s current portfolio with diverse, well located, quality properties and further establishes Indluplace as the residential
     income property consolidator in South Africa.

     In addition, the Company has secured a right of first refusal from the relevant members and partners of the well-respected
     Buffet group who are vendors, in respect of further residential properties with an aggregate value of up to R500 million. It is
     anticipated that there will be a continuing relationship with the Buffet group, which will be beneficial to the Company.


2.   TERMS OF THE TRANSACTIONS

     2.1 The first portfolio transaction

      2.1.1    The properties comprising the "first portfolio" as described in paragraph 3 ("the first portfolio") are all owned by
               companies ("the first portfolio companies") whose shares are held by the relevant vendors described in paragraph 3.

      2.1.2    The relevant transaction agreements comprise subscription and share purchase agreements, pursuant whereto the first
               portfolio companies will be constituted as wholly-owned subsidiaries of Subco ("the first portfolio transactions").

      2.1.3    The subscription consideration payable by Subco in terms of the relevant transaction agreements is in each case an
               amount equal to the agreed value attributable to the property held by the first portfolio companies, as set out in
               paragraph 3, adjusted for working capital items.

      2.1.4    The subscription consideration is payable in cash. The Company will subscribe for shares in Subco to capitalise
               Subco so that Subco is able to pay such subscription consideration. The Company may elect to fund such
               capitalisation in whole or in part by way of debt funding or a specifically approved share placement, a vendor
               consideration placing or other share placement.

      2.1.5    The first portfolio transactions will become commercially effective, and the subscription consideration will be
               payable on, the later of 1 July 2017 or the 1st day of the month following the month in which the last of the conditions
               precedent referred to below has been fulfilled or waived (as applicable), or such other date as may be agreed in
               writing between the relevant parties ("the effective date").

      2.1.6    If the effective date has not occurred by 1 July 2017, the value attributable to the first portfolio shall escalate at an
               annual rate of 5% from 1 July 2017 to the effective date.

      2.1.7    The relevant transaction agreements provide for warranties and indemnities that are normal for a transaction of this
               nature.

      2.1.8    The first portfolio transactions and the third portfolio transactions (as described below) are linked and indivisible,
               and are subject to the fulfilment or waiver, as the case may be, of the relevant conditions precedent set out in
               paragraph 2.5.

     2.2 The second portfolio transaction

      2.2.1    The properties comprising the "second portfolio" as described in paragraph 3 ("the second portfolio") have been
               sold to the Company by the relevant vendors described in paragraph 3 in terms of separate agreements ("the second
               portfolio transactions").

      2.2.2    The purchase consideration payable by the Company in terms of each the relevant transaction agreements is set out
               in paragraph 3.

      2.2.3    The purchase consideration is payable in cash. The Company may elect to fund such consideration in whole or in
               part by way of debt, a specifically approved share placement, a vendor consideration placing or other share
               placement.

      2.2.4    The second portfolio transactions will become commercially effective, and the purchase consideration will be
               payable on, the later of 1 July 2017 or the 1st day of the month following the month in which the last of the relevant
               conditions precedent referred to below has been fulfilled or waived (as applicable), or such other date as may be
               agreed in writing between the Parties ("the effective date").

      2.2.5    If the effective date has not occurred by 1 July 2017, the value attributable to each property in the second portfolio,
               and therefore the relevant purchase consideration, shall escalate at an annual rate of 6% from 1 July 2017 to the
               effective date.

      2.2.6    The relevant transaction agreements provide for warranties and indemnities that are normal for a transaction of this
               nature.

      2.2.7    The second portfolio transactions are all separate and several transactions, and are not linked to or conditional upon
               any of the other transactions or each other.

     2.3 The third portfolio transaction

      2.3.1    The properties comprising the "third portfolio" as described in paragraph 3 ("the third portfolio") are in terms of
               the relevant transaction agreements acquired by the Company from the relevant vendors described in paragraph 3 in
               terms of asset-for-share transactions ("the third portfolio transactions").

      2.3.2    The consideration payable by the Company in terms of each the relevant transaction agreements is set out in
               paragraph 3.

      2.3.3    The consideration is in each case payable by way of the assumption of bank debt, with the balance being settled by
               the issue of shares in the Company to the relevant vendors ("Indlu shares"), such shares ("the consideration
               shares") to be issued at a price per share equal to the price achieved in any placement that the Company may have
               undertaken to fund all or part of the consideration payable in terms of the first portfolio transaction, and if there was
               no such placement, at a price equal to the higher of the closing price and the 5-day-volume weighted average traded
               price of Indlu shares on the JSE on the day before the effective date (as defined below).

      2.3.4    The third portfolio transactions will become commercially effective, and the consideration will be payable on, the
               later of 1 July 2017 or the 1st day of the month following the month in which the last of the relevant conditions
               precedent referred to below have been fulfilled or waived (as applicable), or such other date as may be agreed in
               writing between the Parties ("the effective date").

      2.3.5    If the effective date has not occurred by 1 July 2017, the value attributable to the third portfolio, and therefore the
               relevant consideration, shall escalate at an annual rate of 5% from 1 July 2017 to the effective date.

      2.3.6    Those properties comprising the third portfolio which are described as the "tranche 2" properties in paragraph 3,
               have recently been developed and are still being tenanted. In the circumstances the following additional arrangements
               apply in relation to those properties:
      
       2.3.6.1   the initial consideration for the relevant property is as set out in paragraph 3;
       2.3.6.2   the relevant vendors provide an income guarantee to the Company, which will ensure that the net operating
                 income derived from the relevant properties for the initial period of one year is not less than the currently
                 forecast net operating income for the relevant property;
       2.3.6.3   at the end of the initial period of one year (which period is subject to extension in certain circumstances),
                 the actual net income derived from the relevant property for such initial period will be determined and the
                 property will be revalued based on such actual net income and by applying a yield of 9.5%;
       2.3.6.4   such valuation may result in the payment of additional consideration for the relevant property to the relevant
                 vendor or a price reduction amount payable by the relevant vendor, ultimately resulting in an acquisition
                 yield of 9.5% on the actual normalised net operating income; and
       2.3.6.5   pending the determination of any upward or downward adjustment to the consideration, the Company shall
                 on the effective date advance to the relevant vendors an amount equal to the value of the property that would
                 have applied had it been valued by applying an acquisition yield of 9.5% to the forecast net operating income
                 for the initial period less the initial consideration.

      2.3.7   The relevant transaction agreements provide for warranties and indemnities that are normal for a transaction of this
              nature.

      2.3.8   In terms of a placement and underwriting agreement ("the placement and underwriting agreement") entered into
              with each of the relevant vendors, the Company shall, if the relevant vendor elects before the effective date to dispose
              of its consideration shares, act as its placing agent on the basis that it shall ensure that its consideration shares are
              placed (whether by way of a book-build, treasury repurchases or otherwise) at a price not lower than the price at
              which they were issued less any distribution that may have been paid in respect of the consideration shares, failing
              which the Company shall pay an additional amount to the vendor and/or procure that the consideration shares are
              purchased into treasury by a subsidiary of the Company, in such amount/at such price as may be required to ensure
              that the relevant vendor realises an aggregate amount which is not less than the aggregate price at which all the
              consideration shares were issued less any distributions received in respect thereof.

      2.3.9   The third portfolio transactions and the first portfolio transactions are linked and indivisible, and are subject to the
              fulfilment or waiver, as the case may be, of the conditions precedent set out in paragraph 2.5.

     2.4 Other arrangements

      2.4.1   The Fynbos Trust, an entity affiliated with the Buffet group, will by way of a separate written guarantee ("the Fynbos
              Trust Guarantee") guarantee inter alia certain warranty, indemnity and delivery obligations of the vendors under
              the first portfolio transaction and the third portfolio transaction.

      2.4.2   Each of the vendors under the first portfolio transaction and the third portfolio transaction who are members of the
              Buffet group or its partners have granted to the Company a right of first refusal agreement ("the right of first refusal
              agreement") in respect of certain further residential properties with an aggregate value of up to R500 million.

      2.4.3   As a result the Company and Buffet Trustees Proprietary Limited have entered into an agreement ("the loan and
              subscription agreement") in terms whereof the Company will issue to an entity associated with the Buffet group
              Indlu shares to a value of between R240 million to R250 million, at an issue price of R10.73 per Indlu share ("the
              Buffet Shares"), and will advance to such entity by way of a loan the funds required to subscribe for the Buffet
              shares. The loan is for a period of 10 years and carries interest in an amount equal to the distributions paid in respect
              of the Buffet shares. The Buffet shares serve as security for the loan and their disposal is subject to certain time
              restrictions in respect of which such entity may only sell a certain percentage of such shares over a 3, 4 and 5 year
              period. Any proceeds derived from the disposal of each of the Buffet shares equal to the original cost of such share
              must be used to repay the loan.

     2.5 Conditions precedent

      2.5.1   The first portfolio transactions and the third portfolio transactions are subject to the fulfilment or waiver, as the case
              may be, of the following outstanding conditions precedent:

       2.5.1.1   by not later than 2 business days from the date of signature of the principal transaction agreement, being
                 19 June 2017 ("the signature date"), the Fynbos Trust has executed the Fynbos Trust guarantee;
       2.5.1.2   by not later than 2 business days from the signature date, the right of first refusal agreement has been entered
                 into;
       2.5.1.3   by not later than 2 business days from the signature date, the agreements in respect of the first portfolio
                 transactions and the third portfolio transactions have been entered into;
       2.5.1.4   by not later than 5 business days from the signature date, the Company has furnished the relevant vendors
                 with written notice that it is satisfied with its financial and tax due diligence investigation undertaken in
                 respect of the relevant properties and/or companies, as applicable;
       2.5.1.5   by not later than 5 business days from the signature date, the vendors in respect of the first portfolio
                 companies have delivered copies of the most recent audited accounts of the first portfolio companies to the
                 Company;
       2.5.1.6   by not later than 10 July 2017, the board of directors of the Company has authorised the entering into of
                 first portfolio transactions and the third portfolio transactions and the relevant transaction agreements;
       2.5.1.7   by not later than 10 July 2017, the investment committee of the Company's board of directors has
                 unconditionally approved the first portfolio transactions and the third portfolio transactions and the relevant
                 transaction agreements;
       2.5.1.8   by not later than 10 July 2017, Arrowhead Properties Limited has provided an irrevocable undertaking to
                 vote its shares in the Company in favour of the resolutions to be proposed at the meeting of shareholders of
                 the Company called in order to approve, inter alia, the first portfolio transactions and the third portfolio
                 transactions;
        2.5.1.9  by not later than 31 August 2017, all applicable debt and hedge providers have, to the extent required,
                 provided such consents or approvals, in writing, as may be required in order for the first portfolio
                 transactions and the third portfolio transactions to be implemented;
        2.5.1.10 by not later than 10 September 2017, the Company and the first portfolio companies have obtained all
                 requisite approvals from their directors, shareholders, the JSE, the Takeover Panel and any other regulatory
                 authority in connection with the implementation of the first transactions and the third transactions, including
                 resolutions adopted by the requisite majority of the Company's shareholders in accordance with the JSE
                 Listings Requirements and the Companies Act, including a specific authority to effect any treasury
                 repurchases pursuant to the placement and underwriting agreement, the specific issue of shares for in terms
                 of the loan and subscription agreement, and approval required in terms of section 44 of the Companies Act
                 to provide the loan in terms of the loan and subscription agreement;
        2.5.1.11 by not later than 29 September 2017, the first transactions and the third transactions have been approved by
                 the applicable Competition Authorities; and
        2.5.1.12 by not later than 29 September 2017, each of the agreements relating to first transactions and the third
                 transactions has become unconditional in accordance with its terms, save for any condition therein requiring
                 any other such agreement to become unconditional.

      2.5.2   The second portfolio transactions are subject to the fulfilment or waiver, as the case may be, of the following
              outstanding conditions precedent:

        2.5.2.1   the management agreement being entered into between the Company and Amorispan Proprietary Limited
                  by no later than 30 June 2017;
        2.5.2.2   the sellers passing resolutions approving the second transactions within 10 business days of the signature
                  date;
        2.5.2.3   by not later than 10 July 2017, the investment committee of the Company's board of directors has
                  unconditionally approved the second portfolio transactions and the relevant transaction agreements;
        2.5.2.4   within 60 business days of the signature date, the Company has obtained all requisite approvals (to the
                  extent necessary) from the Competition Commission, its shareholders, the JSE and any other regulatory
                  authority in connection with the implementation of the second transactions; and
        2.5.2.5   within 10 business days of receiving the approvals referred in the paragraph immediately above, the sellers
                  confirming that no third party has any options, pre-emptive rights or similar rights over the subject of the
                  second transactions.

3.   OVERVIEW OF THE PROPERTY PORTFOLIOS AND DESCRIPTION OF VENDORS

                                                                                 Average
                                                                             residential            Total      Net retail
      Property                 Geographical                    Residential   rental/unit       retail GLA   rental per m2   Transaction value
      name        Vendor       location           Sector        units (no)     (R/month)             (m2)             (R)                 (R)
     
      THE FIRST PORTFOLIO TRANSACTION
      Golden Oaks  Yieldex 1,   Boksburg,          Townhouse           165         4 669               -               -           73 609 272
                   4, 7 & 10    Gauteng            complex
                   (Pty) Ltd
      Trejon       Unlocked     Florida,           Suburban             34         5 050               -               -           15 131 947
                   Properties   Gauteng            walk-up
                   6 (Pty) Ltd
      Belgrade     Unlocked     Florida,           Suburban             44         4 308               -               -           16 463 208
                   Properties   Gauteng            walk-up
                   13 (Pty)
                   Ltd
      Telmond &    Unlocked     Bramley Park,      Townhouse            53         7 875               -               -           39 000 000
      Hollyland    Properties   Gauteng            complex
                   14 (Pty)
                   Ltd
      Progress     Ixonix       Randburg,          Suburban             75         4 521           1 177              66           41 388 752
      House        (Pty) Ltd    Gauteng            highrise
      Windmill     Unlocked     Johannesburg       Inner city           91         4 192             149             107           35 946 947
                   Properties   CBD, Gauteng       highrise
                   12 (Pty)
                   Ltd
      Villa Kazi   Unlocked     Johannesburg       Inner city          100         1 932              55             427           12 687 078
                   Properties   CBD, Gauteng       highrise
                   21 (Pty)
                   Ltd
      Skypark      Unlocked     South Beach,       Inner city           39         4 822             509              64           17 407 846
                   Properties   Durban             highrise
                   11 (Pty)
                   Ltd
      Brixton      Unlocked     Brixton,           Suburban             43             -               -               -           10 017 477
                   Properties   Gauteng            walk-up -
                   1 (Pty) Ltd                     students
                                                                                 
      Trifecta     Unlocked     Greyville,         Suburban             80             -               -               -           25 703 375
                   Properties   Durban             walk-up -
                   10 (Pty)                        students
                   Ltd 
      1 Eloff      Buffshelfco  Johannesburg       Inner city          320          3 853               -               -         110 347 099
                   7 (Pty) Ltd  CBD, Gauteng       walk-up
      Pomegranate  First        Johannesburg       Inner city          116          2 977               -               -          24 403 818
      Heights      Residential  CBD, Gauteng       walk-up
                   Project
                   (Pty) Ltd
      Delvers Deep Vasalolor    Johannesburg       Inner city          33          2 721             152             210            9 468 916
                   Pty) Ltd     CBD, Gauteng       highrise

      THE SECOND PORTFOLIO TRANSACTION

      Remeds       Artisans     Jeppestown,        Inner city          35          5 800             267             140           19 212 010
      View         Trust        Gauteng            walk-up
      Amberfield   Propsky 2    Vanderbijlpark     Suburban           102              -               -               -           59 839 252
      Village      (Pty) Ltd    Gauteng            walk-up -
                                                   students
      Park Village Propsky 4    Vanderbijlpark     Suburban           109              -               -               -           88 433 459
                   (Pty) Ltd    Gauteng            walk-up -
                                                   students
      THE THIRD PORTFOLIO TRANSACTION
      TRANCHE 1

      Rhodesfield Buffshelf Rhodesfield,          Suburban             62          4 444                -               -          26 369 308
                  63 Trust  Gauteng               walk-up
      Cranborough Buffshelf Windsor,              Suburban             48          4 930                -               -          22 805 288
      Mews        51 Trust  Gauteng               walk-up
      Rothchild   Buffshelf Roodepoort,           Townhouse            74          5 500                -               -          34 854 807
      Manor       51 Trust  Gauteng               complex
      Upper East  Buffshelf Boksburg,             Townhouse            52          6 554                -               -          34 313 743
      Side        51 Trust  Gauteng               complex
      Villa Mia   Buffshelf Benoni,               Townhouse            81          5 411                -               -          40 595 491
                  51 Trust  Gauteng               complex 
      Rand        Buffshelf Randburg,             Suburban             48          5 301                -               -          24 076 138
      President   51 Trust  Gauteng               walk-up
      Summer      Buffshelf Kloofendal,           Townhouse            49          8 131                -               -          41 315 689
      Place       51 Trust  Gauteng               complex
      Logan's     Buffshelf Liefde En             Townhouse            42          7 906                -               -          37 889 208
      View        62 Trust  Vrede,                complex
                            Gauteng
      Sunset View Buffshelf Liefde En             Townhouse            30          6 493                -               -          22 977 851
                  62 Trust  Vrede,                complex
                            Gauteng
      Kilimanjaro Buffshelf Alberton,             Townhouse            92          4 950                -               -          53 667 244
                  62 Trust  Gauteng               complex
      Jackson's   Buffshelf Alberton,             Townhouse            88          4 967                -               -          46 729 123
      Cove        62 Trust  Gauteng               complex
      Sparrow     Buffshelf Germiston,            Townhouse            97          5 000                -               -          49 423 496
      Hawk        62 Trust  Gauteng               complex
      Kings       Buffshelf Kempton Park,         Suburban             21          5 000                -               -           8 287 982
                  74 Trust  Gauteng               walk-up
      Samuel      Buffshelf Kempton Park,         Suburban             21          5 000                -               -           8 448 220
                  74 Trust  Gauteng               walk-up
      Ezra        Buffshelf Kempton Park,         Suburban             24          3 800                -               -           8 384 361
                  74 Trust  Gauteng               walk-up
      Chronicles  Buffshelf Kempton Park,         Suburban             24          3 800                -               -           7 451 110
                  74 Trust  Gauteng               walk-up
      Levicitus   Buffshelf Kempton Park,         Suburban             24          3 800                -               -           8 859 418
                  74 Trust  Gauteng               walk-up
      Exodus      Buffshelf Kempton Park,         Suburban             24          3 800                -               -           8 682 022
                  74 Trust  Gauteng               walk-up
      Genesis     Buffshelf Kempton Park,         Suburban             24          3 800                -               -           8 861 178
                  74 Trust  Gauteng               walk-up
      Judges      Buffshelf Kempton Park,         Suburban             21          5 000                -               -           8 670 754
                  74 Trust  Gauteng               walk-up
      Nehemiah    Buffshelf Kempton Park,         Suburban             30          4 760                -               -          11 664 949
                  74 Trust  Gauteng               walk-up
      Deutronomy  Buffshelf Kempton Park,         Suburban             18          6 600                -               -          10 058 347
                  74 Trust  Gauteng               walk-up
      Numbers     Buffshelf Kempton Park,         Suburban             18          6 600                -               -          10 477 178
                  74 Trust  Gauteng               walk-up
      Joshua      Buffshelf Kempton Park,         Suburban             21          6 800                -               -          10 322 747
                  74 Trust  Gauteng               walk-up
      Ruth        Buffshelf Kempton Park,         School                -              -             1 080            103           6 999 525
                  74 Trust  Gauteng

      THE THIRD PORTFOLIO TRANSACTION
      TRANCHE 2  
     
      Noordheuwel  Buffshelf Krugersdorp,         Townhouse            51          6 038                 -              -          31 900 130
      Heights      51 Trust  Gauteng              complex
      Germiston    Buffshelf Germiston,           Suburban             44          3 497                 -              -          15 241 621
                   62 Trust  Gauteng              walk-up
      Waterfront   Buffshelf Germiston,           Townhouse            30          6 280                 -              -          16 677 084
                   62 Trust  Gauteng              complex 
      Arches       Buffshelf Benoni,              Suburban             42          4 386                 -              -          20 186 247
                   92 Trust  Gauteng              walk-up
      Cedar Valley Buffshelf Rosettenville,       Townhouse            58          5 921                 -              -          35 549 570
                   92 Trust  Gauteng              complex
      Westwood     Buffshelf Boksburg,            Townhouse            28          8 200                 -              -          22 694 148
      and          92 Trust  Gauteng              complex
      Huntingdon
      Place
      Maria        Buffshelf Benoni,              Suburban             33          4 388                 -              -          13 023 281
      Mansions     92 Trust  Gauteng              walk-up
      Robwill      Buffshelf Benoni,              Suburban             54          4 563                 -              -          25 096 915
      Mansions     92 Trust  Gauteng              walk-up
      Springbok    Buffshelf Benoni,              Suburban             40          4 000                 -              -          17 316 366
      Court        92 Trust  Gauteng              walk-up
      Surrey       Buffshelf Randburg,            Suburban             62          6 352                 -              -          41 151 765
                   51 Trust  Gauteng              walk-up
      Total                                                         2 914          4 264             3 389             98       1 390 082 760


     The net operating income attributable to the first, second and third portfolio transactions, for the 12 months ended 30 June 2018,
     is approximately R141 million. This information has not been reviewed or reported on by independent reporting accountants.

     The transaction consideration attributable to the first, second and third portfolio transactions 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. The
     value of the net assets acquired is R1 390 082 760.

     Details of the portfolio based on unit type, average monthly rental, number of units and percentage of units are set out in the
     table below:

                                 Average residential                                           Percentage
                                         rental/unit                 Number                      of units
       Unit Type                           (R/month)               of units                           (%)
       Bachelor                                3 553                    121                           4.1
       Room                                      877                    227                           7.8
       One bedroom                             4 184                    787                          27.0
       Two bedroom                             4 836                   1470                          50.5
       Three bedroom                           3 595                    249                           8.5
       Four bedroom                            8 318                     60                           2.1
       Total                                   4 264                  2 914                         100.0

4.   FORECAST FINANCIAL INFORMATION

     Set out below are extracts from the profit forecast of the portfolios (the “forecasts”) for the one month period to
     30 September 2017 and the year ending 30 September 2018 (the “forecast period”). The forecasts, including the assumptions
     on which they are based and the financial information from which they are prepared, are the responsibility of the Indluplace
     Board.

     The forecasts have been prepared on the assumption that the transactions will be effective from 1 September 2017 and on the
     basis that the forecasts include forecast results for the duration of the forecast period. The forecasts have not been reviewed or
     reported on by independent reporting accountants. The forecasts have been prepared in accordance with Indluplace’s accounting
     policies, which are in compliance with International Financial Reporting Standards.

                                                                                         Forecast for the           Forecast for the
                                                                                               1 month to                year ending
       R’000                                                                            30 September 2017          30 September 2018
       Net rental income                                                                           15 779                    195 268
       Net operating expenses                                                                     (4 404)                   (53 273)
       Net operating income                                                                        11 375                    141 995
       Finance charges                                                                            (5 659)                   (67 907)
       Total profit and comprehensive income for the period/year                                    5 716                     74 088
       Profit available for distribution for the period/year                                        5 716                     74 088

     Notes and assumptions:
     The forecasts incorporate the following material assumptions in respect of revenue and expenses that can be influenced by the
     Board:

           1. The forecasts have been prepared on an aggregated basis for the portfolio.
           2. The forecasts are based on information derived from the management accounts of the portfolio, the budgets prepared
              by their respective management, rental contracts and independent property valuations.
           3. Rental income is based on each property’s rental agreement.
           4. The operational cost structure of Indluplace is not anticipated to change as a result of the acquisition of the portfolio.
           5. Finance costs are recognised at a weighted average cost of debt of 9.68% p.a on the cash portion of the transaction
              consideration, being approximately R702 million.
           6. No properties are under development during the forecast period.
           7. No fair value adjustments are applied to the portfolio over the forecast period.
           8. All existing lease agreements are valid.

           The forecasts incorporate the following material assumptions in respect of revenue and expenses that cannot be influenced
           by the Board:

           1. The effective date of the transaction is assumed to be 1 September 2017.
           2. There will be no unforeseen economic factors that will affect the lessee's ability to meet their commitments in terms
              of existing lease agreements.

5.   CATEGORISATION OF THE TRANSACTION

     In terms of the JSE Listings Requirements, the transactions collectively constitute a Category 1 transaction and therefore
     Indluplace shareholder approval is required. A circular convening a general meeting and providing further information on the
     transactions will be sent to Indluplace shareholders in due course.

     Where any acquisition results in a company becoming a subsidiary of Indluplace, the Company will ensure that there are no
     provisions in the memorandum of incorporation that may frustrate or relieve the Company from compliance with the JSE
     Listings Requirements.

6.   WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT

     Shareholders are referred to the cautionary announcement issued by Indluplace in relation to the transactions which was
     released on 12 June 2017 and are advised that on the basis of the above caution is no longer required to be exercised when
     dealing in the Company’s shares.

20 June 2017


Corporate advisor and sponsor to Indluplace
Java Capital

Legal advisor
Cliffe Dekker Hofmeyr

Date: 20/06/2017 11:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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