HERIOT REIT LIMITED - Abridged pre-listing statement listing of Heriot by way of introduction on the Alternative Exchange of the JSE

Release Date: 17/07/2017 09:00
Code(s): HET
 
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Abridged pre-listing statement – listing of Heriot by way of introduction on the Alternative Exchange of the JSE

Heriot REIT Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2017/167697/06)
JSE share code: HET
ISIN: ZAE000246740
(“Heriot” or “the company” or “the group”)


ABRIDGED PRE-LISTING STATEMENT – LISTING OF HERIOT BY WAY OF INTRODUCTION ON THE ALTERNATIVE EXCHANGE OF THE JSE


This abridged pre-listing statement is not an invitation to the public to subscribe for shares, but is issued in compliance
with the Listings Requirements of the JSE, for the purpose of providing information to the public regarding the
business and affairs of the company at the time of listing of all the issued shares in the company by way of
introduction in the “Diversified REITs” sector on the Alternative Exchange (“AltX”) of the JSE (the “listing”).

This announcement contains the salient information in respect of Heriot, which is more fully described in the full pre-
listing statement (“full pre-listing statement”) which will be made available for inspection from today. For a full
appreciation and understanding of Heriot and the listing the full pre-listing statement should be read in its entirety.

Terms defined in the full pre-listing statement bear the same meaning in this abridged pre-listing statement.

1.    Introduction

      The JSE has granted Heriot a listing of all of its issued ordinary shares in the “Diversified REITs” sector on the
      AltX of the JSE under the abbreviated name: “Heriot”, JSE share code: “HET” and ISIN: ZAE000246740 with
      effect from the commencement of trade on Monday, 24 July 2017.

2.    History and nature of business

      Heriot was incorporated and registered as a private company on 18 April 2017 and converted to a public
      company on 29 June 2017. The company’s financial year end is 31 May.

      Heriot is a property holding and investment company that is invested in industrial, retail, residential, specialised
      and commercial properties in South Africa.

      Heriot, a newly incorporated company, has been established for purposes of creating a newly listed property
      fund which will acquire and/or develop properties either directly or through subsidiaries and joint ventures and
      accordingly does not have any trading history. Heriot may also invest in listed property shares.

      Heriot Properties, which holds approximately 70% of the properties comprising the property portfolio and
      which is a wholly-owned subsidiary of the company, was founded by Steven Herring in 1998 for the purpose of
      growing a property portfolio that generated sustainable long-term cash flows from blue chip tenants. Heriot
      Properties’ initial investment into the industrial sector was underpinned by triple net, long term leases that
      facilitated quick growth of its asset base. As at the last practical date, Heriot, through its subsidiary Heriot
      Properties, holds 20 industrial properties valued at R1.582 billion.

      In 2003, Heriot Properties diversified its portfolio with the development of a 1 500m2 retail centre. Heriot now,
      through its subsidiaries, owns twelve retail centres with a GLA of 119 981m2 in CBD’s, townships and rural
      areas that focus on the mass market, bringing shopping to the people. The centres, valued at R2.087 billion, are
      anchored by a high percentage of national tenants with long term leases and high trading densities that ensures
      the sustainability of Heriot’s cash flows.

      The property portfolio further includes seven office properties, including Heriot’s head office located in the
      prestigious mixed-use precinct, Melrose Arch.

 3.   Investment and growth strategy

      Heriot, through its subsidiaries and its interest in Heriot Trust 1 and Heriot Trust 3, owns a diversified portfolio
      of 44 properties across the retail, industrial and commercial sectors. The properties are situated in areas with
      high growth potential. The group’s investment strategy is to purchase yield-enhancing assets that can offer
      consistent long-term rental income growth. The asset management function is carried out by Heriot’s
      experienced and specialised management team with a view to extracting maximum value from each property.

      The company’s primary objective is to identify value-enhancing opportunities within the commercial, industrial,
      and retail sectors in South Africa to create a stable and diverse portfolio of assets capable of generating secure
      and escalating free cash flows. This is achieved by its experienced and hands on management team focusing on
      pro-active portfolio management and aggressive cost containment.

      Further details of the property portfolio are set out in Annexure 7of the full pre-listing statement.

4.    Prospects

      The board of Heriot is confident that it will deliver a distribution of 72 cents per share for the year ending
      31 May 2018, further details of which are set out in Annexure 10 of the full pre-listing statement. With its
      opportunistic ability to invest in all real estate sectors in South Africa, the group will be able to add significantly
      to its property portfolio on a yield enhancing basis.

5.    Directors

       Name and age            Steven Bernard Herring (46)

       Business address        Suite 1, Ground Floor, 3 Melrose Boulevard, Melrose Arch, Johannesburg, 2196

       Qualification           Undergraduate Degree in Marketing (University of Johannesburg)
                               Masters of Business Administration (MBA) – Heriot-Watt University

       Position                CEO

       Name and age            Janys Ann Finn (52)

       Business address        Suite 1, Ground Floor, 3 Melrose Boulevard, Melrose Arch, Johannesburg, 2196

       Qualification           BCom, BAcc, CA (SA)

       Position                CFO

       Name and age            Stephen David Friend (71)

       Business address        58 14th Avenue, Edenvale, 1610

       Qualification           B Comm CA(SA)

       Position                Chairman, non-executive director

       Name and age            Selwyn Joel Blieden (45)

       Business address        Barclays Africa Group, 15 Alice Lane, Sandton

       Qualification           PhD (Cambridge), CFA

       Position                Lead independent non-executive director

       Name and age            Trevor John Cohen (75)

       Business address        No. 4 Bernsbury, St. Andrews, Bedfordview, 2008
      
       Qualification           Bachelor of Law / BCom Law

       Position                Independent non-executive director

       Name and age            Nelson Ngale (55)

       Business address        No 1 Plover Street, Struisbelt, Springs

       Position                Independent non-executive director

      All of the directors are South African nationals

6.    Property management

      The property management function in respect of properties numbered 36 to 42 in Annexure 7 of the full pre-
      listing statement is undertaken on market related terms by Blend Property 10 Proprietary Limited and Blend
      Property 17 Proprietary Limited.

      The property management function in respect of properties numbered 28 to 30 in Annexure 7 of the full pre-
      listing statement is undertaken on market related terms by Rainbow Capital Proprietary Limited.

      The property management function in respect of property numbered 16 in Annexure 7 of the full pre-listing
      statement is undertaken on market related terms by McCormick Property Development CC.

      The property management function in respect of the property numbered 1 in Annexure 7 of the full pre-listing
      statement is undertaken on market related terms by Zahavi Estates CC.

      The property management function in respect of the balance of the properties set out in Annexure 7 of the full
      pre-listing statement is undertaken internally.

7.    Asset management

      The asset management function of the group is undertaken internally by its executive management who are very
      experienced in this regard. Part of the asset management role of the executive management of Heriot is to seek
      new investment opportunities for the company, to consider ways of optimising the performance of existing
      assets and, where necessary, to work on the disposal of assets which no longer contribute to the company’s
      income growth strategy.

8.    Summarised forecast information

      Given the nature of its business, Heriot uses distribution per share as its key performance measure as it is
      considered a more relevant performance measure than earnings or headline earnings per share.

      Set out below are the summarised forecast statements of comprehensive income (“summarised forecasts”) for
      the year ending 31 May 2018 and the year ending 31 May 2019 (“forecast periods”). The summarised forecasts
      include forecast figures for the duration of the forecast periods.

      The summarised forecasts, including the assumptions on which they are based and the financial information
      from which they are prepared, are the responsibility of the directors of Heriot.

      The summarised forecasts have been prepared in compliance with IFRS and in accordance with Heriot’s
      accounting policies.


                                                                                   Forecast for the       Forecast for the
                                                                                 year ending 31 May     year ending 31 May
                                                                                               2018                   2019
      Number of shares in issue                                                         255 637 135            257 637 135
      Weighted average number of shares in issue                                        255 637 135            257 637 135
      Basic and diluted earnings per share (cents)                                            71.67                  80.71
      Headline earnings per share (cents)                                                     64.82                  71.06
      Distributable income per share (cents)                                                  71.67                  80.71


      The figures set out above are extracted from detailed forecasts for the year ending 31 May 2018 and the year
      ending 31 May 2019 and have been reported on by the independent reporting accountant, Grant Thornton. The
      detailed forecasts, the independent reporting accountants’ report on the detailed forecast and the assumptions on
      which the detailed forecasts are based, are set out in the full pre-listing statement.

9.    Salient dates and times

                                                                                                                         2017

       Abridged pre-listing statement released on SENS on                                                     Monday, 17 July

       Listing of shares and the commencement of trading on the JSE                                           Monday, 24 July
       (09:00) on

      Notes

      1.      All references to dates and times are to local dates and times in South Africa. These dates and times are subject to
              amendment. Any such amendment will be released on SENS.


10.   Availability of the full pre-listing statement

      Copies of the pre-listing statement may be obtained on the company’s website at www.heriot.co.za from
      Monday, 17 July 2017.


17 July 2017


Corporate advisor and designated advisor
Java Capital

Independent reporting accountants and auditors
Grant Thornton

Attorneys
Werksmans Attorneys
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