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Acquisition of Mwprop 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
Approved as a REIT by the JSE
(“Spear” or “the Company”)
ACQUISITION OF MWPROP RENTAL ENTERPRISE
1. INTRODUCTION
Shareholders are hereby advised that the Company has entered into
a sale agreement (“the Agreement”) with MWProp Proprietary Limited
(“Seller”), KLT Holdings 1 Proprietary Limited (“KLT”), Buffet
Investment Services Proprietary Limited (“Buffet”) and the
Trustees for the time being of the Fynbos Trust on
19 September 2017. In terms of the Agreement, Spear will acquire
Erf 23427 Parow, measuring 2.2322 hectares, held by deed of
transfer T42314/2017 situated at 100 Fairway Close, Parow
(“the Property”) and the rental enterprise conducted by the Seller
in respect of the Property (“Rental Enterprise”), as a going
concern (“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 commercial assets in Cape Town.
3. PURCHASE CONSIDERATION
3.1. In terms of the Agreement, the total acquisition costs (which
includes the purchase price and agent’s commission payable by
Spear) for the Rental Enterprise, including the Property, is
R145 000 000 (“Total Acquisition Cost”).
3.2. The Total Acquisition Cost will be settled on the date of
transfer of the Property into the name of Spear, following the
fulfilment or waiver of the conditions precedent (“Transfer
Date”).
3.3. In terms of the Agreement, the purchase price payable to the
Seller, in the amount of R142 100 000 (“Purchase Price”), will
be settled as follows:
3.3.1. by Spear assuming certain liabilities of the Seller owing to
KLT, Buffet and Investec Bank Limited, amounting to
approximately R116 509 198 (“Assumed Liabilities”), with
effect from the Transfer Date; and
3.3.2. by way of the allotment and issue by Spear of such number of
its ordinary shares to the Seller at an issue price of R10.30
per share, as is equal to the Purchase Consideration less the
Assumed Liabilities on the Transfer Date (“Consideration
Shares”).
3.4. In addition, the agent’s commission payable in terms of the
Agreement (“Agent’s Commission”) will be settled directly by
Spear to the agent on the Transfer Date.
4. CONDITIONS PRECEDENT
The Acquisition is subject to the fulfilment or waiver of the
following outstanding conditions precedent that:
4.1. within a period of 21 business days following the signature
date of the Agreement, Investec Bank Limited (“Investec”)
agrees in writing, on terms acceptable to Spear, to the
assumption by Spear of the liability for all of the obligations
of the Seller under the loan owing by the Seller to Investec,
with effect from the Transfer Date; and
4.2. within a period of 120 days after the signature date of the
Agreement, the Acquisition and all transactions contemplated in
the Agreement are approved by the competition authorities in
terms of the Competition Act No 89 of 1998, either conditionally
or, in the event of a conditional approval, on terms acceptable
to the parties to the Agreement.
5. EFFECTIVE DATE
The Acquisition will become effective on the Transfer Date.
6. WARRANTIES AND OTHER MATERIAL TERMS
6.1. The Agreement contains warranties by the Seller in favour of
Spear which are standard for a transaction of this nature.
6.2. Subject to such warranties, the Rental Enterprise is sold
“voetstoots”.
6.3. The Agreement stipulates that, within 10 days after the Transfer
Date, the Seller shall pay to Spear, by way of interim
adjustment, an amount equal to 50% of all rentals received in
respect of the leases over the Property for the month in which
the Transfer Date occurs and all tenant deposits and interest
accrued thereon.
7. THE PROPERTY
7.1. Details of the Property are as follows:
Property Geographical Sector Gross Weighted
Name and Location Lettable Average
Address Area Gross
(m2) Rental/m2
100 Parow, City Commercial 11 195m2 R106.74
Fairway of Cape Town
Close,
Parow
7.2. 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
9,6% 9.0% 2.5 0.0%
Notes:
a) The costs associated with the Acquisition are estimated at
R3 600 000, including the Agent’s Commission.
b) The Purchase Consideration payable in respect of the Rental
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.
8. 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 the Forecast for the
1-month period 12-month period
ending ending
28 February 2018 28 February 2019
(R) (R)
Revenue 1 974 823 24 517 761
Straight-line rental 94 624 124 941
accrual
Gross revenue 2 069 447 24 642 702
Property expenses (780 476) (9 777 050)
Net property income 1 288 971 14 865 652
Administrative expenses (39 496) (490 355)
Operating profit 1 249 475 14 375 297
Finance cost (895 569) (10 746 828)
Profit before taxation 353 906 3 628 469
Taxation 0 0
Net profit after taxation 353 906 3 628 469
Adjusted For:
Straight-line rental (94 624) (124 941)
accrual
Distributable profit 259 282 3 503 528
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 1-month period ending
28 February 2018 has been calculated from the anticipated
Transfer Date, being on or about 1 February 2017.
d) Contractual rental revenue constitutes 100% of the revenue
for the 1-month period ending 28 February 2018 and 100% of
the revenue for the 12-month period ending 28 February 2019.
e) Uncontracted revenue constitutes 0% of the revenue for the
1-month period ending 28 February 2018 and 0% of the revenue
for the 12-month period ending 28 February 2019.
f) Near-contracted revenue constitutes 0% of the revenue for the
1-month period ending 28 February 2018 and 0% of the revenue
for the 12-month period ending 28 February 2019.
g) Leases expiring during the forecast period have been assumed
to renew at the future value of current market related rates.
h) No rental guarantee has been provided to Spear in respect of
the Rental Enterprise.
9. CATEGORISATION
The Acquisition constitutes a Category 2 transaction in terms of
the JSE Listings Requirements.
Cape Town
19 September 2016
PSG Capital Proprietary Limited: Transaction Advisor and Sponsor
Cliffe Dekker Hofmeyr: Legal Advisor
Date: 19/09/2017 02:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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