Wrap Text
Acquisition Of Blackheath Park Rental Enterprise
SPEAR REIT 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 BLACKHEATH PARK RENTAL ENTERPRISE
1. INTRODUCTION
Shareholders are hereby advised that the Company has entered into
a sale agreement (“the Agreement”) with PE Shelf Co No 193
Proprietary Limited (“Seller”) on 14 December 2017 (“Signature
Date”). In terms of the Agreement, the Company will acquire the
property known as Blackheath Park, situated at Erf 928 Blackheath,
measuring 6.4973 hectares and held by the Seller under deed of
transfer T26687/2007 (“the Property”) and the rental enterprise
conducted by the Seller on the Property (“Rental Enterprise”), as
a going concern (“the Acquisition”).
2. RATIONALE FOR THE ACQUISITION
2.1. The Acquisition is in line with the Company’s strategy to invest
into high quality assets within the Western Cape and to
furthermore increase its industrial assets in Cape Town.
2.2. The property neighbours a current Spear property in the
Blackheath node and thus provides an expansion opportunity of
the Spear Blackheath DC off the back of future tenant demand.
2.3. The Acquisition is at an acquisition yield of 10,43% and is
accretive to shareholders.
3. PURCHASE CONSIDERATION
3.1. In terms of the Agreement, the purchase consideration for the
Rental Enterprise, including the Property, is an amount of
R110 500 000 which includes value added tax at the rate of zero
percent (“Purchase Consideration”). The Purchase Consideration
bears interest at the prime interest rate from 1 May 2017 to
the date of transfer of the Property into the name of the
Company (“Transfer Date”).
3.2. The Purchase Consideration will be paid by the Company in cash
on the Transfer Date, following the fulfilment or waiver (to
the extent applicable) of the conditions precedent to the
Acquisition. The Purchase Consideration shall be funded by
debt funding or a vendor consideration placing, or combination
of both.
3.3. The Company will provide the Seller with normal guarantees for
the payment of the Purchase Consideration, including the
provision of a guarantee in the amount of R3 000 000, should
the Agreement be cancelled by reason of a breach by the Company.
4. CONDITIONS PRECEDENT
The Acquisition is subject to the fulfilment or waiver (to the
extent applicable) of the following outstanding conditions
precedent, namely that:
4.1. within 5 days after the Signature Date, the investment committee
of the Company's board of directors approves the
Acquisition; and
4.2. within a period of 120 days after the Signature Date, the
Acquisition is approved unconditionally by the relevant
competition authorities in terms of the Competition Act, No 89
of 1998.
5. EFFECTIVE DATE
The Acquisition will become effective on the Transfer Date,
anticipated to be 01 April 2018.
6. WARRANTIES AND OTHER MATERIAL TERMS
6.1. The Agreement contains warranties by the Seller in favour of
the Company which are standard for a transaction of this nature
(“Warranties”).
6.2. Subject to such Warranties, the Rental Enterprise is sold
“voetstoots”.
6.3. The Seller provides a rental guarantee to the Company in terms
of which the Seller undertakes to pay to the Company the
shortfall arising between the gross income received by the
Company in respect of the Rental Enterprise during the 12-month
period commencing on the Transfer Date and the gross income in
respect of the Rental Enterprise guaranteed by the Seller in
the Agreement for the same period (“Rental Guarantee”).
6.4. As security for the Rental Guarantee, the Seller shall, on the
Transfer Date pay an amount of R9 000 000 to the conveyancers
(acting as escrow agents) to be held by them in accordance with
the provisions of an escrow agreement.
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
Blackheath Blackheath, Industrial 38 185 R32,89
Park, Cnr. Cape Town
Range and
Station
Road
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
10,43% 8% 1.83 5%
Notes:
a) In addition to the Purchase Consideration, the costs
associated with the Acquisition are estimated at
R2 000 000. No agents’ commission is payable in respect of
the Acquisition.
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 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.
8. FORECAST FINANCIAL INFORMATION OF THE ACQUISITION
The forecast financial information relating to the Acquisition
for the financial periods ending February 2019 and February 2020
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 the Company’s directors.
Forecast for the Forecast for the
11-month period 12-month period
ending Feb-19 ending Feb-20
(R) (R)
Revenue 15 676 329 18 416 177
Straight-line rental 157 015 39 285
accrual
Gross revenue 15 833 344 18 455 462
Property expenses (4 193 476) (4 852 567)
Net property income 11 639 868 13 602 895
Administrative expenses (470 290) (552 485)
Operating profit 11 169 578 13 050 410
Finance cost (4 416 480) (4 836 127)
Profit before taxation 6 753 098 8 214 283
Taxation - -
Net profit after taxation 6 753 098 8 214 283
Adjusted For:
Straight-line rental (157 015) (39 285)
accrual
Distributable profit 6 596 083 8 174 998
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 11-month period ending
28 February 2019 has been calculated from the anticipated
Transfer Date, being on or about 01 April 2018.
d) Contractual rental revenue constitutes 81% of the revenue for
the 11-month period ending 28 February 2019 and 41% of the
revenue for the 12-month period ending 28 February 2020.
e) Uncontracted revenue constitutes 2% of the revenue for the
11-month period ending 28 February 2019 and 2% of the revenue
for the 12-month period ending 28 February 2020.
f) The Seller has provided the Rental Guarantee to the Company
in respect of the Rental Enterprise, as set out in paragraph
6.3. Contracted revenue in respect of the Rental Guarantee
constitutes 81% of the revenue for the 11-month period ending
28 February 2019 and 41% of the revenue for the 12-month
period ending 28 February 2020.
g) Near-contracted revenue constitutes 17% of the revenue for
the 11-month period ending 28 February 2019 and 57% of
the revenue for the 12-month period ending 28 February
2020.It is anticipated that debt funding will be used to fund
45% of the Purchase Consideration.
h) Leases expiring during the forecast period have been assumed
to renew at the future value of current market related rates.
9. CATEGORISATION
The Acquisition constitutes a Category 2 transaction in terms of
the JSE Listings Requirements.
Cape Town
15 December 2017
PSG Capital Proprietary Limited: Transaction Advisor and Sponsor
Cliffe Dekker Hofmeyr: Legal Advisor
Date: 15/12/2017 09:00:00 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
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
