TOWER PROPERTY FUND LIMITED - Tower concludes R300 million investment in tower international with Oryx properties limited

Tower concludes R300 million investment in tower international with Oryx properties limited

TOWER PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2012/066457/06)
JSE share code: TWR ISIN: ZAE000179040
(Approved as a REIT by the JSE)
(“Tower” or “the company”)

TOWER CONCLUDES R300 MILLION INVESTMENT IN TOWER INTERNATIONAL WITH ORYX PROPERTIES LIMITED

Introduction and background

In its interim results announcement for the six months ended 30 November 2017, Tower advised shareholders that it
had embarked on the process of ring-fencing its Croatian properties through a separate offshore company (to be named
“TPF International”) that would leverage Tower's existing relationships in Croatia and surrounding countries to grow
the group’s European exposure and enable TPF International to raise its own capital.

The establishment of TPF International will strengthen Tower’s balance sheet whilst providing Tower with the ability
to grow its earnings from its Croatian investments.

In a significant step forward for its strategy, Tower is pleased to advise shareholders that Oryx Properties Limited
(“Oryx”), a property loan stock company listed on the Namibian Stock Exchange with a diverse property portfolio
valued at approximately $N2.3 billion (R2.3 billon), has signed an irrevocable undertaking in terms of which Oryx will
make a R300 million investment in TPF International (“the Oryx Investment” or “the transaction”). The Oryx
investment will take the form of:

-     the acquisition by Oryx of TPF International shares from Tower for R200 million (“the share sale”); and
-     the subsequent subscription by Oryx for further shares in TPF International for R100 million (“the share
      subscription”).

TPF International will use the proceeds from the share subscription to fund yield enhancing acquisitions, while Tower
intends to use the proceeds from the share sale to:
-     strengthen its balance sheet by reducing both Euro and ZAR debt, which will give it greater flexibility to
      implement a number of its South African initiatives that promise significant upside for the group; and/or
-     repurchase Tower shares (should the purchase price remain attractive).

Tower may elect to reduce the share sale amount and increase the subscription amount in multiples of R1 million,
provided that each will be at least R100 million and the aggregate will be R300 million.

TPF International

TPF International will be incorporated in Mauritius as a Category 1 Global Business Licence company, with the
intention being to list TPF International on the Stock Exchange of Mauritius and the JSE in due course and subject to
regulatory approvals.

TPF International’s initial portfolio will comprise Tower’s R1.30 billion (€90.88 million) Croatian property portfolio,
comprising the Konzum portfolio of four retail properties with retailer Konzum as the head-lease tenant and the majority
of the VMD building, a high-quality office building in Zagreb. TPF International’s strategy is to continue to invest in
high quality, income producing properties in the retail, industrial and office sectors in Croatia and surrounding countries,
facilitated through Tower’s strong relationships in the region.

Tower remains committed to its Croatian strategy as it provides Tower with a hedge against exposure to a single market
and will, in Tower’s view, add significant value to shareholders over time. Tower intends to remain a long-term
shareholder of reference for TPF International and, to the extent required, will continue to provide support to TPF
International which will be operated from Mauritius. Tower will be represented on TPF International’s board, including
through its CEO, Marc Edwards, who will be a non-executive director.
Terms of the Oryx Investment

The Oryx Investment is in the form of an irrevocable undertaking. The undertaking will lapse if by 31 July 2018:

-     a share sale agreement recording the share sale on the terms set out below (“the sale agreement”) has not been
      signed and become unconditional; and
-     a share subscription agreement recording the share subscription on the terms set out below (“the subscription
      agreement”) has not been signed and become unconditional.

The sale agreement and the subscription agreement will be signed once TPF International has been formally
incorporated.

      The sale agreement

      Upon the fulfilment of the conditions precedent to the sale agreement, Oryx will acquire TPF International shares
      from Tower for the Euro equivalent of R200 million. The exact number of TPF International shares to be acquired
      by Oryx will be determined with reference to the number of TPF International shares in issue at that time, the
      Rand:Euro exchange rate and the net assets held by TPF International. It is anticipated that Oryx will own circa
      27.8% of the shares in TPF International pursuant to the sale agreement and subscription agreement.

      The sale agreement remains subject to the fulfilment of the following conditions precedent:
      -     exchange control approval;
      -     all requisite regulatory and corporate approvals for the transaction being obtained; and
      -     TPF International becoming the owner of the Croatian portfolio.

      Should there be a shortfall between the contractual rental and the actual rental received by the Croatian
      subsidiaries that own the Croatian property portfolio in either the first or second year (from 1 June 2018 and 2019
      to 31 May 2019 and 2020 respectively) after the sale agreement is wholly unconditional, Tower will pay Oryx a
      rental adjustment amount, capped at €1 575 339.

      The sale agreement contains terms, undertakings and warranties that are usual for a transaction of this nature.

      The subscription agreement

      Upon the fulfilment of the conditions precedent to the subscription agreement, Oryx will subscribe for TPF
      International shares for the Euro equivalent of R100 million. The exact number of TPF International shares to be
      subscribed for by Oryx will determined with reference to the number of TPF International shares in issue at that
      time, the Rand:Euro exchange rate and the net assets held by TPF International.

      The subscription agreement remains subject to the fulfilment of the following conditions precedent:
      -     exchange control approval;
      -     all requisite regulatory and corporate approvals for the transaction being obtained; and
      -     the sale agreement has been entered into and becomes unconditional.

      The subscription agreement contains terms, undertakings and warranties that are usual for a transaction of this
      nature.

Financial effects and property specific information

The value attributable to the net assets of TPF International is €59.48 million, comprising the Croatian property portfolio
of €90.88 million less interest-bearing bank borrowings of €31.40 million.

The historical profits attributable to the net assets of TPF International for the six months ended 30 November 2017 are
set out below. This information has been extracted without adjustment from Tower’s unaudited condensed consolidated
results for the six months ended 31 November 2017.
                                                                                                                 R’000
 Revenue (excluding straight-line lease adjustments)                                                            54 415
 Net operating costs                                                                                             (497)
 Net property income                                                                                            53 918

The property specific information required in terms of the JSE Listings Requirements in relation to the Croatian property
portfolio, including property name and address, geographical location, rentable area by sector, weighted average rental
per square metre and value attributable to the property is set out below.

 Property name and address               VMD KVART, Ulica Grada Vukovara 269d/VIII, 10000
 Sector                                  Office
 Geographical location                   Croatia
 Rentable Area (m2)                      10 691.80m² office and 253.30m² storage
 Weighted Average rental per m2          €13.34
 Value attributed to the property        €22 228 996

 Property name and address               Sub City Centre, Dubrovnik/ Srebreno, Setaliste Dr. Franje Tudmana
 Sector                                  Retail
 Geographical location                   Croatia
 Rentable Area (m2)                      11 939
 Weighted Average rental per m2          €15.05
 Value attributed to the property        €31 010 186

 Property name and address               Zagreb superKonzum, Zagreb, Ulica grada Vukovara 275
 Sector                                  Retail
 Geographical location                   Croatia
 Rentable Area (m2)                      3 223
 Weighted Average rental per m2          €20.40
 Value attributed to the property        €13 151 880

 Property name and address               Meridijan 16, Zagreb, Gracanska cesta 208
 Sector                                  Retail
 Geographical location                   Croatia
 Rentable Area (m2)                      9 091
 Weighted Average rental per m2          €10.78
 Value attributed to the property        €15 677 987

 Property name and address               Velika Gorica superKonzum, Velika Gorica, A.K. Miošica, 64
 Sector                                  Retail
 Geographical location                   Croatia
 Rentable Area (m2)                      5 510
 Weighted Average rental per m2          €9.99
 Value attributed to the property        €8 809 947

Independent valuations have been carried out by Andreja Karlovic of Spiller Farmer as at 31 May 2017, who has been
appointed as a permanent court expert in architecture, construction and real estate evaluation by the County Court in
Zagreb, Croatia.

Categorisation of the transaction

As the sale agreement and the subscription agreement involve the same party, Oryx, which will be concluding the sale
agreement and subscription agreement with Tower and Tower’s subsidiary, TPF International, respectively, the sale
agreement and subscription agreement will be aggregated for categorisation purposes. The sale agreement and
subscription agreement are classified as a category 2 transaction in terms of the JSE Listings Requirements.
Accordingly, they are not subject to approval by shareholders.

1 March 2018

Corporate advisor and sponsor
Java Capital

Legal advisors
Cliffe Dekker Hofmeyer

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