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Acquisition Of No. 2 Estuaries 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 NO. 2 ESTUARIES RENTAL ENTERPRISE
1. INTRODUCTION
Shareholders are hereby advised that the Company concluded a sale of rental
enterprise agreement (the “Agreement”) with Gutsche Investments and Management
Company Proprietary Limited (the “Seller”), on 4 May 2018. In terms of the Agreement,
the Company will acquire the property known as Erf 6498 Montague Gardens,
measuring 3,838 square metres in extent, held by the Seller under deed of transfer
T34980/2006, situated at The Estuaries, 2 Oxbow Crescent, Century City
(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
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.
This acquisition is Spear’s maiden investment into the Century City Commercial Precinct
and further investment into this well-established node will be pursued as and when
suitable opportunities present themselves.
3. PURCHASE CONSIDERATION AND ADJUSTMENT AMOUNT
3.1. In terms of the Agreement, the purchase price payable for the Rental Enterprise,
including the Property, is R98 000 000 (including VAT at the rate of 0%) (“Purchase
Consideration”).
3.2. The Purchase Consideration will be paid by the Company in cash on the date of
registration of transfer of the Property into the name of the Company, following the
fulfilment or waiver (to the extent applicable) of the conditions precedent to the
Acquisition (“Transfer Date”).
3.3. Within 14 days of the fulfilment or, where applicable, waiver of the conditions
precedent to the Acquisition, the Company shall furnish the Seller with a bank
guarantee required and approved by the Seller.
3.4. As soon as possible after the Transfer Date (but within 20 days thereafter), the Seller
shall, at its cost, prepare an adjustment account in respect of the Rental Enterprise
as at the close of business on the day prior to the Transfer Date, reflecting:
3.4.1. as credits to the Seller, any amounts prepaid by the Seller beyond the Transfer
Date, in respect of the Rental Enterprise; and
3.4.2. as debits to the Seller, (i) any amounts in respect of rates, taxes or service charges
which are in arrears as at the Transfer Date, all tenants’ deposits and all rentals
or other income prepaid for periods after the Transfer Date.
3.5. If the adjustment account reflects a net balance to the credit of the Seller, the
Company shall pay the Seller the amount of such net balance within 14 days of the
delivery of the adjustment account and if the adjustment account reflects a net
balance to the debit of the Seller, the Seller shall pay the Company the amount of
such net balance within such 14 days.
4. CONDITIONS PRECEDENT
4.1. The Acquisition is subject to the fulfilment or, where applicable, waiver of the following
outstanding conditions precedent, namely that:
4.1.1. by no later than 10 May 2018, the investment committee of the board of directors
of the Company, approves the Acquisition on the terms and conditions set out in
the Agreement; and
4.1.2. within 14 days after the fulfilment of the condition precedent in paragraph 4.1.1,
the Company obtains a loan from a bank or other financial institution in an amount
not exceeding the Purchase Consideration, against security of a first mortgage
bond over the Property.
4.2. The conditions precedent have been inserted for the benefit of the Company which
will be entitled to waive fulfilment of any such condition precedent.
5. EFFECTIVE DATE
The Acquisition will become effective on the Transfer Date, which is anticipated as being
1 July 2018.
6. WARRANTIES AND OTHER MATERIAL TERMS
6.1. The Agreement contains representations, warranties and indemnities by the Seller in
favour of the Company which are standard for a transaction of this nature.
6.2. Subject to such warranties, the Rental Enterprise is sold “voetstoots”.
6.3. The Seller shall pay the sum of R37 500 (plus VAT) per month to the Company for a
period of 12 months, commencing on the first day of the month immediately following
the month in which the Transfer Date occurs, as additional rental payable by the
tenant under the current lease agreement in respect of the Property.
7. THE PROPERTY
7.1. Details of the Property are as follows:
Property Geographical Sector Gross Weighted
Name and Location Lettable Area Average
Address (m2) Gross Office
Rental/m2
The Century City, Commercial 4 199 165
Estuaries, 2 City of Cape
Oxbow Town
Crescent,
Century City
7.2. Details regarding the Property, as at the anticipated Transfer Date, are set out below:
Purchase Yield Weighted Weighted Vacancy % by
Attributable to Average Average Lease Gross Lettable
Shareholders Escalation Duration (years) Area
9,22 8% 4,3 0
Notes:
a) In addition to the Purchase Consideration, the costs associated with the
Acquisition are estimated at R 2 000 000. 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 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 2019 and 28 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 Spear’s
directors.
Forecast for the 8- Forecast for the 12-
month period ending month period ending
28 February 2019 28 February 2020
(R) (R)
Revenue 7 280 206 11 652 860
Straight-line rental accrual 214 389 (155 169)
Gross revenue 7 494 595 11 497 691
Property expenses (1 312 335) (2 065 110)
Net property income 6 182 260 9 432 581
Administrative expenses (36 401) (58 264)
Operating profit 6 145 859 9 374 317
Finance cost (5 795 986) (8 821 285)
Profit before taxation 349 873 533 0312
Taxation - -
Net profit after taxation 349 873 553 032
Adjusted For:
Straight-line rental accrual (214 389) 155 169
Distributable profit 135 484 708 201
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 8-month period ended 28 February 2019 has been
calculated from the anticipated Transfer Date, being on or about 1 July 2018.
d) Contractual rental revenue constitutes 100% of the revenue for the 8-month period
ended 28 February 2019 and 100% of the revenue for the 12-month period ended
28 February 2020.
e) Uncontracted revenue constitutes 0% of the revenue for the 8-month period ended
28 February 2019 and 0% of the revenue for the 12-month period ended 28
February 2020.
f) Near-contracted revenue constitutes 0% of the revenue for the 8-month period
ended 28 February 2019 and % of the revenue for the 12-month period ended 28
February 2020.
9. CATEGORISATION
The Acquisition constitutes a Category 2 transaction in terms of the JSE Listings
Requirements.
Cape Town
8 May 2018
Sponsor and corporate advisor
PSG Capital
Date: 08/05/2018 07:50:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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