Wrap Text
Acquisition of 1 Waterhouse Place Century City
SPEAR REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2015/407237/06)
Share code: SEA
ISIN: 000228995
(Approved as a REIT by the JSE)
(“Spear” or “the Company”)
ACQUISITION OF 1 WATERHOUSE PLACE CENTURY CITY
INTRODUCTION
Shareholders are hereby advised that on 8 June 2018, Spear entered into a sale of shares
agreement (“Sale of Shares Agreement”) with High Mast Properties 30 Proprietary Limited
(“Seller”), Webram Four Proprietary Limited (“Webram”) and Adam Lee Morze (“Morze”) in
terms of which Spear will acquire from the Seller 100 ordinary shares in the issued share
capital of Webram constituting 100% of the entire issued share capital of Webram, the sole
owner of (i) erf 5248 Montague Gardens, measuring 5 900 square metres and held under
deed of transfer T49977/2001 and (ii) erf 5254 Montague Gardens, measuring 7 136 square
metres and held under deed of transfer T449977/2001, and all improvements thereon, situated
at 1 Waterford Place, Century City (“Property”) (“Acquisition”).
RATIONALE FOR THE ACQUISITION
This Acquisition is in line with Spears strategy of acquiring high quality assets in excess of R
100m in the Western Cape. Management has identified this asset as one that presents a
strong value proposition pre- and post- redevelopment of the asset. Management has
proceeded to increase its investment holdings in the Century City node through this
Acquisition, as strong demand for high quality office space persists in this node and rental
growth remains strong.
PURCHASE CONSIDERATION AND AGENT’S COMMISSION
In terms of the Sale of Shares Agreement, the purchase consideration payable by Spear to
the Seller for the Acquisition is an amount equal to the sum of R112 500 000 plus (if the
amount is positive) or minus (if the amount is negative) an amount equal to the net working
capital of Webram as at the Effective Date (as defined below) (“Purchase Consideration”).
The Purchase Consideration will be settled as follows:
• a cash deposit in the sum of R 3 000 000 on the later of the date of signature of the Sale
of Shares Agreement and Friday, 8 June 2018, which deposit will not be refundable to
Spear despite the lapsing or termination of the Sale of Shares Agreement, unless such
lapsing or termination is as a result of the fault of the Seller;
• the allotment and issue to the Seller by Spear on the Closing Date (as defined below) of
5 198 020 shares in the share capital of Spear at a price of R10.10 per share
(“Consideration Shares”); and
• payment of the sum of R57 000 000 in cash.
In addition to the Purchase Consideration, the Purchaser shall pay agent’s commission of
R2 000 000.
CONDITIONS PRECEDENT
The Acquisition is subject to the fulfilment of the following outstanding conditions precedent –
• by not later than the date of signature of the Sale of Shares Agreement, the shareholders
of the Seller passing all such resolutions as may be required in terms of section 112 and
section 115 of the Companies Act No. 71 of 2008 to approve and implement the
Acquisition; and
• by no later than 28 September 2018, the Acquisition and all agreements and
transactions contemplated in the Sale of Shares Agreement (to the extent necessary)
being unconditionally approved by the competition authorities in terms of the
Competition Act, No. 89 of 1998 or conditionally approved on terms and conditions which
each of Spear and the Seller confirms in writing to the other to be acceptable to it.
CLOSING DATE AND EFFECTIVE DATE
The closing date shall be the third business day following the date on which the conditions
precedent are fulfilled (“Closing Date”). Notwithstanding the Closing Date or the date of
signature of the Sale of Shares Agreement, the effective date of the Acquisition will be 1 July
2018 (“Effective Date”).
OTHER TERMS
The Sale of Shares Agreement contains warranties and indemnities by the Seller and Morze
in favour of Spear which are standard for a transaction of this nature.
THE PROPERTY
Details of the Property are as follows:
Property Name Geographical Sector Gross Lettable Weighted
and Address Location Area (m2) Average Gross
Rental/m2
Erf 5248 Century City, Commercial 11 030 N/A
Montague City of Cape
Gardens Town
situated at 1
Waterford
Place
and
Erf 5254
Montague
Gardens
situated at 1
Waterford
Place
Note: The Property is vacant
PROPERTY SPECIFIC INFORMATION
Details regarding the Acquisition, as at the expected Effective Date, are set out below:
Purchase Yield Weighted Weighted Vacancy % by
Attributable to Average Average Lease Gross Lettable
Shareholders Escalation Duration (years) Area
12.22% 0 0 100%
Notes:
a) The costs associated with the Acquisition are estimated at R3 600 000;
b) The Purchase Consideration 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;
c) Purchase yield calculated using the rental guarantee; and
d) Purchase yield attributable to shareholders is reflecting a pre-redevelopment yield.
FINANCIAL INFORMATION
The value of the net assets attributable to Webram for the 11 month period ending 31 May
2018, the date of the most recent management accounts of Webram, was R108 141.
Historically, the Property was held in a bare dominium structure which has subsequently been
unwound and in terms of which the asset value has been diminished over the life of the
aforementioned structure.
The loss after tax attributable to Webram for the 11 month period ending 31 May 2018, the
date of the most recent management accounts of Webram, was R2 019 577.
Shareholders should note that the Property, being the only asset owned by Webram, has been
vacant for a period of 23 months. As a result of the aforementioned, there has been no rental
income or profit for the 11 month financial period ending 31 May 2018 and the financial year
ending 30 June 2017.
The management accounts for the 11 month period ending 31 May 2018 on which the
aforementioned financial information have been based, has been approved by the directors of
Webram. Spear is satisfied with the quality of the management accounts of Webram, however,
shareholders are warned that they are unaudited.
In terms of the Sale of Shares Agreement, the Seller has agreed to procure that its auditors
prepare and complete unqualified, audited financial statements for the financial year ending
June 2018 and present such to the Purchaser by no later than 30 days after the Closing Date.
RENTAL GUARANTEE
Notwithstanding that the Property has been vacant for a period of 23 months, the Seller has
provided Spear with a rental guarantee (“Rental Guarantee”) for a period of 24 months with
effect from the Effective Date (“Rental Guarantee Period”).
In terms of the Rental Guarantee, if the aggregate gross amount of rentals, storage income,
tenant operating cost contributions and other recoveries received by Webram in respect of the
Property for any six month period falling within the first twelve months of the Rental Guarantee
Period is less than the sum of R6 996 000 and for any six month period falling within the
second twelve months of the Rental Guarantee Period is less than the sum of R7 998 000,
the Seller shall pay Spear an amount equal to the shortfall in such period.
As security for its obligations in terms of the Rental Guarantee, the Seller has ceded and
pledged all of its rights in and to 2 970 297 Consideration Shares, provided that the Seller
shall at any time during the Rental Guarantee Period, be entitled to replace the security given
by way of such pledge with a deposit of cash, subject to the terms of the Sale of Shares
Agreement.
CATEGORISATION
The Acquisition constitutes a Category 2 transaction in terms of the JSE Listings
Requirements
Cape Town
11 June 2018
PSG Capital - Sponsor and Corporate Advisor
Cliffe Dekker Hofmeyr – Legal Advisor
Date: 11/06/2018 05:19:00 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 
