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Acquisition Of Portions Of The Northgate Sectional Title Scheme
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 PORTIONS OF THE NORTHGATE SECTIONAL TITLE SCHEME
1. INTRODUCTION
Shareholders are advised that on 21 November 2018, the Company entered into an
agreement (“Agreement”) with Tremtrust 1 (“Seller”), in terms of which the Company will
acquire 30% of block 1 and 100% of blocks 2, 3 and 4 of the property known as Northgate
Island, erf 168886 Cape Town, situated at Brooklyn in the City of Cape Town,
Administrative District of the Cape Province of the Western Cape, measuring 2,857
hectares and the letting enterprise conducted by the Seller on the property (together, the
“Property”), as a going concern, for a purchase consideration of R313 000 000
(“Purchase Consideration”) (“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
The Purchase Consideration shall be payable by the Company against registration of
transfer of the ownership of the Property into the name of the Company. The Company
may, at any time prior to or after the Transfer Date (as defined below) undertake an equity
capital raise in the form of a vendor consideration placing, issue of shares for cash, a
rights offer to its shareholders and/or any other share issue or placing in order to fund or
refinance the Purchase Consideration.
If registration of transfer of the ownership of the Property into the name of the Company
(“Transfer”) occurs after 31 March 2019, the Purchase Consideration will increase by an
amount determined by applying to the Purchase Consideration the percentage rate
obtained by multiplying the prime rate calculated and expressed as an effective daily rate,
by the number of days elapsed between 1 April 2019 and the Transfer Date (as defined
below), excluding the first day and including the last day of that period.
4. CONDITIONS PRECEDENT
The Acquisition is subject to the fulfilment of the condition precedent (“Condition
Precedent”) that before the 28 February 2019, the Acquisition is unconditionally approved
by the Competition Authority or is approved on terms and conditions reasonably
acceptable to the parties.
The Condition Precedent must be fulfilled by not later than the aforementioned date, which
date may be extended by the parties in writing.
5. EFFECTIVE DATE OF THE ACQUISITION
The effective date of the Acquisition will be the date of registration of Transfer, which is
anticipated as being 28 February 2019 or as soon as reasonably and practically possible
thereafter (“Transfer Date”).
If the Transfer Date does not occur before 30 June 2019, either the Seller or the Company
will have the right, exercisable during the period from 30 June 2019 to 31 July 2019
(“Cancellation Period”) to cancel the Agreement on 5 days written notice to the other.
Upon such cancellation, neither party shall have a claim against the other for any
damages or losses suffered as a result of such cancellation and both parties shall be
restored to the same position as they were prior to the Agreement becoming final and
binding. If neither the Seller nor the Company exercise its right to cancel the Agreement
during the Cancellation Period, the Agreement shall continue to be binding on both
parties, who shall use their reasonable commercial endeavours to procure that Transfer
is occurs as soon as possible.
6. WARRANTIES
The Agreement contains warranties, undertakings and indemnities by the Seller in favour
of the Company which are standard for a transaction of this nature.
Subject to such warranties, the Property is sold “voetstoots”.
7. OTHER SIGNIFICANT TERMS OF THE AGREEMENT
The Seller provides a rental guarantee to the Company for 18 months from the Transfer
Date for the existing vacancies in the amount of R128 312.30 per month (“Rental
Guarantee”).
As security for the Rental Guarantee, the Seller shall, no later than the Transfer Date,
cause a financial institution to the issue a bank guarantee in favour of the Company for
the sum of R3 000 000 in a form and on terms and conditions reasonably acceptable to
the Company.
8. THE PROPERTY
Details of the Property are as follows:
Property Geographical Sector Gross Weighted
Name and Location Lettable Area Average
Address (m2) Office Rental /
m2
Northgate Northgate Commercial 17 002 R148
Island, 20 Estate, Cape
Section Street, Town
Paarden Eiland
Details regarding the Property, as at the anticipated Transfer Date, are set out below:
Purchase Yield Weighted Average Weighted Average Vacancy % by
Attributable to Escalation Lease Duration Gross Lettable
Shareholders (years) Area
9.45% 8.6% 3 5.4%
Notes:
a) In addition to the Purchase Consideration, the costs associated with the Acquisition
are estimated at R3 000 000. No agents’ commission is payable in respect of the
Acquisition.
b) The Purchase Consideration payable in respect of 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.
9. FORECAST FINANCIAL INFORMATION OF THE ACQUISITION
The forecast financial information relating to the Acquisition for the financial periods
ending February 2020 and February 2021 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 Limited Listings Requirements and is the responsibility of the
Company’s directors.
Forecast for the 12- Forecast for the 12-
month period ending month period ending
29- Feb-2020 28-Feb-2021
(R) (R)
Revenue 36 080 974 39 067 971
Straight-line rental accrual 2 656 618 543 069
Gross revenue 38 737 592 39 611 040
Property expenses - 6 055 529 - 6 477 016
Net property income 32 682 063 33 134 024
Administrative expenses - 451 012 - 488 350
Operating profit 32 231 051 32 645 674
Finance cost - 28 057 813 - 28 057 813
Profit before taxation 4 173 238 4 587 861
Taxation - -
Net profit after taxation 4 173 238 4 587 861
Adjusted For:
Straight-line rental accrual - 2 656 618 - 543 069
Distributable profit 1 516 620 4 044 792
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 12-month period ended February 2020 has been
calculated from the anticipated Transfer Date, being on or about 01 March 2019
d) Contractual rental revenue constitutes 92% of the revenue for the 12-month period
ended February 2020 and 87% of the revenue for the 12-month period ended
February 2021.
e) Uncontracted rental revenue constitutes 5% of the revenue for the 12-month period
ended February 2020 and 5% of the revenue for the 12-month period ended
February 2021. Please note that the uncontracted revenue is the amount
guaranteed by the Rental Guarantee. The Rental Guarantee ends at the end of
August 2020 and renewed rental of 2-year leases have been assumed on each
vacant space.
f) Near-Contracted rental revenue constitutes 3% of the revenue for the 12-month
period ended February 2020 and 8% of the revenue for the 12-month period ended
February 2021.
10. CLASSIFICATION OF THE ACQUISITION
The Acquisition constitutes a category 2 transaction in terms of the JSE Limited Listings
Requirements.
21 November 2018
Sponsor and Corporate Advisor - PSG Capital
Legal Advisor - Cliffe Dekker Hofmeyr
Date: 21/11/2018 04:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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