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SPEAR REIT LIMITED - Acquisition Of Radnor Road Distribution Centre, Tygerberg Property

Release Date: 15/04/2019 16:55
Code(s): SEA     PDF:  
 
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Acquisition Of Radnor Road Distribution Centre, Tygerberg Property

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 RADNOR ROAD DISTRIBUTION CENTRE, TYGERBERG PROPERTY


1.   INTRODUCTION

     Shareholders are advised that on 12 April 2019, the Company entered into a sale of letting
     business agreement (“Agreement”) with Capital Propfund Proprietary Limited (“Seller”),
     in terms of which the Company will acquire erf 24264 Parow in the City of Cape Town,
     Cape Division, Province of the Western Cape, situated at 20 Radnor Road, Tygerberg,
     measuring 2,0151 hectares (“Property”) and the rental enterprise conducted by the Seller
     on the Property (“Rental Enterprise”), as a going concern, for a purchase consideration
     of R112 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 exposure to modern industrial assets in
     Cape Town.

3.   PURCHASE CONSIDERATION

     The Purchase Consideration shall be payable by the Company, in cash, on the date of
     registration of transfer of the ownership of the Property into the name of the Company
     (“Transfer Date”). The Company may, at any time prior to the Transfer Date undertake
     an equity capital raise in the form of a vendor consideration placing, issue of shares for
     cash, a rights offer and/or any other share issue or placing, in order to fund or refinance
     up to 100% of the Purchase Consideration.

     If the Transfer Date occurs after 31 July 2019, interest will accrue on the Purchase
     Consideration.

4.   CONDITION PRECEDENT

     The Acquisition is subject to the fulfilment of the outstanding condition precedent
     (“Condition Precedent”) that the Seller resolves to approve the conclusion and
     implementation of the Acquisition by no later than Thursday, 18 April 2019.

     The parties to the Agreement may extend the date for fulfilment of the Condition
     Precedent to such further date/s as they may agree to in writing.

5.   EFFECTIVE DATE OF THE ACQUISITION

     The effective date of the Acquisition will be the Transfer Date.
6.   WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT

     The Seller has warranted to the Company that it will be able to grant transfer of ownership
     of the Property to the Company on the Transfer Date.

     Save for the aforementioned warranty, the Rental Enterprise and the Property are sold
     “voetstoots”.

     The Seller shall provide the Company with a maximum amount of R300 000 (excluding
     value added tax) as consideration towards future rental in respect of the Property.

7.   THE PROPERTY

     Details of the Property are as follows:

      Property             Geographical      Sector            Gross             Weighted
      Name and             Location                            Lettable Area     Average
      Address                                                  (m2)              Gross Rental /
                                                                                 m2
      Erf 24264            Parow, Cape       Industrial        12 880            R66
      Parow in the         Town
      City of Cape
      Town, Cape
      Division,
      Province of the
      Western Cape,
      situated at 20
      Radnor Road,
      Tygerberg

     Additional details regarding the Property are set out below:

      Purchase Yield         Weighted Average      Weighted Average       Vacancy % by
      Attributable to        Escalation            Lease Duration         Gross Lettable
      Shareholders                                 (years)                Area
      
      9.1%                   7%                    3                      0%


     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 29 February 2020 and 28 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 9-        Forecast for the 12-
                                          month period ending        month period ending
                                          29 February 2020           28 February 2021
                                          (R)                        (R)
      Revenue                                         9 213 547                 12 729 750
      Straight-line rental accrual                     (382 631)                   (49 704)
      Gross revenue                                   8 830 916                 12 680 046
      Property expenses                              (1 596 871)                (2 247 249)
      Net property income                             7 234 045                 10 432 797
      Administrative expenses                                 -                          -
      Operating profit                                7 234 045                 10 432 797
      Finance cost                                   (7 561 936)               (10 082 582)
      Profit before taxation                           (327 891)                   350 215
      Taxation                                                -                          -
      Net profit after taxation                        (327 891)                   350 215
      Adjusted For:
      Straight-line rental accrual                      382 631                     49 704
      Distributable profit                               54 740                    399 919

     Notes:

     a)   Property expenses include all utility and council charges applicable to the Property.
     b)   The forecast information for the 9-month period ended 29 February 2020 has been
          calculated from the anticipated Transfer Date, being on or about 1 June 2019.
     c)   Contractual rental revenue constitutes 100% of the revenue for the 9-month period
          ended 29 February 2020 and 100% of the revenue for the 12-month period ended 28
          February 2021.
     d)   There is no uncontracted revenue.
     e)   There is no near-contracted revenue.

9.   CLASSIFICATION OF THE ACQUISITION

     The Acquisition constitutes a category 2 transaction in terms of the JSE Limited Listings
     Requirements.

15 April 2019

Sponsor and Corporate Advisor

PSG Capital

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