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GRAND PARADE INVESTMENTS LIMITED - Disposal of 33 Heerengracht

Release Date: 29/06/2020 15:00
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Disposal of 33 Heerengracht

GRAND PARADE INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number 1997/003548/06)
Share code: GPL
ISIN: ZAE000119814
(“GPI” or the “Company”)

DISPOSAL OF 33 HEERENGRACHT

1.       INTRODUCTION

         Shareholders are hereby advised that on 26 June 2020 (“Signature Date”), the
         Company’s wholly-owned subsidiary, GPI Properties Proprietary Limited (“Seller”),
         entered into a sale agreement (“Agreement”) with Aragon Property Development
         Proprietary Limited (“Purchaser”), in terms of which the Seller will dispose of the
         property situated at 33 Heerengracht Street, being Erf 110 Cape Town (“Property”) and
         the rental enterprise conducted by the Seller on the Property (“Rental Enterprise”), to
         the Purchaser as a going concern (“the Disposal”).

2.       RATIONALE FOR THE DISPOSAL

         In line with GPI’s strategy to unlock value for shareholders through a controlled sale of
         assets, the Property (a non-core asset) is in the process of being sold. This is also in
         line with GPI’s focus on reducing head office costs and disposing of loss-making
         operations. The building is currently being underutilised in terms of GPI’s requirements.
         Management and the board of GPI are of the view that the Disposal will unlock capital
         which will be better utilised across the GPI group to repay debt and/or for distributions
         to shareholders.

3.       PURCHASE CONSIDERATION

3.1.        In terms of the Agreement, the purchase consideration for the Rental Enterprise,
            including the Property, is an amount of R90 000 000 which includes value added tax
            at the rate of zero percent (“Purchase Consideration”).

3.2.        The Purchase Consideration shall be paid by the Purchaser to the Seller as follows:

3.2.1.        R80 000 000 on the date of registration of transfer of the Property into the name
              of the Purchaser (“Transfer Date”), in cash or secured by a guarantee issued by
              a South African bank or other financial institution acceptable to the Seller; and

3.2.2.        R10 000 000 twelve months after the Transfer Date, in cash.

4.       APPLICATION OF THE PURCHASE CONSIDERATION

         The proceeds from the Disposal will be used to pay down debt secured by the Property.
         Once the debt is settled, distributions to shareholders will be considered.

5.       CONDITIONS PRECEDENT

5.1.       The Disposal is subject to the fulfilment or waiver (to the extent applicable) of the
           following outstanding conditions precedent, namely that:

5.1.1.        within 30 days from the Signature Date, the Purchaser completes a due diligence
              investigation to its satisfaction and provides the Seller with a letter confirming that
              it is satisfied with the outcome of such due diligence; and

5.1.2.        within 6 months after delivery of the written acceptance of the due diligence
              investigation by the Purchaser:

5.1.2.1.            the Purchaser obtains a loan from a bank or other financial institution against
                    the security of a first mortgage bond over the Property;

5.1.2.2.            the existing lease agreements with various GPI entities in respect of part of
                    the Property are amended to the satisfaction of the Purchaser and the
                    relevant GPI entities, to specifically include an early termination clause and
                    a tenant relocation clause and include such further amendments as the
                    Purchaser may reasonably require;

5.1.2.3.            all other existing lease agreements in respect of the Property are amended
                    to the satisfaction of the Purchaser; and

5.1.2.4.            the Purchaser receives written confirmation together with supporting
                    documentation that a servitude which extends from the adjacent building,
                    known as “the Onyx”, to the Property in favour of the Property has been
                    registered.

5.2.       The conditions precedent have been inserted for the benefit of the Purchaser, who
           shall be entitled to waive the need for the fulfilment of any of such conditions, which
           it shall do by written notice to such effect given to the Seller prior to the date specified
           for the fulfilment of the relevant condition.

6.       EFFECTIVE DATE

         The Disposal will become effective on the Transfer Date, anticipated to be during April
         2021. This estimate accounts for 1-month due diligence, a 6-month leasing period and
         a 3-month window for the legal transfer of the Property. During the 6-month leasing
         period, GPI may obtain alternative offers exceeding the R90 000 000 Purchase
         Consideration, subject to paragraph 7.3 below.

7.       WARRANTIES AND OTHER MATERIAL TERMS

7.1.       The Seller grants a mandate to the Purchaser for a 6-month period after delivery of
           the written acceptance of the due diligence investigation (referred to in paragraph
           5.1.1 above) by the Purchaser (the "Leasing Period") entitling the Purchaser to
           negotiate and agree leasing terms with prospective tenants for the Property to the
           satisfaction of the Purchaser, acting reasonably.

7.2.       If for any reason, the Purchaser does not purchase the Rental Enterprise but
           unconditional leases are successfully concluded with tenants introduced by the
           Purchaser during the Leasing Period, the Seller shall be liable to pay a leasing fee to
           the Purchaser, which shall be due and payable on the occupancy date of the leases,
           and calculated according to the standard Broll Property Group leasing commission
           rates (exclusive of VAT).

7.3.       Should the Seller, during the last 3 months of the Leasing Period only, and prior to
           the conditions precedent (referred to in paragraph 5 above) being fulfilled, be
           presented with a bona fide, unconditional offer to purchase the Property, from a bona
           fide third party, for a purchase price which exceeds the Purchase Consideration,
           which the Seller is minded to accept, the Seller shall without delay notify the
           Purchaser in writing of the third party offer. The Purchaser shall have 30 calendar
           days from date of receipt of the notice to confirm that it shall match the purchase price
           of the third party offer. In the event of the Purchaser failing to match the purchase
           price of the third party offer, the Seller shall be entitled, with written notice to the
           Purchaser, to accept the third party offer, and in consequence of such acceptance,
           the Agreement, save as for paragraph 7.2 above, shall terminate and be of no force
           or effect.

7.4.       The Agreement contains warranties by the Seller in favour of the Purchaser which
           are standard for a transaction of this nature (“Warranties”).

7.5.       Subject to such Warranties, the Rental Enterprise is sold “voetstoots”.

8.     FINANCIAL INFORMATION IN RELATION TO THE THE RENTAL ENTERPRISE

       In terms of the latest audited annual financial statements of GPI for the year ended
       30 June 2019 prepared in accordance with the International Financial Reporting
       Standards and in the manner required by the Companies Act No. 71 of 2008, the value
       of the net assets being disposed of (the Rental Enterprise) amounts to R84 140 159,
       while the audited loss after tax attributable to the Rental Enterprise amount to
       R1 435 223 for the same period. In terms of the latest unaudited interim results for GPI
       for the 6-month period ended 31 December 2019, the value of the net assets being
       disposed of (the Rental Enterprise) amounts to R84 140 159, while the loss after tax
       attributable to the Rental Enterprise amounts to R238 009 for the same period.

9.     CLASSIFICATION OF THE DISPOSAL

       The Disposal constitutes a Category 2 transaction in terms of the JSE Listings
       Requirements.


Cape Town
29 June 2020

Sponsor
PSG Capital

Date: 29-06-2020 03:00:00
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