27 May - 8 min read

Disposal of Blackheath Park and Island Business Park

Disposal of Blackheath Park and Island Business Park

SPEAR REIT LIMITED
(Incorporated in the Republic of South
Africa)
(Registration number: 2015/407237/06)
Share code: SEA
ISIN: ZAE000228995
LEI: 378900F76170CCB33C50
(Approved as a REIT by the JSE)
(“Spear” or “the Company”)


DISPOSAL OF BLACKHEATH PARK AND ISLAND BUSINESS PARK


1.   INTRODUCTION

1.1. Shareholders are advised that on 27 May 2021, the Company entered into the following
     agreements with Inospace 5 Proprietary Limited (“Purchaser”) –

1.1.1.     a sale of letting enterprise agreement as amended by the first addendum thereto
           (“Island Business Park Disposal Agreement”), in terms of which the Company will
           dispose of the property known as Island Business Park, situated at Erf 17611, Cape
           Town (“Island Business Park Property”) and the letting enterprise conducted by the
           Company on the Island Business Park Property (“Island Business Park
           Letting Enterprise”) to the Purchaser, as a going concern, for a disposal
           consideration of R20 000 000 (“Island Business Park Disposal Consideration”)
           (“Island Business Park Disposal”); and

1.1.2.     a sale of letting enterprise agreement as amended by the first addendum thereto
           (“Blackheath Park Disposal Agreement”) in terms of which the Company will
           dispose of the property known as Blackheath Park, situated at Erf 928, Blackheath
           (“Blackheath Park Property”) and the letting enterprise conducted by the Company
           on the Blackheath Park Property (“Blackheath Park Letting Enterprise”) to the
           Purchaser, as a going concern, for a disposal consideration of R140 000 000
           (“Blackheath Park Disposal Consideration”) (“Blackheath Park Disposal”),

     (together, the “Disposals”). The combined purchase consideration of R160 000 000 for
     the Disposals is 0.25% below Book Value.

2.   RATIONALE FOR THE DISPOSALS

     Management advised the market of its strategy to dispose of assets it considers non-core.
     The Disposals furthermore align with managements’ loan-to-value (“LTV”) reduction
     roadmap.

3.   DISPOSAL CONSIDERATION

3.1. The Island Business Park Disposal Consideration of R20 000 000 and the Blackheath
     Park Disposal Consideration of R140 000 000 will be settled by the Purchaser being
     advanced a (i) vendor loan equal to 30% of the Island Business Park Disposal
     Consideration (“Island Business Park Vendor Loan”) and (ii) a vendor loan equal to
     30% of the Blackheath Park Disposal Consideration (“Blackheath Park Vendor Loan”),
     by the Company. The balance of the Island Business Park Disposal Consideration and
     the balance of the Blackheath Park Disposal Consideration will be paid in cash by the
     Purchaser to the Company on the Island Business Park Property Transfer Date and the
     Blackheath Park Property Transfer Date, respectively.

 3.2. The Island Business Park Vendor Loan shall be repaid within three years from the date
      of registration of transfer of the Island Business Park Property into the name of the
      Purchaser (“Island Business Park Property Transfer Date”) and the Blackheath Park
      Vendor Loan shall be repaid within three years from the date of registration of transfer
      of the Blackheath Park Property into the name of the Purchaser (“Blackheath Park
      Property Transfer Date”).

 3.3. Each of the Island Business Park Vendor Loan and the Blackheath Park Vendor Loan
      will bear interest at the prime rate plus 2%, which interest shall be calculated daily,
      accrue monthly and be payable monthly in arrears.

3.4.  If the Island Business Park Property Transfer Date and the Blackheath Park Property
      Transfer Date, respectively, do not occur on 1 October 2021, the Island Business Park
      Disposal Consideration will incur interest at the prime rate from 1 October 2021 until the
      Island Business Park Property Transfer Date and the Blackheath Park Disposal
      Consideration will incur interest at the prime rate from 1 October 2021 until the Blackheath
      Park Property Transfer Date. Notwithstanding the aforementioned, the Island Business
      Park Disposal Consideration shall not exceed R21 400 000 and the Blackheath Park
      Disposal Consideration shall not exceed R149 800 000.

 4.   APPLICATION OF THE DISPOSAL CONSIDERATION

      The Island Business Park Disposal Consideration and the Blackheath Park Disposal
      Consideration will be applied by the Company to reduce debt in line with its stated LTV
      reduction roadmap.

 5.   CONDITIONS PRECEDENT

 5.1. The Island Business Park Disposal is subject to the fulfilment of the following
      outstanding conditions precedent (“Island Business Park Disposal Conditions
      Precedent”):

 5.1.1.     the Purchaser being satisfied, in its sole discretion, with the results of the due
            diligence investigation in respect of the Island Business Park Letting Enterprise and
            delivering a written notice of its satisfaction to the Company;

 5.1.2.     the Purchaser obtaining mortgage finance on standard terms and condition for a sum
            of 70% of the Island Business Park Disposal Consideration within 15 business days
            after the fulfilment or waiver of the Island Business Park Disposal Condition
            Precedent in 5.1.1 above;

 5.1.3.     the Purchaser, within 90 days of the date of signature of the Island Business Park
            Disposal Agreement, obtaining pre-sales of sectional title units to be created over the
            Island Business Park Property equal to 30% of the Purchaser’s projected sales value;

 5.1.4.     if applicable, within 90 business days after the fulfilment or waiver of the Island
            Business Park Disposal Condition Precedent in 5.1.3 above, the unconditional
            approval of the competition authorities for the Island Business Park Disposal is
            obtained; and

5.1.5.      the investment committee of the Company approving the Island Business Park
            Disposal within 10 days of fulfilment of the Island Business Park Condition Precedent
            in 5.1.1 above.

5.2. The Blackheath Park Disposal is subject to the fulfilment of the following outstanding
     conditions precedent (“Blackheath Park Disposal Conditions Precedent”):

5.2.1.      the Purchaser being satisfied, in its sole discretion, with the results of the due
            diligence investigation in respect of the Blackheath Park Letting Enterprise and
            delivering a written notice of its satisfaction to the Company;

5.2.2.      the Purchaser obtaining mortgage finance on standard terms and condition for a sum
            of 70% of the Blackheath Park Disposal Consideration within 15 business days after
            the fulfilment or waiver of the Blackheath Park Disposal Condition Precedent in 5.2.1
            above;

5.2.3.      the Purchaser, within 90 days of the date of signature of the Blackheath Park Disposal
            Agreement, obtaining pre-sales of sectional title units to be created over the
            Blackheath Park Property equal to 30% of the Purchaser’s projected sales value;

5.2.4.      if applicable, within 90 business days after the fulfilment or waiver of the Blackheath
            Park Disposal Condition Precedent in 5.2.3 above, the unconditional approval of the
            competition authorities for the Blackheath Park Disposal is obtained; and

5.2.5.      the investment committee of the Company approving the Blackheath Park Disposal
            within 10 days of fulfilment of the Blackheath Park Condition Precedent in 5.2.1
            above.

5.3. In addition to the above, the Island Business Park Disposal Agreement and the
     Blackheath Park Disposal Agreement are inter-conditional in that the one agreement will
     only become final and binding upon the other agreement becoming final and binding,
     simultaneously with the fulfilment or waiver of the final Island Business Park Disposal
     Condition in respect of the Island Business Park Disposal Agreement and the final
     Blackheath Park Disposal Condition in respect of the Blackheath Park Disposal
     Agreement.

6.   EFFECTIVE DATE OF THE DISPOSAL

6.1. The effective date of the Island Business Park Disposal will be the Island Business Park
     Property Transfer Date, which shall be as soon as is reasonable and practicable after
     all the Island Business Park Conditions Precedent have been fulfilled or waived.

6.2. The effective date of the Blackheath Park Disposal will be the Blackheath Park Property
     Transfer Date, which shall be as soon as is reasonable and practicable after all the
     Blackheath Park Conditions Precedent have been fulfilled or waived.

7.   WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT

     Each of the Island Business Park Disposal Agreement and the Blackheath Park Disposal
     Agreement contains warranties, undertakings and indemnities by the Company in favour
     of the Purchaser, and by the Purchaser in favour of the Company, which are standard for
     transactions of this nature.

8.   THE PROPERTIES

     Details of the Island Business Park Property and the Blackheath Park Property are as
     follows:

      Property              Geographical         Sector             Gross             Weighted
      Name and              Location                                Lettable Area     Average
      Address                                                       (m2)              Gross Rental /
                                                                                      m2
      Island                Paarden             Commercial          2 405             R90.37
      Business Park         Eiland, Cape
      situated at Erf       Town
      17611, Cape
      Town

      Blackheath            Blackheath          Industrial          37 334            R35.08
      Park, situated        Industria, Cape
      at Erf 928,           Town
      Blackheath

     Notes:

     a)   In addition to the Island Business Park Disposal Consideration and the Blackheath
          Park Disposal Consideration, the costs associated with the Disposals are estimated
          at R4 000 000 including VAT. Agents’ commission is payable in respect of the
          Disposals.
     b)   The Island Business Park Disposal Consideration payable in respect of the Island
          Business Park Letting Enterprise (which includes the Island Business Park Property)
          and the Blackheath Park Disposal Consideration payable in respect of the Blackheath
          Park Letting Enterprise (which includes the Blackheath Park Property) are 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.   FINANCIAL INFORMATION

     The value of the net assets comprising the Island Business Park Property as at 28
     February 2021, being the date of the last audited annual financial statements, was
     R22 400 000.

     The audited profits after tax attributable to the Island Business Park Property for the year
     ended 28 February 2021, was R2 705 833, based on the audited annual financial
     statements of Spear REIT Limited, which were prepared in terms of IFRS.

     The value of the net assets comprising the Blackheath Park Property as at 28 February
     2021, being the date of the last audited annual financial statements, was R138 000 000.

     The audited profits after tax attributable to the Blackheath Park Property for the year
     ended 28 February 2021, was R13 176 437, based on the audited annual financial
     statements of Spear REIT Limited, which were prepared in terms of IFRS.

10. CLASSIFICATION OF THE DISPOSAL

    The Disposals have been aggregated and accordingly constitute a category 2 transaction
    in terms of the JSE Limited Listings Requirements.

27 May 2021

Cape Town

Sponsor and Corporate Adviser
PSG Capital

Date: 27-05-2021 12:00:00
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