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Category 2 Disposal Announcement – 100 Fairways, N1 City
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")
CATEGORY 2 DISPOSAL ANNOUNCEMENT – 100 FAIRWAYS, N1 CITY
1. INTRODUCTION
Shareholders are advised that on 20 June 2024 ("Signature Date"), Spear entered into a sale
of rental enterprise agreement ("Agreement") with The City of Cape Town ("Purchaser"), in
terms of which Agreement, Spear will dispose of the property known as Erf 23427 Parow, City
of Cape Town, situated at 100 Fairway Close, Parow Golf Course, Cape Town, with all
improvements thereon ("Property"), and the rental enterprise conducted by Spear on the
Property ("Rental Enterprise"), as a going concern ("Disposal"), for a disposal consideration
of R160 000 000 ("Disposal Consideration").
2. RATIONALE FOR THE DISPOSAL
The disposal of the Property, which forms part of Spear's commercial office portfolio, is aligned
with management's capital recycling strategy, to dispose of assets that have matured within the
portfolio and to create more optimal sectoral exposure balance within the core portfolio post the
implementation of the Emira Western Cape portfolio acquisition.
3. APPLICATION OF THE DISPOSAL CONSIDERATION
The Disposal Consideration will be utilised to settle portions of existing Spear portfolio variable
debt facilities to align with Spear's loan to value ratio ("LTV") strategy post the implementation
of the Emira Western Cape portfolio acquisition.
Spear has no debt drawn against the Property and the full Disposal Consideration will be utilised
to reduce group LTV. Spear's fixed debt ratio post implementation of the Disposal will increase
to circa 75% of the group's total debt being hedged, in line with management's strategy of
hedging between 65% and 75% of Spear's portfolio debt at any given time.
The application of the Disposal Consideration will reduce Spear's LTV to between 23% and
23.50% prior to the implementation of the Emira Western Cape portfolio acquisition. Spear's
strategic LTV band is set at between 38% and 43%, with management's strategic intent to
operate at 39%, on a normalised basis going forward.
4. CONDITION PRECEDENT
4.1. The Agreement is subject to the fulfilment of the condition precedent ("Condition
Precedent") that the Disposal is unconditionally approved by the applicable competition
authorities in terms of the Competition Act, No. 89 of 1998, or conditionally approved on
conditions which are acceptable to the parties.
4.2. The Condition Precedent must be fulfilled by not later than 120 days after the Signature Date,
which date may be extended by the parties in writing.
5. EFFECTIVE DATE OF THE DISPOSAL
The effective date of the Disposal will be the date of registration of transfer of the Property into
the name of the Purchaser ("Transfer Date"), which is anticipated as being on or about
1 December 2024.
6. WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT
6.1. The Purchaser currently leases a portion of the Property and will continue to do so in terms
of the current lease agreement with Spear, until the Transfer Date. In addition, the Purchaser
will take occupation of 7,825 m2, of vacant portions in the Property inclusive all associated
parking bays and storerooms linked to the vacant portions, from the Signature Date, at an
agreed occupational rental.
6.2. Negotiations are currently ongoing with a third party for the lease of the remaining vacant
portions of the Property (of approximately 918 m2). Should the proposed lease agreement
between Spear and the third party in respect of those remaining vacant portions of the
Property not be finalised by 30 August 2024, the Purchaser shall take occupation of such
remaining vacant portions of the Property from 1 September 2024 at an agreed occupational
rental.
6.3. The Agreement contains representations and warranties by Spear, in respect of the Letting
Enterprise and the Property, in favour of the Purchaser which are standard for a transaction
of this nature.
6.4. Subject to such warranties, the Letting Enterprise and the Property are sold "voetstoots".
7. THE PROPERTY
Details of the Property are as follows:
Property Name Geographical Sector Gross Lettable Weighted
and Address Location Area Average Gross
(m2) Rental / m2
100 Fairway Parow, Western Office 11,664 R156.79
Close, Parow Cape
Golf Course,
Cape Town
Details regarding the Property, as at the Signature Date, are set out below:
Disposal Yield Weighted Average Weighted Average Vacancy % by
Attributable to Escalation Lease Duration Gross Lettable
Shareholders (years) Area
9.80% 7.00% 0.75 7.87%
Notes:
a) In addition to the Disposal Consideration, the costs associated with the Disposal are
estimated at R1,000,000. No agents' commission is payable in respect of the Disposal.
b) The Disposal Consideration payable in respect of the Letting Enterprise (which includes the
Property), 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.
8. FINANCIAL INFORMATION
8.1. As at 29 February 2024, being the date of the last published audited consolidated annual
financial statements of Spear, the value of the net assets attributable to Letting Enterprise,
was R160 000 000.
8.2. The profit after tax attributable to the Letting Enterprise for the financial year ended
29 February 2024, was R13 422 044, based on the last published audited consolidated
annual financial statement of Spear, which were prepared in terms of IFRS.
9. CLASSIFICATION OF THE DISPOSAL
The Disposal Consideration represents more than 5% but less than 30% of Spear's market
capitalisation as at the Signature Date and accordingly the Disposal constitutes a category 2
transaction in terms of the JSE Limited Listings Requirements.
Cape Town
21 June 2024
Sponsor Legal Adviser
PSG Capital ENSafrica
Date: 21-06-2024 03:00:00
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