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Disposal of a portfolio of Johannesburg inner-city residential properties, commercial rental businesses and land
SA Corporate Real Estate Limited
(Incorporated in the Republic of South Africa)
Share Code: SAC ISIN Code: ZAE000203238
(Registration number 2015/015578/06)
(“SA Corporate” or the “Company”)
REIT status approved
DISPOSAL OF A PORTFOLIO OF JOHANNESBURG INNER-CITY RESIDENTIAL
PROPERTIES, COMMERCIAL RENTAL BUSINESSES AND DEVELOPMENT LAND
1. INTRODUCTION
SA Corporate is pleased to announce that it has, through its group companies, Afhco Holdings
Proprietary Limited and Afhco Proprietary Limited (the “Seller”), entered into a sale and
implementation agreement (the “Agreement”) with Firstmile Properties JHB CBD Crown Mines
Proprietary Limited (“Firstmile” or the “Purchaser”), ultimately wholly owned by Lonsa
Group Limited, to dispose of a property portfolio comprising a number of the Seller’s
residential properties, commercial rental businesses and development land (the “Sale
Assets”) in the Johannesburg inner-city (the “Disposal”).
It is anticipated that all conditions precedent will be fulfilled by 31 December 2021, whereafter
each of the Sale Assets will be transferred to the Purchaser as soon as reasonably possible
thereafter (the “Effective Date/s”). However, if any of the Sale Assets have not been
transferred twelve months after the signature date of the Agreement (the “Signature Date”),
either the Seller or the Purchaser may terminate the sale of the Sale Assets that have not yet
been transferred.
2. DETAILS AND TERMS OF THE DISPOSAL
2.1 Disposal consideration
SA Corporate will dispose of the Sale Assets to Firstmile for a total consideration of
R546.25 million exclusive of value-added tax and transfer duty but inclusive of an
amount of R16.25 million in respect of sales commission and transaction costs (the
“Disposal Consideration”). The Disposal will be implemented through the sale of
residential properties and sectional title sections, the sale of residential and
commercial rental businesses by a transfer of shareholding of the SA Corporate group
companies owning such businesses (the “Income Generating Assets") and the sale
of development land by the transfer of erven.
The Disposal Consideration will be settled by the Purchaser upon transfer of the Sale
Assets net of a R30.00 million "Agterskot" (the “Agterskot”) payable on the expiry of
a 3-year period from the implementation of the various transactions comprising the
Disposal. During the aforementioned 3-year period the property management of the
Sale Assets will be undertaken by a SA Corporate group company, Afhco Property
Management (Pty) Ltd. The Agterskot will be payable if the Income Generating Assets
achieve an aggregate actual average net property income (“Actual NPI”) over the
aforementioned 3-year period of at least R54.00 million pro-rated across the Income
Generating Assets (“Target NPI”). If the Actual NPI is less than the Target NPI, then
the following calculation shall be performed to calculate how much of the Agterskot, if
any, shall be payable: Actual NPI multiplied by 10.115 less R500.00 million.
2.2 Material terms
The terms of the Disposal contain undertakings, warranties and indemnities which are
normal for a transaction of this nature.
2.3 Rationale and use of proceeds
The Disposal is aligned to SA Corporate’s strategy to increase the proportion of its
suburban residential portfolio through a partial divestment of non-precinct inner-city
properties, and to reduce its exposure to inner-city properties not located in precincts
which the Afhco group of companies, wholly-owned by SA Corporate, can ensure
accessibility, security and lifestyle amenities.
The Disposal Consideration will be used to strengthen the Company’s financial position.
2.4 Conditions precedent
The Disposal is subject to the following conditions precedent:
2.4.1 the Purchaser confirming in writing that it is satisfied with the results of its due
diligence investigation within 30 days after the Signature Date (“1st CP Date”);
2.4.2 the Purchaser procuring debt funding by third party debt providers in order to
partly fund the Disposal Consideration in the amount of not more than 75% on
such terms and conditions as the Purchaser may determine in its sole discretion
(the “Debt Funding”) and all agreements relevant to the Debt Funding having
been concluded within 30 days of the fulfilment or waiver of the condition
precedent set out in paragraph 2.4.1 (“2nd CP Date”);
2.4.3 the requisite regulatory approvals to implement the Disposal having been
obtained by the 2nd CP Date;
2.4.4 consent having been given by the mortgagee to the cancellation of the existing
mortgage bonds over certain of the properties included in the Sale Assets within
90 days of the fulfilment or waiver of the last of the conditions precedent set
out in paragraphs 2.4.2 and 2.4.3 (“3rd CP Date”);
2.4.5 the Disposal having been unconditionally approved by the Competition
Authorities by the 3rd CP Date; and
2.4.6 all agreements relevant to the Debt Funding and the Disposal having become
unconditional by the 3rd CP Date.
2.5 Value of the net assets and profits attributable to the net assets of the
Disposal
The Income Generating Assets, excluding the development land of the Long Street
property (“Long Street”), were valued at R561.30 million as at 31 December 2020.
The Long Street development land valuation was written down to reflect an earlier
contracted value of R45.00 million. The terms of the earlier contract in respect of Long
Street were not fulfilled and consequently terminated. The portion of the Disposal
Consideration attributable to the Income Generating Assets is R487.89 million and
R58.36 million is attributable to Long Street. The annual net property income (“NPI”)
for the years ended 31 December 2019 and 31 December 2020 attributable to the
Income Generating Assets is tabulated below:
2019 NPI 2020 NPI
NPI including expected credit loss 54 074 266 36 926 476
Expected credit loss 1 932 743 9 330 661
NPI excluding expected credit loss 56 007 009 46 257 138
The annual holding costs associated with Long Street for the year ended 31 December
2020 were R1.77 million. The aforementioned information has been extracted from SA
Corporate’s audited annual financial statements for the year ended 31 December 2019
and 31 December 2020, which have been prepared in terms of International Financial
Reporting Standards.
3. DETAILS OF THE SALE ASSETS
Details of the Sale Assets are as follows:
Property Location Sector Rentable Weighted Value of the Disposal
area average Sale Assets consideration
rental per m2 as at 31
December
2020
(m2) (R) (R) (R)
Cavendish 183 Rahima Moosa Residential 5 604 142.41 63 500 000 60 005 846
Street, and Retail
Johannesburg
Greatermans 220 Commissioner Residential 12 435 103.57 112 000 000 105 837 082
Street, City and and Retail
Suburban,
Johannesburg
Ilanga 131 Pritchard Residential 7 325 119.14 71 000 000 67 093 150
Street, and Retail
Johannesburg
Legae 219 Lilian Ngoyi Residential 7 109 125.29 68 500 000 64 730 716
Street, and Retail
Johannesburg
Long Street Margaret Mcingana Development 26 000 N/a 45 000 000 58 359 950
Street, Spes Bona, Land
Jeppestown South,
Johannesburg
Lustre 114 Goud Street, Residential 3 940 117.65 34 100 000 32 223 612
Johannesburg and Retail
Panama 200 Commissioner Residential 8 081 118.98 76 600 000 72 385 005
Street, City and and Retail
Suburban
Queens Court 245 Lilian Ngoyi Residential 2 395 186.46 40 200 000 37 987 952
Street, and Retail
Johannesburg
Sambro House 25 – 29 Kruis Residential 5 031 122.21 50 400 000 47 626 687
Street, Marshalltown and Retail
Total 561 300 000 546 250 000
Note: The valuation of the Sale Assets was undertaken by Quadrant Properties (Pty) Ltd, an independent valuer
registered as a professional valuer in terms of the Property Valuers Profession Act, No 47 of 2000.
4. CATEGORISATION
The Disposal constitutes a Category 2 transaction in terms of the JSE Limited Listings
Requirements and accordingly, no shareholder approval is required.
Cape Town
16 September 2021
Sponsor: Nedbank Corporate and Investment Banking, a division of Nedbank Limited
Legal Advisors: Cliffe Dekker Hofmeyr Inc
Date: 16-09-2021 05:10:00
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