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Disposal of Promenade Rental Enterprise, Option to subscribe for shares, New Cautionary and Renewal of Cautionary
ORION REAL ESTATE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/021085/06)
Share Code: ORE ISIN: ZAE000075651
("Orion " or “the Company” or “the Group”)
DISPOSAL OF THE PROMENADE SHOPPING CENTRE RENTAL ENTERPRISE, OPTION TO SUBSCRIBE
FOR SHARES, ADVICE OF LEGAL PROCEEDINGS, FURTHER DELAY IN THE PUBLICATION OF THE
AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2018, NEW CAUTIONARY ANNOUNCEMENT AND
RENEWAL OF PREVIOUS CAUTIONARY ANNOUNCEMENT
A DISPOSAL OF THE PROMENADE
1. Introduction
Shareholders are advised that the Orion Property Holding Trust (“the Seller”), a trust which holds
the properties managed by Orion Real Estate on behalf of the Company and for the benefit
of the Company has signed an agreement, subject to certain conditions precedent, for the
disposal of the rental enterprise, constituting the property known as the Promenade Shopping
Centre, situate at Remaining Extent of Erf 404, Nelspruit (“the Property”) and the leases
managed by the Company in respect thereof (the “Disposal”), as a going concern to Prinia
Asset Management Proprietary Limited on behalf of a company to be formed or nominated
(the “Purchaser”). The Purchaser is not a related party to the Seller or the Company. The
effective date of the Disposal will be the date of fulfilment of the payment obligations set out
in clause 3 below.
2. Rationale for the Disposal and Application of Proceeds of the Disposal
Shareholders are referred to section C below for the rationale for and the application of the
proceeds of the Disposal.
3. Terms of the Disposal
The consideration for the Disposal is R180 000 000, exclusive of VAT at 0%, to be settled as
follows:
3.1 R120 000 000 shall be settled by way of cash and secured by acceptable letters of
Guarantee (“Guarantee(s)”) issued by a reputable bank or financial institution in favour
of the Seller and payable against registration of transfer of the Property into the name of
the Purchaser (the “Transfer”).
3.2 R5 000 000 will be paid in cash directly to the Seller on or before 18 December 2018;
3.3 R 5 000 000 will be paid in cash directly to the Seller on or before 31 January 2019;
3.4 R5 000 000 will be paid in cash directly to the Seller on or before 28 February 2019;
3.5 R5 000 000 will be paid in cash directly to the Seller on or before 31 March 2019; and
3.6 the balance of R40 000 000 will be paid in 40 interest free monthly instalments of
R1 000 000 each commencing on 30 April 2019 and becoming payable on the last day
of each month thereafter until paid in full.
The cash payments of R5 000 000 for each of the months commencing 18 December 2018 and
ceasing on 31 March 2019 shall accrue interest at 1% per month compounded monthly in
arrears until the registration of the Transfer.
If VAT becomes payable by the Seller, the consideration will be deemed to be exclusive of VAT
and the Purchaser shall, on written demand from the Seller, be obliged to pay the amount of
VAT to the Seller within 7 days of delivery by the Seller to the Purchaser of an appropriate tax
invoice.
4 Description of the Property
The Property specific information is detailed below:
PROPERTY NAME ADDRESS LOCATION SECTOR
Promenade Shopping Cnr Samora Nelspruit, Retail, Offices
Centre Machel Drive & Mpumalanga & Hotel
Henshall Street,
Nelspruit, 1200
WEIGHTED AVERAGE
RENTABLE AREA NET RENTAL PER M2 TENANT PROFILE
14,500 sqm R98 per sqm 70% National tenants
including Boxer, Mr Price,
Old Mutual, Orion Hotel
5. Suspensive conditions
The Disposal is subject to the following conditions precedent:
5.1 The Purchaser signing the necessary Guarantees referred to in clause 3.1 above on or
before 30 April 2019;
5.2 On or before 31 January 2019, Michael Georgiou signing all documents required by
Investec Bank Limited (“Investec”) for him to stand as co-surety for a period of 12 months
in respect of the loan facility granted by Investec over the Seller’s properties;
5.3 The Purchaser making payment to the Seller of all amounts stipulated in sub-paragraphs
3.2 to 3.5 above.
6. Classification of the Disposal
The Disposal is classified as a Category 1 transaction in terms of section 9 of the JSE Listings
Requirements and will accordingly require shareholder approval. The controlling shareholder
has advised that it will vote in favour of the Disposal.
7. Financial Information
The disposal consideration of R180m is below the value of R212,5 million, attributed to the
Property by independent professional valuer, Peter Parfitt as at 30 June 2018.
The aggregate net rental received in respect of the aforementioned property amounts to
R1,5 million per month, excluding VAT.
It is expected that transaction fees of not more than 4% of the total disposal consideration will
be payable on the fulfilment of the suspensive conditions of the Disposal.
Costs will also be incurred in relation to the Category 1 circular.
8. WARRANTIES
The normal warranties are in place for a disposal of this nature.
B OPTION TO SUBSCRIBE FOR SHARES FOR CASH
1. Introduction
The Company has entered into an American-style option agreement (“Option Agreement”)
with Celtic Knot Proprietary Limited (“Celtic Knot”) in terms of which and subject to the Disposal
becoming unconditional, it has granted Celtic Knot an option to subscribe for up to 250 000 000
shares in the Company (“Option shares”) over a 5-year period commencing from the
12 December 2018 (“Effective date”), at a subscription price of 90 cents per share (“Option”).
2. Terms
The Option may be exercised in whole or in part and in various tranches by Celtic Knot
delivering a written notice of its exercise of the Option (“Exercise notice”) to the Company, the
delivery of which shall be deemed to constitute a subscription agreement between Celtic Knot
and the Company. Celtic Knot will be obliged to make payment for the Option shares within
3 days of the delivery of the Exercise notice.
3. Suspensive Conditions to the Option Agreement
The Option Agreement and the exercise of the Option is subject to the following conditions
precedent:
3.1 the Disposal becoming unconditional on or before 30 April 2019; and
3.2 shareholder approval of the specific issue of shares for cash in the event of the Celtic
Knot exercising the Option.
C ADVICE OF LEGAL PROCEEDINGS
During 2018 the Company’s bond finance from Investec amounting to R116 million came up
for the 5-year renewal. Investec elected not to renew the bond facilities.
Orion secured replacement funding to the value of R233 million from FedGroup, including
additional funding, for the acquisition of 9 new properties and FedGroup issued guarantees to
the various parties. FedGroup unexpectedly withdrew the guarantees on 29 November 2018
and advised that they were prepared to reissue the guarantees, but the onerous conditions
that were to be imposed on the controlling shareholder were not acceptable to the controlling
shareholder.
Orion has since received notification that Investec has applied for the liquidation of the
Company l. These recent events have led to the decision by the Group to dispose of the
Property, a portion of the proceeds which will be applied to settle Investec in full and the
balance will be applied to other mortgage debt and to provide working capital, effectively
leaving the Company debt free. Accordingly, the liquidation application will be opposed by
Orion and Orion is in the process of securing new guarantees in favour of Investec.
D FURTHER DELAY IN THE PUBLICATION OF ORION’S AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE
2018
Due to the recent events, Orion is busy assessing the situation, but due to the unavailability of
staff at its auditors during the festive season, will only be able to issue its results in the New Year.
Shareholders will be updated in due course as to the timing of the publication and the issue of
the Annual Report.
E NEW CAUTIONARY ANNOUNCEMENT AND RENEWAL OF CAUTIONARY
Shareholders are advised to exercise caution when dealing in their securities until a further
announcement is made regarding the potential liquidation of the Company.
In addition, shareholders are referred to the announcement on 6 November 2018 and are
advised that the cautionary announcement is renewed.
JOHANNESBURG
18 December 2018
Sponsor
Arbor Capital Sponsors Proprietary Limited
Date: 18/12/2018 05:49:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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