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EXEMPLAR REITAIL LIMITED - Related party acquisition of a 50.1% stake in Thembisa Mall Proprietary Limited

Release Date: 30/10/2020 09:58
Code(s): EXP     PDF:  
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Related party acquisition of a 50.1% stake in Thembisa Mall Proprietary Limited

Exemplar REITail Limited
(Incorporated in the Republic of South Africa)
(Registration number 2018/022591/06)
Approved as a REIT by the JSE
JSE share code: EXP
ISIN: ZAE000257549
LEI: 3789000558287E37F130
("Exemplar" or "the Company")


      Shareholders are advised that the Company has, subject to certain conditions precedent, acquired 50.1% of
      the shares in the Mall of Thembisa Proprietary Limited ("Devco") from McCormick Property
      Development Proprietary Limited ("MPD"), in addition to MPD’s claims on loan account against Devco in
      excess of R632,592,052. Devco’s only asset is the Mall of Thembisa, a 44 809m2 mall currently under
      development in Thembisa, Gauteng. The total purchase consideration is R78,584,805, which will be
      satisfied through the issue of 7 262 921 new ordinary Exemplar shares to MPD (the "consideration").

      The acquisition is in line with Exemplar's strategy to acquire high quality assets from MPD, which assets
      are consistent with the metrics of the existing Exemplar property portfolio.

      3.1. The Transaction
           Exemplar has entered into an agreement with MPD to acquire 50.1% of the issued shares in Devco,
           in addition to the claims on loan account in excess of R632,592,052 which MPD has against Devco,
           for the consideration (the "acquisition"), and with effect from 20 November 2020 (the "effective

      3.2. Purchase consideration
           The consideration payable for the acquisition will be settled through the issue of 7 262 921 new
           ordinary Exemplar shares to MPD.

      3.3. Conditions precedent
           The acquisition is subject to the fulfilment or waiver, as the case may be, of the following conditions
            -    that the development of the Mall of Thembisa is completed to the reasonable satisfaction of
            -    that all approvals required for the Mall of Thembisa to be tenanted legally have been granted
                 unconditionally, or are granted subject to such conditions which the parties agree are
                 acceptable to them;
            -    that all approvals required in terms of the Competition Act are granted without conditions or
                 are granted subject to such conditions which the parties agree are acceptable to them; and
            -    all approvals required by the JSE Limited have been obtained.
      3.4. Material terms
           The agreement in respect of the acquisition contains warranties which are normal for an acquisition
           of this nature; specifically, 50.1% of the net income is guaranteed by MPD for a period of two years,
           from 1 December 2020.


                                                                average                       Value attributed to
                                                             rental per       Purchase       the property as at 1
      Property   Geographical                       GLA              m2   consideration             November 2020
      name       location           Sector          (m2)         (R/m2)             (R)                       (R)
      Mall of    Gauteng            Retail        44,809        R137.16     R78,584,805              R726,000,000

     *     Valuations have been carried out by Quadrant Properties Proprietary Limited as at 1 November
           2020. Quadrant Properties is an external valuer as defined in section 13 of the JSE Listings
           Requirements. The purchase price of the property is 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.

     Set out below are the forecast revenue, operational net income, net profit after tax and earnings available
     for distribution of the acquisition (“the forecast”) for the 12 months ending 30 November 2021 (the
     “forecast period”).

     The forecast has been prepared on the assumption that the acquisition will be implemented on
     1 December 2020 and on the basis that the forecast includes forecast results for the duration of the forecast

     The forecast, including the assumptions on which it is based and the financial information from which it
     has been prepared, is the responsibility of the directors of the Company. The forecast has not been
     reviewed or reported on by independent reporting accountants.

     The forecast presented in the table below has been prepared in accordance with the Company’s accounting
     policies, which are in compliance with International Financial Reporting Standards.

                                                                                           Forecast for the 12
                                                                                                 months ending
                                                                                              30 November 2021

      Revenue                                                                                      109 541 158
      Net property income                                                                           71 603 992
      Net after tax profit                                                                          34 103 992
      Total comprehensive profit for the period                                                     34 103 992
      Profit available for distribution                                                             23 984 844
          The forecast incorporates the following material assumptions in respect of revenue and expenses:
                1. The forecast is based on information derived from the management accounts, budgets, and
                   rental contracts provided by Devco.
                2. Rental income is derived from the forecasts provided to the Company by Devco.
                3. Net property income includes the effects of straight lining rental income.
                4. Total comprehensive profit includes the effects of finance costs.
                5. Contracted revenue is based on existing lease agreements including stipulated increases, all of
                   which are valid and enforceable.
                6. Of the rental income of R73,750,800, 100% relates to contracted rental. No near contracted
                   rental income is forecast.
                7. Property operating expenditure has been forecast by the property manager on a line-by-line
                   basis based on management’s review of historical expenditure, where available, and discussion
                   with the property manager.
                8. No fair value adjustment is recognised.
                9. There will be no unforeseen economic factors that will affect the lessees’ ability to meet their
                   commitments in terms of existing lease agreements.

      In terms of section 10 of the JSE Listings Requirements, the acquisition constitutes a small related party
      transaction as MPD is a material shareholder of Exemplar, and John McCormick and Jason McCormick
      are directors of both MPD and Exemplar. Accordingly, Exemplar is required to obtain a fairness opinion
      from an independent expert in this regard.

      A further announcement will be released following the finalisation of the independent expert’s opinion.

30 October 2020

Java Capital

Date: 30-10-2020 09:58:00
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