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 ACQUISITION ANNOUNCEMENT – THE ISLAND


1.   INTRODUCTION

     Shareholders are advised that on 12 October 2022 (“Signature Date”), Spear entered
     into a sale of rental enterprise agreement (“Agreement”) with Inospace 2 Proprietary
     Limited (“Seller”) (beneficially owned by the shareholders listed in footnote 1 below), in
     terms of which Spear will acquire the property known Erf 35538 Milnerton, held by the
     Seller under Title Deed T59483/2018 with all improvements thereon (“Property”), and the
     rental enterprise known as “The Island” conducted by the Seller on the Property (“Rental
     Enterprise”), as a going concern (“Acquisition”), for a purchase consideration of
     R185 000 000 (“Purchase Consideration”).

2.   RATIONALE FOR THE ACQUISITION

     The Acquisition is in line with Spear’s stated strategy to continuously increase portfolio
     exposure to high quality industrial real estate with a focus on logistics, urban logistics and
     bulk warehousing within the Cape Town Metropol. The Property, known as “The Island”,
     is one of only a hand full of large-scale modern warehousing complexes with roof heights
     ranging from 11 metres to 14 metres under eaves, located in Paarden Eiland, Cape Town.
     Paarden Eiland is within 10 minutes’ drive of the Cape Town CBD offering a compelling
     accommodation solution to urban logistics firms, large box destination-based service
     providers and engineering services serving the Cape Town Metropol, in addition to the
     shipping ports.

     The Acquisition of the Property further bolsters Spear’s high quality industrial portfolio and
     will meaningfully contribute to the ongoing sustainable and consistent cashflows
     generated across the balance of the 100% Western Cape portfolio.

3.   PURCHASE CONSIDERATION

     The Purchase Consideration is an amount of R185 000 000 and is inclusive of value-
     added tax (“VAT”) at a rate of 0%.

     The Purchase Consideration will be secured by a bank guarantee and will be paid by
     Spear to the Seller, in cash, on the date of registration of transfer of ownership of the
     Property into the name of Spear (“Transfer Date”).

     In terms of the Agreement, Spear may, at any time prior to or after the Transfer Date,
     undertake an equity capital raise in the form of a vendor consideration placing in order to
     raise or refinance an amount of up to 100% of the Purchase Consideration.
4.   CONDITION PRECEDENT

     The Acquisition is subject to the fulfilment of the outstanding condition precedent
     (“Condition Precedent”) that within 60 days of the Signature Date, the Acquisition has
     been 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.

     The Condition Precedent must be fulfilled by not later than the aforementioned date, which
     date may be extended by the parties in writing.

5.   EFFECTIVE DATE OF THE ACQUISITION

     The effective date of the Acquisition will be the Transfer Date, which date shall be as soon
     as practically possible after the date on which the Condition Precedent is fulfilled, which
     date is anticipated as being on or about 1 February 2023.

6.   WARRANTIES AND OTHER SIGNIFICANT TERMS OF THE AGREEMENT

     The Agreement contains representations and warranties by the Seller, in favour of Spear,
     which are standard for a transaction of this nature. Subject to such warranties, the Rental
     Enterprise and Property are sold “voetstoots”.

     The Agreement further contains a rental guarantee, in terms of which the Seller
     guarantees that Spear will receive a monthly rental income of R20 145 (plus VAT), in
     respect of the month-to-month or short term (less than 6 months) leases concluded in
     respect of the Property, for a period of 12 months after the Transfer Date.

7.   THE PROPERTY

     Details of the Property are as follows:

      Property Name      Geographical      Sector            Gross             Weighted
      and Address        Location                            Lettable Area     Average Net
                                                             (m2)              Rental / m2
      The Island, 9      Milnerton,        Industrial        21,774            R69,00
      Milner Street,     Western Cape
      Metro Industrial
      Township

     Details regarding the Property, as at the Signature Date, are set out below:

      Purchase Yield         Weighted Average       Weighted Average       Vacancy % by
      Attributable to        Escalation             Lease Duration         Gross Lettable
      Shareholders                                  (years)                Area
      9,75%                  7,60%                  2,45                   0%

     Notes:

     a)   In addition to the Purchase Consideration, the costs associated with the Acquisition
          are estimated at R1 500 000. Agents’ commission, in the amount of R5 550 000, is
          payable by the Seller, in respect of the Acquisition.
     b)   The Purchase Consideration payable in respect of the Rental 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.   FORECAST FINANCIAL INFORMATION OF THE ACQUISITION

     The forecast financial information relating to the Acquisition for the 1-month period ending
     28 February 2023 and the 12-month period ending 29 February 2024 are set out below.
     The forecast financial information has not been reviewed or reported on by a reporting
     accountant in terms of section 8 of the JSE Limited Listings Requirements and is the
     responsibility of Spear’s directors.

                                      Forecast for the 1-month      Forecast for the 12-
                                      period ending                 month period ending
                                      28 February 2023              29 February 2024
                                      (R)                           (R)
      Revenue                                        1,828,120                   22,896,527
      Straight-line rental accrual                       87,070                       85,747
      Gross revenue                                  1,915,189                   22,982,274
      Property expenses                              (358,675)                   (4,409,612)
      Net property income                            1,556,514                   18,572,662
      Administrative expenses                          (27,422)                    (343,448)
      Operating profit                               1,529,093                   18,229,214
      Finance cost                                 (1,414,775)                 (16,977,295)
      Profit before taxation                           114,318                     1,251,920
      Taxation                                                -                            -
      Net profit after taxation                        114,318                     1,251,920
      Adjusted For:
      Straight-line rental accrual                     (87,070)                      (85,747)
      Distributable profit                               27,249                    1,166,173

     Notes:

     a)   Revenue includes gross rentals and other recoveries but excludes any adjustment
          applicable to the straight-lining of leases.
     b)   Property expenses include all utility and council charges applicable to the Property.
     c)   The forecast information for the 1-month period ended 28 February 2023 has been
          calculated from the anticipated Transfer Date, being on or about 1 February 2023.
     d)   Contractual rental revenue constitutes 100% of the revenue for the 1-month period
          ended 28 February 2023 and 100% of the revenue for the 12-month period ended
          29 February 2024.
     e)   There is no uncontracted revenue.
     f)   There is no near-contracted revenue.

9.   CLASSIFICATION OF THE ACQUISITION

     The Purchase Consideration represents more than 5% but less than 30% of Spear’s
     market capitalisation as at the Signature Date and accordingly the Acquisition constitutes
     a category 2 transaction in terms of the JSE Limited Listings Requirements.
Cape Town
12 October 2022

Sponsor                                                  Legal Advisor
PSG Capital                                              Cliffe Dekker Hofmeyr




Footnote 1: The shareholders (beneficial owners) of the Seller, as at the Signature Date, are Esipro
Proprietary Limited, the Sierra Trust, Duxbury North Proprietary Limited, Setso Property Fund
Proprietary Limited, Malewell Two Proprietary Limited, KLT Holdings 1 Proprietary Limited.