ANNUITY PROPERTIES LIMITED (Incorporated in the Republic of South Africa) (Registration Number 2011/145994/06) Share code: ANP ISIN: ZAE000165643 ( Annuity or the Company ) ACQUISITION OF VARIOUS PROPERTIES AND PRIVATE PLACEMENT A. INTRODUCTION Annuity is pleased to advise holders of Annuity linked units ( Linked unit holders ) that it has agreed terms with the relevant vendors for the following properties: - the Clarins SA Portfolio ; - the McCarthy/Unitrans Portfolio ; and - the Coricraft Distribution Centre (collectively the s ). The s are consistent with Annuity s strategy to build a quality property portfolio that offers long-term distribution and capital growth underpinned by strong underlying contractual cash flows and also present an opportunity for Annuity to increase its portfolio weighting within the specialised retail and industrial sectors. Details pertaining to the s are set out in Section B below. The s are not inter-conditional on one another. The aggregate purchase consideration for the s is approximately R369 million. B. THE PROPERTY ACQUISITIONS 1. THE CLARINS SA PORTFOLIO ACQUISITION 1.1 THE CLARINS SA PORTFOLIO ACQUISITION Annuity has agreed the terms, on an exclusive basis, with the relevant vendors to acquire a portfolio of prime office and industrial properties that are exclusively tenanted by Clarins South Africa Proprietary Limited ( Clarins SA ). Clarins SA is a subsidiary of the Clarins Group, an international luxury cosmetics company, headquartered in France, which manufactures prestige skincare, makeup and fragrance products. A major player in the beauty sector, Clarins has an international presence in all segments of the cosmetics market with a global network of 20 subsidiaries, over 140 local agents and approximately 6,000 staff worldwide. The portfolio of properties includes: the Clarins head office property situated at 17A Scott Street, Waverley, Johannesburg (the Scott Street ), together with all leases and assets, forming necessary parts of the letting enterprise as a going concern (the Scott Street Letting Enterprise ), (collectively, the Scott Street );
the Clarins industrial property situated at 17 Modulus Road, Ormonde, Johannesburg (the Modulus Road ), together with all leases and assets, forming necessary parts of the letting enterprise as a going concern (the Modulus Road Letting Enterprise ), (collectively, the Modulus Road ); and the Clarins office property, situated at 30 Barnett Street, Gardens, Cape Town (the Dunkley House ), together with all leases and assets, forming necessary parts of the letting enterprise as a going concern (the Dunkley House Letting Enterprise ), (collectively, the Dunkley House ). The Clarins SA leases each escalate at a rate of 8.0%, with approximately 3 years and 6 months remaining on each such lease. The effective date for the acquisition of each Clarins SA property will be the date of transfer of such property into the name of Annuity, which is expected to take place on or about 15 September 2013. 1.2 PROPERTY AND OTHER INFORMATION ON THE CLARINS PORTFOLIO ACQUISITION Description of the property: Location: Vendor: Scott Street Portion 15 of Erf 13, Waverley Township, Registration Division I.R. Province of Gauteng 17A Scott Street Waverley, Johannesburg Rand Treasury Modulus Road Erf 85, Theta Extension 6 Township, Registration Division I.Q. Province of Gauteng 17 Modulus Road, Ormonde, Johannesburg Rand Treasury Dunkley House Erf 95485, ST 250/1996, Gardens, Local Authority of Cape Town Unit 46 SS Dunkley House, 30 Barnett Street, Gardens, Cape Town Dunkley House Single or multitenanted: Single-tenanted Single-tenanted Single-tenanted Grade: A Grade Industrial / warehouse B Grade GLA (m 2 ): Office: 1,442m² Industrial: 2,000m² Office: 360m² Weighted average gross rental per square Office: R135.49/m² Industrial: R41.69/m² Office: R92.85/m² metre (R/m²): Weighted average lease expiry (by GLA): 3.5 years 3.5 years 3.5 years Vacancy: 0% 0% 0% Purchase consideration: R23,238,074 R10,308,854 R3,653,072 1.3 CATEGORISATION As the Clarins Portfolio represents less than 5% of Annuity s market capitalisation in terms of the Listings Requirements of the JSE ( JSE Listings Requirements ), the disclosure contained in paragraph 1 of this announcement is voluntary.
2. THE MCCARTHY/UNITRANS PORTFOLIO ACQUISITION 2.1 THE MCCARTHY/UNITRANS PORTFOLIO ACQUISITION Annuity has agreed the terms, on an exclusive basis, with various vendors to acquire a portfolio of specialised retail and office properties ( McCarthy/Unitrans Portfolio ) situated in a prime location within the well established Hendrik Potgieter strip in Roodepoort, which is a prominent mixeduse business node of retail, office and vehicle retail showrooms and within close proximity to the N1 highway and the Clearwater Regional Shopping Centre on the West Rand of Johannesburg. The specialised retail properties offer a high quality tenant profile with McCarthy Audi (part of the McCarthy Motor Group, a subsidiary of Bidvest Limited) and Unitrans Nissan (operated by Unitrans, a subsidiary of KAP International Holdings Limited) occupying approximately 78% of the total specialised retail GLA. The office property is predominately tenanted by a combination of large, medium and small corporates and professional firms. The portfolio of properties includes: the McCarthy Audi Centre West Rand property situated at corner of Christiaan De Wet Road and Rooibok Avenue, Allen s Nek, Roodepoort (the McCarthy Audi ), together with all leases and assets, forming necessary parts of the letting enterprise as a going concern (the McCarthy Audi Letting Enterprise ), (collectively, the McCarthy Audi ); the Unitrans Nissan Roodepoort property situated at corner of Christiaan De Wet Road and Rooibok Avenue, Allen s Nek, Roodepoort (the Unitrans Nissan ), together with all leases and assets, forming necessary parts of the letting enterprise as a going concern (the Unitrans Nissan Letting Enterprise ), (collectively, the Unitrans Nissan ); and the Warich Close Office Park property situated at corner of Christiaan De Wet Road and Rooibok Avenue, Allen s Nek, Roodepoort (the Warich Office Park ), together with all leases and assets, forming necessary parts of the letting enterprise as a going concern (the Warich Office Park Letting Enterprise ), (collectively, the Warich Office Park ). The effective date for the acquisition of each McCarthy/Unitrans property will be the date of transfer of such property into the name of Annuity, which is expected to take place on or about 1 October 2013. 2.2 PROPERTY AND OTHER INFORMATION ON THE MCCARTHY/UNITRANS PORTFOLIO ACQUISITION McCarthy Audi Unitrans Nissan Warich Office Park Description of the property: Erf 682, Allen s Nek Extension 43 Township, Registration Division I.Q. Province of Gauteng Corner of Christiaan De Wet and Rooibok Avenue, Allen s Nek, Roodepoort, Johannesburg Time Bandit Properties 25 Erf 732, Allen s Nek Extension 47 Township, Registration Division I.Q. Province of Gauteng Erf 733, Allen s Nek Extension 47 Township, Registration Division I.Q. Province of Gauteng Location: 43 Van Vuuren Street, Allen s Nek, Roodepoort, Johannesburg 39 Van Vuuren Street, Allen s Nek, Roodepoort, Johannesburg Vendor: Wilrock Properties Wilrock Properties
\ \ \ \ Single or multitenanted: Multi-tenanted Single-tenanted Multi-tenanted Grade: N/A N/A A Grade GLA (m 2 ): Special retail: 4,309m² Special retail: 4,000m² Office: 3,212m² Weighted average gross rental per square metre (R/m²): Special retail: R104.53/m² Special retail: R112.05/m² Office: R89.16/m² Weighted average 4.4 years 4.6 years 2.6 years lease expiry (by GLA): Vacancy: 0% 0% 0% T Purchase h R67,063,384 R68,091,964 R46,594,651 consideration: e vendor of the Warich Office Park will guarantee the gross income of all the tenants to Annuity s satisfaction for a period of 2 years from the date of transfer of the Warich Office Park into the name of Annuity. 2.3 CONDITIONS PRECEDENT TO THE MCCARTHY/UNITRANS PORTFOLIO ACQUISITION Each of the McCarthy Audi, the Unitrans Nissan and the Warich Office Park is subject to the fulfillment of, inter alia, the following conditions precedent: a) the listing of the new Annuity linked units to fund such acquisitions in terms of the JSE Listing Requirements; and b) the raising of the necessary debt and equity capital required to fund such acquisitions. 2.4 CATEGORISATION The Unitrans Nissan and the Warich Office Park are from the same vendor, Wilrock Properties ( Wilrock ). Wilrock and the vendor for the McCarthy Audi are considered to be associated companies as defined in terms of the JSE Listings Requirements. Accordingly, the purchase considerations of the McCarthy Audi, Unitrans Nissan and the Warich Office Park have been aggregated in considering the categorisation of the McCarthy/Unitrans Portfolio. As a result, the McCarthy/Unitrans Portfolio constitutes a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not require approval by Linked unit holders. 3. THE CORICRAFT DISTRIBUTION CENTRE ACQUISITION 3.1 THE CORICRAFT DISTRIBUTION CENTRE ACQUISITION Annuity has agreed the terms, on an exclusive basis, with Reflex Partners to acquire the Coricraft distribution centre, situated at Friedlander Street, Stormill, Johannesburg (the Coricraft Distribution Centre ), together with all leases and assets, forming necessary parts of the letting enterprise as a going concern (the Coricraft Distribution Centre Letting Enterprise ), (collectively, the Coricraft Distribution Centre ). The Coricraft Distribution Centre is exclusively tenanted by Coricraft Group ( Coricraft ). Coricraft is a manufacturer and retailer of a wide variety of couches, dining, living and
bedroom furniture. Coricraft is one of South Africa s fastest growing retailers and is the leading cash furnishing retailer in South Africa through their 34 stores. Coricraft is on a 10 year triple net lease which escalates at the higher of 8% or CPI per annum and has 8 years and 1 month remaining on such lease, which terminates on 31 July 2021. Coricraft will sign a new 10 year lease upon transfer of the Coricraft Distribution Centre into Annuity s name. The effective date of the Coricraft Distribution Centre will be the date of transfer of the Coricraft Distribution Centre into the name of Annuity, which is expected to take place on or about 1 October 2013. 3.2 PROPERTY AND OTHER INFORMATION ON THE CORICRAFT DISTRIBUTION CENTRE ACQUISITION Description of the property: Erven 3, 4, 7, 10-13, 117 Stormill Township, Registration Division I.Q. Province of Gauteng Location: Single or multi-tenanted: Grade: GLA (m 2 ): Weighted average gross rental per square metre (R/m²): Weighted average lease expiry (by GLA): Friedlander Street, Stormill, Johannesburg Single-tenanted Industrial / distribution centre Industrial: 19,369m² Industrial: R32.92/m² 8.1 years, to be extended to 10 years on transfer Vacancy: 0% Purchase consideration: R86,145,390 3.3 CONDITIONS PRECEDENT TO THE CORICRAFT DISTRIBUTION CENTRE ACQUISITION The Coricraft Distribution Centre is subject to the fulfillment of, inter alia, the following conditions precedent: a) the delivery of the following documents by the vendor of the Coricraft Distribution Centre to Annuity: - an approved site development plan in respect of the Coricraft Distribution Centre ; - building plans of the Coricraft Distribution Centre approved by the City of Johannesburg Metropolitan Municipality (the Johannesburg Municipality ); and - an occupancy certificate issued by the Johannesburg Municipality b) Competition Authority approval in terms of the Competition Act 89 of 1998. 3.4 CATEGORISATION
The Coricraft Distribution Centre constitutes a category 2 transaction in terms of the JSE Listings Requirements and accordingly does not require approval by Linked unit holders. 4. INDEPENDENT VALUATIONS OF THE PROPERTY ACQUISITIONS The directors of Annuity ( Annuity Board ) are satisfied that the values of each of the Scott Street, Modulus Road, Dunkley House, McCarthy Audi, Unitrans Nissan, Warich Office Park and the Coricraft Distribution Centre are in line with the purchase prices being paid by Annuity. The Annuity Board is not independent and is not registered as professional valuers or as professional associate valuers in terms of the Valuers Profession Act, No 47 of 2000. 5. PROPOSED FUNDING OF THE PROPERTY ACQUISITIONS The purchase consideration for the s is payable in cash against transfer of each of the properties into the name of Annuity. The aggregate purchase consideration for the s (the Aggregate Purchase Consideration ) will be funded through a combination of new and existing debt facilities and/or the issue of new Annuity linked units via a private placement ( Private Placement ). The related property acquisition and transaction costs will be funded through new debt facilities. In this context the minimum amount Annuity will seek to raise via the Private Placement will be approximately R193.6 million. 6. FINANCIAL EFFECTS The financial effects, including the assumptions on which they are based and the financial information from which they are prepared, are the responsibility of the Annuity Board and have not been reviewed or reported on by the reporting accountant in terms of section 8 of the JSE Listing Requirements. The financial effects presented in the tables below have been prepared in accordance with the Company's accounting policies and in compliance with IFRS. The financial effects have been prepared on the assumption that the Aveng (Linked unit holders are referred to the announcement dated 14 May 2013 for details relating to the Aveng ) will be implemented (transfer of the properties into Annuity s name) on 15 August 2013, the Clarins Portfolio will be implemented (transfer of the properties into Annuity s name) on 15 September 2013 and the McCarthy/Unitrans Portfolio and Coricraft Distribution Centre will be implemented (transfer of the property into Annuity s name) on 1 October 2013.
Notes Forecast for the twelve months ending 31 March 2014 before the Aveng and s 1 Adjustment for actual linked units in issue 2 Aveng 3 Clarins Portfolio 4 McCarthy/ Unitrans 5 Coricraft Distribution Centre 5 Forecast for the twelve months ending 31 March 2014 after the Aveng and s Revenue 191,254,259 4,782,974 2,633,994 12,237,118 5,857,171 216,765,516 Net property income 146,737,703 4,724,562 2,269,959 10,056,736 5,799,182 169,588,142 Net operating profit before interest and taxation 123,229,031 2,705,055 1,203,181 4,750,005 2,217,689 134,104,961 Number of linked units in issue at end of period 6 187,158,344 1,974,573 6,121,156-20,971,154 9,939,853 226,165,080 Weighted average number of linked units in issue 6 187,158,344 1,974,573 3,555,302-10,456,849 4,956,310 208,101,378 Earnings per linked units (cents) 6, 7 40.79 38.44 Headline earnings per linked unit (cents) 6, 7 49.79 49.64 Distribution per linked unit (cents) 6, 7 45.09 45.09
General assumptions and notes: 1. The forecasts are based on the same material assumptions as are listed in the Circular to Annuity Linked unit holders, dated 25 October 2012; 2. The Adjustment for actual linked units in issue column reflects the adjustment for actual linked units in issue; 3. Based on an assumed 50%/50% debt to equity funding ratio for the Aveng ; 4. Based on an assumed 100% debt funding ratio for the Clarins Portfolio ; 5. Based on an assumed 40%/60% debt to equity funding ratio for the McCarthy/Unitrans and the Coricraft Distribution Centre 6. Based on an indicative clean price of R5.20 per linked unit for the Private Placement, which is at a 8.9% discount to the 30 day VWAP of Annuity prior to the issue date of this announcement; and 7. The debt portion will be funded from new debt facilities at an indicative blended fixed and floating interest rate of 7.28%. 7. UNAUDITED PRO FORMA FINANCIAL INFORMATION The unaudited pro forma financial effects are the responsibility of the Annuity Board and have been prepared for illustrative purposes only to provide information relating to how the Aveng and the s may have impacted Linked unit holders on the relevant reporting date and, due to their nature, may not give a fair reflection of Annuity`s financial position after implementation of the Aveng and the s. The unaudited pro forma financial effects have been prepared in accordance with the JSE Listings Requirements, the Guide on Pro Forma Financial Information issued by SAICA and the measurement and recognition requirements of IFRS. The accounting policies used to prepare the unaudited pro forma financial effects are consistent with those applied in the preparation of the financial statements for the year ended 31 March 2013. The table below sets out the unaudited pro forma financial effects of the Aveng and the s on net asset value ("NAV") and tangible net asset value ("TNAV") per linked unit for the year ended 31 March 2013. Pro forma results as per Annuity s historical financial information on 31 March 2013 1 Aveng Clarins Portfolio McCarthy/ Unitrans Coricraft Distribution Centre Pro forma results after the Aveng and the s 2 NAV per linked unit (cents) 522.0-1.44-1.23-2.74-3.23 513.36 TNAV per linked unit (cents) 522.0-2.18-0.94-4.62-1.40 512.86 Number of linked units in issue at end of 189,132,917 6,121,156-20,971,154 9,939,853 226,165,080
period The pro forma financial effects have been calculated on the basis of the following assumptions: 1. The Pro forma as per Annuity s historical financial information on 31 March 2013 column, which is based on the audited financial results for the year ended 31 March 2013, reflects the NAV and the TNAV value per linked unit as at 31 March 2013. 2. The Pro forma results after the Aveng and the s column represents NAV and TNAV per linked unit including the s. It includes the effect of the acquisition and transfer of the properties to the value of R360.2 million, being the fair value of the Aveng and the s in terms of IFRS 3. 3. It is assumed that the Aveng and the s will be funded by the Private Placement and via debt funding as set out in the notes to paragraph 6 of this announcement. 4. The total estimated once-off transaction costs to be paid amount to R11.8 million. acquisition costs have been expensed in terms of IFRS 3 and transaction costs relating to debt have been capitalised to the financial liability in terms of IFRS.
C. CONCLUSION The Annuity Board believes that the s further enhance the quality of Annuity s underlying portfolio in a manner that is consistent with Annuity s investment strategy to build a quality portfolio that offers long-term distribution and capital growth underpinned by strong lease covenants and above market escalations. Illovo 29 July 2013 Lead Investment Bank and Transaction Sponsor to Annuity Investec Bank Limited Joint Investment Bank to Annuity Sasfin Capital (A division of Sasfin Bank Limited) Sponsor to Annuity Rand Merchant Bank (A division of FirstRand Bank Limited) Legal advisors to Annuity Glyn Marais Inc