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PEMBURY LIFESTYLE GROUP LIMITED - Detailed Cautionary Announcement - Acquisition of a Rental Business and a Property and Renewal of Cautionary

Release Date: 21/02/2018 17:19
Code(s): PEM     PDF:  
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Detailed Cautionary Announcement - Acquisition of a Rental Business and a Property and Renewal of Cautionary

PEMBURY LIFESTYLE GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2013/205899/06)
(“PL Group” or “the Company”)
ISIN Code: ZAE000222949      JSE Code: PEM


DETAILED CAUTIONARY ANNOUNCEMENT RELATING TO THE ACQUISITION OF A RENTAL ENTERPRISE AND A
PROPERTY BY PLG PROPERTIES PROPRIETARY LIMITED (“PLG PROPERTIES”) AND RENEWAL OF CAUTIONARY
ANNOUNCEMENT


1.    Background
      Shareholders are advised that PLG Properties, a wholly owned subsidiary of PL Group (“Purchaser”),
      has entered into an agreement (conditional) with Zephan Properties Proprietary Limited (“Seller”) to
      acquire the rental income stream (“Rental Enterprise”) and a property in Sandton (“Property”) from
      which the Rental Enterprise receives its rental income, for a total consideration of R159 000 000
      (“the Acquisition”). The Seller is not a related party to PL Group and PL Group is not a property
      entity as defined in the JSE Listings Requirements. The Property is currently leased by PLG
      Retirement Villages Proprietary Limited (“PLG Retirement Villages”), a wholly owned subsidiary of
      the Company.

      It is noted that, as at the date of this announcement, the Seller is not yet the registered owner of the
      Property; however, the Seller is in the process of taking transfer of the Property by virtue of a sale
      agreement between the Seller and the third party who currently owns the Rental Enterprise and the
      Property (“First Sale Agreement”).

      Shareholders are reminded that, as announced on 16 May 2017, PL Group acquired the business of
      Pembury Retirement Lodges through PLG Retirement Villages Proprietary Limited from Mr Andrew
      Mclachlan, with effect from 1 July 2017. The Property is one of the original Pembury Retirement
      Lodges and has been leased for a number of years.

2.    Effective date
      The effective date of the Acquisition is 1 February 2018.

3.    Terms of the Acquisition
3.1   The purchase consideration of R159 000 000 (“Purchase Consideration”) is payable to the Seller by
      way of a loan from the Seller (“the Loan”), which will be interest bearing and payable in cash within
      seven years of the date of transfer of the Property into the name of the Purchaser.

3.2   The Loan will be secured through:
      3.2.1 the registration of a first mortgage bond over the Property in favour of the Seller for the full
            amount of the Purchase Consideration; or
      3.2.2 in the event that a mortgage bond is granted by another bank or financial institution
            (“Financial Institution”), a second covering bond will be granted for any remaining portion
            of the Purchase Consideration
      (collectively “the Bond”).

3.3   Interest on the Loan is payable monthly in arrears to the Seller on the balance of the Purchase
      Consideration a rate of:

             3.3.1   7% in the first year from the Effective Date;
             3.3.2   7.5% in the second year from the Effective Date;
             3.3.3   8% in the third year from the Effective Date;
             3.3.4   8.5% in the fourth year from the Effective Date;
             3.3.5   9% in the fifth year from the Effective Date;
             3.3.6   9.5% in the sixth year from the Effective Date; and
             3.3.7   10% in the seventh year from the Effective Date.

3.4   Any capital repayments are at the discretion of the Purchaser during the seven-year period, in
      multiples of R100 000.

3.5   In the event that a mortgage bond is granted by a Financial Institution, the Loan will be reduced
      and interest on the mortgage bond will be payable in accordance with the terms approved by the
      Financial Institution.

4     Description of the Property
      The Property houses a retirement village known as Pembury Sandton and is located on Katherine
      Street in Sandton on the remaining extent of Erf 22 Sandown and Erf 23 Sandown, both covering
      approximately 8 922 square meters.

      Pembury Sandton offers retirement apartments to rent in various sizes of accommodation which
      includes single rooms with en-suite bathrooms, studio/bachelor apartments, one-bedroom suites
      (which include a separate bedroom with en-suite bathroom with shower and bath, a separate
      lounge area and kitchenette area), and double suites (which include a lounge cum kitchenette
      area with a bedroom on either side with en suite bathrooms).

      The retirement village also offers comfortable frail care apartments.

5     Property specific information
      Property specific information is detailed below:

       Property Name         Address                      Location               Sector
       Erf Number            84 Katherine Street          Sandton, Gauteng       Retirement village
       22 and remaining                                                         (residential)
       extent of Erf 23

       Rentable Area                   Weighted Average Rental         Tenant Profile
      (Square meters)                  Per m2
       8 922                           R119.84                         PLG Retirement Villages

6     Rationale for the Acquisition
      The rationale for the Acquisition is based on PL Group’s strategy to, where practical and
      reasonable, own and be in control of the properties from which its subsidiaries operate, be it its
      schools or retirement villages.

7     Conditions precedent
      The Acquisition is subject to the following conditions precedent:

      7.1 Approval of the Acquisition by the board of directors of PL Group on or before 27 February
          2018; and
      7.2 Registration of transfer of the Property in the name of the Seller within 120 days from 1 February
          2018, which is subject to the First Sale Agreement.

8    Classification of the transaction
     The Acquisition is classified as a Category 1 transaction in terms of the JSE Listings Requirements,
     and therefore shareholder approval is required. Accordingly, a summary circular, incorporating
     revised listing particulars, will be posted to shareholders within 60 days of this announcement in
     accordance with the JSE Listings Requirements. Due to the nature of the Acquisition, the
     transaction does not constitute a reverse takeover as defined in the JSE Listings Requirements. The
     shareholder approval will either be by way of Section 60 of the Companies Act, 71 of 2008 or by
     way of a General Meeting, the notice of which will be enclosed with the circular.

9    Financial information
     The Purchase Consideration for the Property is R159 000 000. The Property will be independently
     valued and details will be included in the circular to shareholders.

     Rental received by the Seller in relation to the Property is R1 069 200 per month, excluding VAT, and
     is paid by PLG Retirement Villages, a wholly owned subsidiary of PL Group. The lease agreement is
     a triple-net lease and thus no additional material costs are expected to be incurred in relation to
     the Property.

     Pursuant to the Acquisition, the rental paid by PLG Retirement Villages to PLG Properties will be
     eliminated on consolidation in the group results. No third-party income will be received on the
     Property. Interest will be payable as detailed in paragraph 3 above.

10   Renewal of cautionary announcement
     Shareholders are referred to the renewal of cautionary announcement dated 2 February 2018 and
     are advised that the Company remains under cautionary in respect of the following:

     -   The successful conclusion of the First Sale agreement and related transfer of the Property to be
         able to implement the Acquisition as announced above; and
     -   the receipt and publication of the financial information (i.e. the net asset value and the profit)
         attributable to the Acquisition, as previously announced,

     Accordingly, shareholders are advised to continue to exercise caution when dealing in the
     Company’s securities until a further announcement is made.

BY ORDER OF THE BOARD
21 February 2018
Johannesburg

Designated Advisor
Arbor Capital Sponsors Proprietary Limited

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