Castleview Property Fund : Related party category 1 acquisition, reverse takeover, specific issue for cash, withdrawal of cautionary

CASTLEVIEW PROPERTY FUND LIMITED (Incorporated in the Republic of South Africa) (Registration number: 2017/290413/06)

JSE share code: CVW

ISIN: ZAE000251633 (Approved as a REIT by the JSE) ("Castleview" or the "company")

ANNOUNCEMENT REGARDING:

• A RELATED PARTY, CATEGORY 1 ACQUISITION OF DIRECT AND INDIRECT PROPERTY ASSETS WHICH CONSTITUTES A REVERSE TAKEOVER OF CASTLEVIEW;
• A SPECIFIC ISSUE OF SHARES FOR CASH; AND
• WITHDRAWAL OF CAUTIONARY

1. Introduction

Shareholders are referred to the cautionary announcement released on 22 June 2022 advising that Castleview was in advanced negotiations regarding the acquisition of a portfolio of direct and indirect property assets from a related party.

Shareholders are now advised that Castleview has entered into the following acquisition agreements (the "acquisition agreements"), in terms of which it will acquire:

• the Willowbridge retail properties from the Willowbridge vendors;
• the K346 development properties, all held in K346 and situated in the City of Cape Town and its surrounding suburbs, from U Big;
• the iRes residential properties, all held in iRes and situated in the City of Cape Town and its surrounding suburbs, from IGFH;
• the entire issued share capital of, and claims against, Tensai Property Services Limited ("TPS"), including its 46.07% interest in EPP Community Properties JV B.V. ("EPP Community Properties") (the "EPPCP investment") and, indirectly, its 25.7% interest in Collins Property Projects Proprietary Limited ("CPP")
• 
  (the "CPP investment") held through its wholly-owned subsidiary, U Reit Collins Proprietary Limited
  ("U Reit Collins") from U Big; and
• more than 50% of the issued shares in Emira Property Fund Limited ("Emira") through the acquisition of
• 1. IG EMI Holdings Proprietary Limited ("IG EMI"); and (ii) the 14 275 529 Emira shares held by K2019451018 (South Africa) Proprietary Limited ("K018 Emira shares") (collectively, the "Emira investment").

The acquisition of the assets detailed above is collectively referred to hereinunder as the "acquisitions." Shareholders are referred to paragraph 12 of this announcement for full details of the direct property assets and their vendors.

The Willowbridge retail properties, the K346 development properties, the iRes residential properties, the EPPCP investment, CPP investment and the Emira investment are all being acquired from subsidiaries of I Group Investments Proprietary Limited ("I Group").

I Group is an innovative property and development company based in Cape Town, whose strategy is to establish a diversified property portfolio by investing in South African and selected international real estate focused, firstly, on net asset value growth, and, secondly, on the maintenance of a sustainable yield. I Group's investments comprise of commercial properties, held either directly or indirectly through listed and non-listed property companies, and residential properties, including residential developments.

In addition to the acquisitions, Castleview has entered into share subscription agreements (the "share subscription agreements") with Womens Soccer League Proprietary Limited ("Womens Soccer League") and Streepperdjie Proprietary Limited ("Streepperdjie"), respectively, in terms of which Womens Soccer League will subscribe for approximately 34 908 876 Castleview shares and Streepperdjie will subscribe for approximately 17 000 000 Castleview shares in terms of a specific authority to issue shares for cash (the "share subscription").

The acquisitions and the share subscription are collectively referred to hereinunder as the "transaction."

1. Rationale for the transaction
   Castleview is a property holding and investment company that listed as a retail REIT on the AltX of the JSE on 20 December 2017. The company's strategy has been to accumulate a diversified portfolio of retail properties in
   South Africa, providing exposure to consumers from a cross-section of income categories and it is currently invested in two well-located South African shopping centres, the first, a small regional shopping centre in Gqeberha (previously known as Port Elizabeth), the second, a convenience centre in Goodwood, Cape Town.
   Castleview's investment mandate is to deliver healthy total returns to its shareholders via a robust income stream and capital growth of its assets.
   The transaction will result in the company acquiring a diversified, well-located and quality portfolio of direct and indirect assets across all property sectors and will reposition the company as a mid-tier REIT with a net asset value of c.R5.5 billion.
2. Terms of the acquisitions
   Castleview will acquire the Willowbridge retail properties, the K346 development properties, the iRes residential properties, the EPPCP investment, the CPP investment and the Emira investment, valued at an aggregate amount of c.R5 billion, with effect from the date on which the last of the conditions precedent is fulfilled or waived, as the case may be, or such later date as agreed between the parties (the "effective date") through six separate acquisitions in exchange for the issue by the company of new Castleview shares (the "consideration shares").
   The aggregate number of consideration shares to be issued pursuant to the implementation of the acquisitions shall be calculated on a NAV for NAV basis with reference to the NAV of the acquisition assets concerned and the NAV of Castleview, each determined on the basis of the pro forma consolidated balance sheet of the acquisition asset concerned (save that in respect of iRes, it shall be determined with reference to the pro forma balance sheet of iRes) and the pro forma consolidated balance sheet of Castleview on 31 August 2022, in terms of the following formula:
   NCS = [(NAVco x PCoS) / NAVP)] × TnPS where:
   NCS stands for the number of consideration shares, which shall be rounded up or down (as the case may be) to the nearest integer;
   NAVco stands for the NAV of the acquisition asset;
   PCoS stands for the percentage that the sale shares comprise of the total issued shares of the relevant acquisition asset as at 31 August 2022;
   NAVP stands for the NAV of Castleview. For the avoidance of doubt, it is recorded that the calculation of the NAV of Castleview shall be determined before the implementation of the acquisition agreements, and shall therefore not have regard to the changes to NAV pursuant to the implementation of those agreements; and
   TnPS stands for 41 042 547, being the total number of Castleview shares in issue as at 31 August 2022 (before having regard to the acquisitions), excluding treasury shares (if applicable).

The estimated number of consideration shares to be issued for each acquisition is set out below:

• Castleview will acquire the entire issued share capital of Interurban Willowbridge Proprietary Limited ("Interurban Willowbridge"), and consequently the Willowbridge retail properties, valued at an aggregate amount of approximately R535.7 million, from the Willowbridge vendors in exchange for the issue of consideration shares as determined according to the formula set out above, expected to be 89 726 018 Castleview shares at an indicative issue price of R5.97 per share;
• Castleview will acquire the entire issued share capital of K346 and indirectly the K346 development properties from U Big, collectively valued at an aggregate amount of approximately R221.6 million, in exchange for the issue of consideration shares as determined according to the formula set out above, expected to be 37 125 672 Castleview shares at an indicative issue price of R5.97 per share;
• Castleview will acquire an 85% interest in the share capital and related shareholder loans of iRes and indirectly the iRes residential properties, including the 50% held in its subsidiary, Resi Developments Proprietary Limited ("Resi Developments"), from IGFH valued at an aggregate amount of approximately R197.7 million in exchange for the issue of consideration shares as determined according to the formula set out above, expected to be 33 107 790 Castleview shares at an indicative issue price of R5.97 per share;
• Castleview will acquire the entire issued share capital of and claims against TPS and, accordingly the EPPCP investment and the CPP investment from U Big, valued collectively at an aggregate amount of approximately R2 008.3 million in exchange for the issue of consideration shares as determined according to the formula set out above, expected to be 336 393 812 Castleview shares at an indicative issue price of R5.97 per share;
• Castleview will acquire the K018 Emira shares at an indicative issue price of R5.97 per share; and
• Castleview will acquire the entire issued share capital of IG EMI and, accordingly, its wholly-owned subsidiaries, U Reit Holdings Proprietary Limited ("U Reit") and Maitlantic Investments Proprietary Limited ("Maitlantic Investments"), which together own c.47.3% of the Emira shares in issue, from IGFH, Maitlantic 10 Proprietary Limited and K2017034069 (South Africa) Proprietary Limited. The Emira investment is valued at an aggregate amount of approximately R2 011.4 million and will be acquired in exchange for the issue of consideration shares as determined according to the formula set out above, expected to be 336 918 080 Castleview shares at an indicative issue price of R5.97 per share.

With respect to the loan claims against iRes being acquired in exchange for consideration shares, the number of consideration shares to be issued shall be calculated with reference to the face value of the loan claims concerned and the NAV of Castleview, determined on the basis of the pro forma consolidated balance sheet of Castleview as at 31 August 2022, in terms of the following formula:

NCS = (FVSCco / NAVP) × TnPS

where:

FVSCco stands for the face value of the loan claims as at 31 August 2022,

and the remaining inputs are as defined above.

All acquisition assets detailed above will become subsidiaries of Castleview post the acquisitions.

4. Conditions precedent to the acquisitions

The acquisitions are subject to the fulfilment or waiver, as the case may be, of the following conditions precedent:

4.1. the shareholders of Castleview approving all resolutions required to authorise the conclusion and implementation of the acquisition agreements in terms of the JSE Listings Requirements;

1. the boards of directors and shareholders of each of the counterparties to the acquisition agreements approving the conclusion and implementation of the acquisition agreements in terms of the relevant parties' memoranda of incorporation and the Companies Act, 71 of 2008 (the "Companies Act"), as amended;
2. to the extent required, any financial institution(s) whose consent is required for the implementation of the acquisition agreements consent(s) in writing to the implementation of those agreements;
3. the vendors having delivered to Castleview written confirmation that the Takeover Regulation Panel has either:
4. 1. granted an exemption in terms of section 119(6) of the Companies Act exempting the vendors from submitting a mandatory offer to the remaining shareholders of Castleview in terms of section 123 of the Companies Act and the Takeover Regulations pursuant to the implementation of the acquisition agreements; or
   2. issued a compliance certificate indicating compliance with the requirements in parts B and C of chapter 5 of the Companies Act and the Companies Regulations promulgated under the Companies Act;
5. the acquisition agreements have all been concluded and become unconditional in accordance with their terms; and
6. the unconditional approval of the acquisitions contemplated in the acquisition agreements by the Competition Authorities in terms of the Competition Act No. 89 of 1998, or the conditional approval on terms and conditions acceptable the affected parties.

Should any of the conditions precedent not be fulfilled or waived, as the case may be, by 17:00 on 31 October 2022, or such other date as agreed by the parties, then the acquisition agreements shall not automatically lapse and be of no further force and effect. Rather, any party may on or after the aforementioned date and time, on written notice (the "notice") to the other parties, require that the condition precedent in question be fulfilled within one month after the date of the notice and, failing fulfilment of the condition precedent in question within the one-month period, then the acquisition agreements shall terminate.

The acquisition agreements contain warranties normal for transactions of this nature and are limited to the respective parties' capacity and authority to enter into, and perform their obligations in terms of, the acquisition agreements and entitlement to issue and/or transfer (as the case may be) unencumbered shares to the relevant party/ies.

5. Terms of the share subscription

In terms of the share subscription, Womens Soccer League will subscribe for approximately 34 908 876 Castleview shares and Streepperdjie will subscribe for approximately 17 000 000 Castleview shares (altogether, the "subscription shares").

The aggregate subscription consideration shall be calculated with reference to the NAV of Castleview on the basis of the pro forma consolidated balance sheet of Castleview on 31 August 2022, in terms of the following formula:

SC = (NAVCVW / CVWs) x SS

where:

SC	stands for the aggregate subscription consideration for the subscription shares;

NAVCVW stands for the NAV of Castleview. For the avoidance of doubt, it is recorded that the calculation of the NAV of Castleview shall be determined before the implementation of the acquisition agreements, and shall therefore not have regard to the changes to NAV pursuant to the implementation of those agreements;

CVWs stands for 41 042 547 Castleview shares, being the total number of Castleview shares in issue as at 31 August 2022 (before having regard to the shares to be issued in terms of the acquisition agreements), excluding treasury shares (if applicable); and

1. stands for the total number of subscription shares.

The estimated aggregate subscription consideration to be received by Castleview is set out below:

• Womens Soccer League will subscribe for 34 908 876 subscription shares at an indicative subscription price of R5.97 per Castleview share for a total subscription consideration which is anticipated to be R208 405 989.70; and
• Streepperdjie will subscribe for 17 000 000 subscription shares at an indicative subscription price of at R5.97 per Castleview share for a total subscription consideration which is anticipated to be R101 490 000.

Womens Soccer League and Streepperdjie will also be afforded the opportunity to settle a portion of the subscription price in Emira shares on a NAV for NAV basis. If such election is exercised, the number of Emira shares to be delivered will be calculated with reference to the NAV of Emira, in terms of the following formula:

NCS = SC / NAVEMI

where:

NCS stands for the number of Emira shares to be delivered, which shall be rounded up or down (as the case may be) to the nearest integer;

SC stands for the aggregate subscription consideration or the balance thereof not settled in cash as described above, as the case may be; and

NAVEMI stands for the NAV per Emira share.

The cash proceeds received from both Womens Soccer League and Streepperdjie pursuant to the share subscription will be used to reduce Castleview's existing debt facilities and to provide capacity for further growth.

6. Conditions precedent to the share subscription

The share subscription is subject to the fulfilment or waiver, as the case may be, of the following conditions precedent:

1. the approval by Castleview shareholders of the subscription agreements;
2. all other resolutions of the boards of directors and shareholders of the relevant parties required in order to authorise the conclusion of the subscription agreements and the implementation of the acquisitions contemplated thereby have been validly adopted; and
3. those acquisition agreements identified by Castleview have been concluded, become unconditional in accordance with their terms and are implemented.

The share subscription agreements contain warranties normal for transactions of this nature

7. Property specific information

Details of the Willowbridge retail properties, the iRes residential properties and the K346 development properties, are set out in the table below: