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Runway Property Group Limited (Incorporated in the Republic of South Africa) (Registration number 2019/547292/06) ZAR X Share code: “ZXRPG ISIN: ZAEZ00000059 (“Runway” or “the Company”)
LISTING CIRCULAR
The definitions and interpretations commencing on page 8 of this Listing Circular have, where applicable, been used in these cover pages.
This Listing Circular is not an invitation to the public to subscribe for Shares but is issued in compliance with the ZAR X Listings Requirements and the Companies Act, for the purpose of providing information to investors regarding Runway and is issued in respect of a listing, by way of introduction, of all the issued Shares of the Company on ZAR X with effect from commencement of trade on Tuesday, 11 February 2020. The Shares are being listed at a listing price of R10.00 per Share, with the initial market capitalisiation of the Company being approximately R480 million.
Important points of note
All of the Shares issued by Runway rank pari passu with each other. There are no convertibility or redemption provisions relating to any of the Shares. The Shares have only been issued in dematerialised form. No certificated Shares will be issued. There will be no fractions of Shares listed. There is no underwriting and the listing is not conditional on raising any capital.
Investors should note that the main purpose of the Listing is to allow the Company to establish a presence on an exchange platform that facilitates trade in listed securities, to access debt and equity capital more cost effectively and to have the ability to incentivise management and employees by granting access to listed tradeable Shares in the Company. Runway undertakes and intends to raise capital of up to 20% to 30% of its issued Shares over the 36 months immediately post-listing in order to allow it access to future acquisition opportunities using its own scrip, as these opportunities arise.
Immediately prior to the Listing –
the authorised Share capital of the Company comprised 1 000 000 000 Shares of no par value;
the issued Share capital of the Company comprised 47 995 092 Shares of no par value; and
the Company had no treasury Shares.
Given that the Listing is being implemented by way of introduction, there will no change in the authorised or issued Share capital after the Listing.
At the date of listing, the anticipated market capitalisation of the Company will be approximately R480 million.
ZAR X has granted Runway a listing of 47 995 092 Shares on ZAR X under ISIN: ZAEZ00000059, with effect from the commencement of trade on Tuesday, 11 February2020.
Each of the advisors whose names are included in this Listing Circular, have consented in writing and have not prior to publication of this Listing Circular, withdrawn their written consent to the inclusion of their names in the capacity stated and, where applicable, to their reports being included in this Listing Circular.
Date of issue: 11 February 2020
This Listing Circular is available on the Company’s Website (at www.runwaypropertygroup.co.za/investors) and on the ZAR X website at www.zarx.co.za and is only available in English.
Draft 14 – 7 Jan 2020 2
The Directors of Runway, collectively and individually, having made due and careful enquiry, accept full responsibility for the accuracy of the information provided in this Listing Circular and certify that, to the best of their knowledge and belief, there are no facts that have been omitted that would make any statement contained herein false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that the Listing Circular contains all information required by law.
The Company warrants that the information contained in this Listing Circular is true and complete and indemnifies ZAR X to the fullest extent permitted by law in respect of any claim, action or expense arising from, or connected with, and breach of this warranty.
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CORPORATE INFORMATION
Registered office of the Company Company secretary Block A, 1st Floor, Georgian Place Office Park, Watermans Corporate Services Proprietary Limited 18 Southway Road, Eastgate Extension 6, (Registration number 2018/080584/07) Johannesburg, 2090 Suite 702, Top Floor, 1410 Eglin, (PO Box 653636 Benmore 2010) 14 Eglin Road, Sunninghill, Johannesburg Incorporated in the Republic of South Africa on (PO Box 4349, Rivonia, 2128) 30 October 2019.
Independent reporting accountants and auditors Independent Property Valuer De Vos Richards Inc Quadrant Properties Proprietary Limited Practice number 914584 (Registration number 1995/003097/07) Chartered Accountants and Registered Auditors Registered Property Valuer Clearview Office Park, Block C Unit 11, Dunkeld Court, 16 North Road, Wilhelmina Avenue cnr Jan Smuts Avenue, Dunkeld West Constantia Kloof (PO Box 1984, Parklands, 2121) (PO Box 6910, Westgate, 1734)
This Listing Circular is not an offer to the general public but is merely issued in connection with the introduction of the Shares onto the ZAR X. This document is only addressed to persons to whom it may lawfully be made. The distribution of this Listing Circular may be restricted by law in certain jurisdictions. It is the responsibility of any person into whose possession this Listing Circular comes to inform themselves about and observe any such restrictions. Any failure to comply with any of those restrictions may constitute a violation of the laws of any such jurisdiction. This Listing Circular does not constitute an offer of, or an invitation to subscribe for any of the Shares in any jurisdiction.
To the extent that this Listing Circular is provided to persons outside South Africa the following is noted: None of the U.S. Securities and Exchange Commission (the “SEC”), any other U.S. federal or state securities commission or any U.S. regulatory authority has approved or disapproved of the Shares nor have such authorities reviewed or passed upon the accuracy or adequacy of this Listing Circular. Any representation to the contrary is a criminal offence in the United States.
Forward-looking statements
This Listing Circular includes forward-looking statements. Forward-looking statements are statements including, but not limited to, any statements regarding the future financial position of the Group, profits, cash flows and its future prospects. Forward-looking statements are based on estimates and assumptions regarding the Group, and although the Board believes them to be reasonable, such estimates, assumptions, or statements may not eventuate and are not guarantees of future performance. Examples of forward-looking statements include, inter alia, the Forecast Financial Information contained in Annexure 1 to this Listing Circular.
All statements, other than statements of historical fact are, or may be deemed to be, forward-looking statements, including, but not limited to the Company’s expectations, beliefs, prospects, plans, objectives, future events or performance. These statements are often, but not always, made through the use of words or phrases such as “will,” “will likely result,” “are expected to,” “will continue,” “believe,” “is anticipated,” “estimated,” “intends,” “expects,” “plans,” “seek,” “projection” and “outlook”. These statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in them.
Any forward-looking statements are qualified in their entirety by reference to the assumptions made and factors discussed throughout this Listing Circular.
Additional Group risk factors, and the mitigation thereof, are set out in Annexure 3.
Because the risk factors referred to in this Listing Circular could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made in this Listing Circular, undue reliance should not be placed on any of these forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward- looking statement to reflect events or circumstances after the date on which the statement is made or to reflect 4 the occurrence of unanticipated events. New factors will emerge in the future, and it is not possible for the Company to predict such factors. In addition, the Company cannot assess the effect of each factor on the Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those described in any forward-looking statements.
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TABLE OF CONTENTS
The definitions and interpretations commencing on page 8 of this Listing Circular have been used in the following table of contents.
Page Corporate information Inside front cover Salient features 7 Definitions and interpretations 8 Listing circular Section one – Information on Runway 1. Name, address and incorporation 13 2. Directors, other office holders or material third parties 13 3. History, state of affairs and prospects of the Company 17 4. Information regarding the Properties 18 5. Share capital of the Company 18 6. Options and preferential rights in respect of Shares 21 7. Employee Share incentive scheme 21 8. Commissions paid or payable in respect of underwriting 22 9. Material contracts 22 10. Interests of Directors, management and promoters 22 11. Loans and borrowings 22 12. Shares issued or to be issued otherwise than for cash 22 13. Properties, assets and business undertakings acquired or to be acquired 22 14. Purposes of the Listing 22 15. Salient dates and times 22 16. Minimum subscription 23 17. Statement as to listing on stock exchange 23
Section two – Financial information 18. Report by Directors as to material changes 23 19. Historical financial information 24 20. Forecast financial information 24 21. Pro Forma Aggregated Financial Information 24
22. Liquidity 24 23. Analysis of capital resources 24 24. Off-balance sheet arrangements 25 25. Transactions with related parties 25
Section three – Additional material information 26. Risk policy and factors 26 27. Appointed advisor 26 28. Government protection and investment encouragement law 26 29. Corporate governance 26 30. Legal proceedings 26 31. Regulatory actions 26 32. Directors’ responsibility statement 26 33. Consents 27 34. Interests of Company advisors 26 35. Documents available for inspection 27 36. Certificate and Board statement 27
Annexure 1 The Forecast Financial Information 30 Annexure 2 Reporting accountant’s report on the Forecast Financial Information 32 Annexure 3 Runway Risk Policy and risk factors 35 Annexure 4 Extracts from the MOI 40 Annexure 5 Pro Forma Aggregated Financial Information 43 6
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Annexure 6 Independent reporting accountant’s assurance report on the compilation of 45 aggregated financial information Annexure 7 The Property Manager and Extracts from the Property Management Agreement 46 Annexure 8 Group structure and Subsidiaries 46 Annexure 9 Capital structure and authorisations 49 Annexure 10 Corporate governance statement 54 Annexure 11 Information on the Directors, management and material third parties 65 Annexure 12 Historical financial information 67 Annexure 13 Key accounting policies of Runway 69 Annexure 14 Summary of loans accounts, funding and funding terms 79 Annexure 15 Valuation summary 82 Annexure 16 Property details 89
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SALIENT FEATURES
The information set out in this section of the Listing Circular is only an overview and is not intended to be comprehensive. It should be read in conjunction with the information contained in other sections of this Listing Circular.
1. INTRODUCTION, NATURE OF BUSINESS AND BUSINESS STRATEGY
1.1. Runway was incorporated as a public company on 30 October 2019. The company’s financial year-end is end February. As at the year-end date, the portfolio had a gross asset value of approximately R1 145 800 000. The loan-to-value ratio is approximately 53% (calculated as interest bearing debt divided by aggregate property values).
1.2. The Company is an internally asset-managed property entity (which will be a REIT, once listed on the ZAR X Stock Exchange) which holds a portfolio of income generating immovable properties focussed primarily in the retail sector, principally located in the greater Gauteng region. Vacancies are low, with the average vacancy level across the portfolio being 3.77%.
1.3. The business began as two separate property portfolios, the one run by the Cendrowski Family since 1998 and the other run by the Marks Family since 2000. In 2009, the Cendrowski and Marks Families joined forces to create a new property portfolio which would be predominantly retail based. Over the years, the business has evolved, through acquisition and redevelopment, into a predominantly family-run quality income-generating South African property business with 28 properties, which have primarily long-term leases at market-related rentals and a diverse tenant base. It is hoped that the Listing will provide the Company with access to more attractive debt funding terms and acquisition opportunities, including through use of the Company’s Shares as future acquisition currency and for future capital raising opportunities. The Company’s investment strategy is focused on the acquisition of predominantly retail properties which are capable of either “value-addition”, distribution enhancement, or both, resulting in value enhancement for Shareholders.
1.4. Asset management is steered internally by the Board, which comprises a team of well-qualified and highly experienced individuals. Profiles of the Directors are set out in paragraph 2.1 of this Listing Circular. The Company’s properties are currently operated and managed by the Property Manager in terms of the Property Management Agreement. The management team has been responsible for the management of the properties since inception and has an in-depth working knowledge of the properties. Details of the Property Manager are set out in paragraph 2.2 of this Listing Circular.
2. STATEMENT AS TO LISTING ON ZAR X
ZAR X has granted Runway a listing of all of its issued Shares on ZAR X under ISIN: ZAEZ00000059 with effect from the commencement of trade on Tuesday, 11 February2020.
3. FURTHER COPIES OF THE LISTING CIRCULAR
The Listing Circular may be obtained on the Company’s Website (at www.runwaypropertygroup.co.za/investors) and on the ZAR X website (at www.zarx.co.za).
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DEFINITIONS AND INTERPRETATIONS
In this Listing Circular and the annexures hereto, unless inconsistent with the context, an expression which denotes one gender includes the other genders, a natural person includes a juristic person and vice versa, the singular includes the plural and vice versa and the expressions set out in the first column bear the meaning assigned to them in the second column.
“Board” or “Directors” or “Board of the board of directors of Runway as set out in paragraph 2 of Runway” this Listing Circular;
“business day” any day other than a Saturday, Sunday or official public holiday in South Africa;
“Cendrowski Family” Collectively Roman Cendrowski and his wife, Ela Cendrowska;
“CEZ Investments” CEZ Investments Proprietary Limited, (registration number 2016/352442/07), a private company incorporated under the laws of South Africa, the shareholding of which is held equally between Roman Cendrowski and Ela Cendrowska;
“Company Advisors” collectively the Appointed Advisor, the company secretary, the Independent Property Valuer and the Independent Reporting Accountants and Auditors;
“Companies Act” or “the Act” the Companies Act, 2008, as amended;
“Companies Regulations” or the Companies Regulations, 2012 promulgated in Government “Regulations” Gazette No. 34239 in terms of section 223 of the Companies Act;
“CSDP” a Central Securities Depository Participant in South Africa appointed by a Shareholder for purposes of holding in custody and administering securities, cash or an interest in securities on behalf of a Shareholder. The ZAR X authorised CSDP is Computershare;
“dematerialised Shares” Runway Shares which have been incorporated into the Strate system, title to which is not represented by Share certificates or other physical documents of title;
“EC” or “E Cendrowska” or “Ela Elzbieta (Ela) Cendrowska; Cendrowska”
“Financial Markets Act” Financial Markets Act (Act 19 of 2012), as amended;
“Forecast Financial Information” the forecast statement of comprehensive income in respect of the Group for the financial years ending 28 February 2020 and 2021, as set out in Annexure 1, and reported on by the Independent Reporting Accountants, which report is set out in Annexure 2;
“Founders” or “Founding the current major Shareholders of the Group being collectively Shareholders” R Cendrowski, E Cendrowska, CEZ Investments, Rino and PSM;
“GLA” gross lettable area;
“government” the government of South Africa;
“Group” or “the Group” collectively, the Company and the Subsidiaries; 9
“Group Restructure” the restructure of the Group in terms of which the Company acquired all the interests from the Founders in Reflect All, Stand 278 and Linden Square in exchange for the issue of Shares in the Company, so as to facilitate the consolidation of the Group, in terms of a share exchange agreement;
“Group Restructure Agreements” the restructure agreements entered into between, inter alia, the Founders and the Company for purposes of facilitating the consolidation of the Group prior to Listing;
“IFRS” International Financial Reporting Standards;
“Income Tax Act” Income Tax Act (Act 58 of 1962), as amended;
“Independent Reporting Accountants De Vos Richards Incorporated (Practice number 914584), a and Auditors” or “Independent partnership formed in terms of the laws of South Africa, full Reporting Accountants” details of which are set out in the “Corporate Information” section;
“Incorporation Date” the date of incorporation of the Company, being 30 October 2019;
“Independent Property Valuer” Quadrant Properties Proprietary Limited (registration number 1995/003097/07), a private company incorporated under the laws of South Africa, an independent external registered professional valuer in terms of the Property Valuers Profession Act, no 47 of 2000, full details of which are set out in the Corporate Information section of the Listing Circular;
“King IV” the Code of Corporate Practices and Conduct in South Africa representing principals of good corporate governance as laid out in the King Report, as amended from time to time;
“Last Practical Date” the last business day before the finalisation of this Listing Circular, being Tuesday, 11 February2020;
“Linden Square” Linden Square Shopping Centre Proprietary Limited (registration number 2002/027189/07), a private company duly incorporated in accordance with the company laws of South Africa;
“Listing” the listing of the entire issued Share capital of the Company on the ZAR X on the Listing Date;
“Listing Circular” this bound document inclusive of all annexures and accompanying forms dated Tuesday, 11 February2020, prepared in compliance with the ZAR X Listings Requirements;
“Listing Date” the date of the Listing, expected to occur as at commencement of trading on the ZAR X on or about Tuesday, 11 February2020;
“Marks Family” collectively, Peter Marks and his sons, Earle and Wayne Marks;
“Material Contracts” the Property Management Agreement, being the only material contract entered into by the Company since its incorporation;
“MOI” the memorandum of incorporation of the Company, extracts of which are set out in Annexure 4;
“net asset value” or “NAV” as determined in accordance with IFRS; 10
“New Heights 224” or “NH 224” New Heights 224 Proprietary Limited (registration number 2000/021246/07), a private company duly incorporated in accordance with the company laws of South Africa;
“New Heights 267” or “NH 267” New Heights 267 Proprietary Limited (registration number 2000/023377/07), a private company duly incorporated in accordance with the company laws of South Africa;
“PM” or “P Marks” Peter Marks;
“Prime Rate” the publicly quoted basic rate of interest levied by Nedbank Limited from time to time on overdraft, calculated on a 365-day year, irrespective of whether the applicable year is a leap year, and provided, prima facie, in the event of a dispute and in the absence of manifest error, by a certificate under the hand of any director or manager of Nedbank, whose appointment and authority need not be approved;
“Pro Forma’s” the pro forma aggregated statement of financial position, statement of comprehensive income and cash flow statement for the Group which illustrates the financial effects of the Group Restructure and the Listing, as set out in Annexure 5, and which has been reported on by the Independent Reporting Accountants as set out in Annexure 6;
“promoter” the party(ies) responsible for the formation of a company to be listed, or acquired by an existing issuer, and who earn(s) a fee therefrom, in cash or otherwise;
“Property Company” a company as defined in the Companies Act whose primary business activities include the purchase and holding of immovable property for investment purposes and for renting, or the purchase of immovable property for development and subsequent retention for investment purposes or sale;
“Property Manager” Leopard Property Management Proprietary Limited (registration number 2019/209595/07) a private company incorporated and registered in accordance with the laws of South Africa;
“Property Management Agreement” the Property Management Agreement between the Company and the Property Manager, entered into on 15 January 2020;
“PSM” PSM Holdings Proprietary Limited (registration number 2002/027487/07), a private company registered under the laws of South Africa, the entire shareholding of which is held by Rino;
“RC” or “R Cendrowski” or “Roman Zbigniew Roman Cendrowski; Cendrowski”
“Rands” or “R” South African Rand, the official currency of South Africa;
“Reflect All” Reflect-All 1025 Proprietary Limited (registration number 2016/348963/07) a private company registered under the laws of South Africa and a wholly owned subsidiary of the Company;
“Register” the register of Dematerialised Shareholders maintained by ZAR X;
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“REIT” a public Company listed on a licensed stock exchange as a Real Estate Investment Trust;
“REIT Profits” the distributable profit of a REIT which is equal to gross income as defined in the Income Tax Act less the deductions and allowances that are permitted to be deducted by a REIT in accordance with, inter alia, section 25BB(2)(b) of the Income Tax Act;
“Runway” or “the Company” Runway Property Group Limited (registration number 2019/547292/06), a public company incorporated and registered in accordance with the laws of South Africa;
“Rino” Rino Properties Proprietary Limited (registration number 2018/612503/07) a private company incorporated and registered in accordance with the laws of South Africa, the shares in which are 50% held by each of Noless Properties Proprietary Limited (which is wholly-owned by the Noless Trust, the beneficiaries of which are Wayne Marks and his immediate family) and Rimon Properties Proprietary Limited (which is wholly-owned by the Rimon Trust, the beneficiaries of which are Earle Marks and his immediate family);
“RSA” or “South Africa” the Republic of South Africa;
“Shareholders” or “Runway holders of Runway Shares, as recorded in the Share register of Shareholders” the Company;
“Special Resolution” a special resolution as defined in section 1 of the Companies Act;
“Stand 278” Stand 278 Strijdom Park Proprietary Limited (registration number 1998/010700/07), a private company incorporated under the laws of South Africa;
“Strate” Strate Proprietary Limited (Registration number 1998/022242/07), a private company which is registered in terms of the Financial Markets Act, a Central Securities Depository responsible for the electronic clearing and settlement of all Shares traded on ZAR X;
“Subsidiaries” or “Subsidiary” the wholly-owned subsidiaries of the Company, as set out in Annexure 8, or each of them as the context implies;
“Tensing” Tensing Trading Proprietary Limited (registration number 2006/013709/07), a private company duly incorporated in accordance with the company laws of South Africa;
“Thistledown” Thistledown Properties Proprietary Limited (registration number 2006/018434/07), a private company duly incorporated in accordance with the company laws of South Africa;
“VAT” value added tax as defined in the Value Added Tax Act, 1991, as amended;
“VWAP” volume weighted average price per Share;
“Website” the Company’s website – www.runwaypropertygroup.co.za;
“ZAPS” the ZAR X Publishing Service which communicates issuer news to Shareholders; 12
“ZAR X” the exchange, licensed under the Financial Markets Act, operated by the ZAR X Limited (registration number 2015/089692/06), a public company incorporated under the laws of South Africa;
“ZAR X Listings Requirements” the Listings Requirements of the ZAR X in force as at the Last Practicable Date;
“ZAR X market participant” an entity as approved and authorised by ZAR X in terms of the ZAR X Operating Rules;
“ZAR X Nominees” an entity approved by the Financial Services Board in terms of section 76 of the Financial Markets Act to hold monies on behalf of investors in a bank account with a bank authorised in terms of the Banks Act (No 94 of 1990) as amended; and
“ZAR X Operating Rules” the Operating Rules, which regulate ZAR X Market Participants and secondary-market trading, as issued by ZAR X from time to time.
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Runway Property Group Limited (Incorporated in the Republic of South Africa) (Registration number 2019/547292/06) ZAR X Share code: “ZXRPG” ISIN for: ZAEZ00000059 (“Runway” or “the Company”)
Directors of the Company
Executive Directors Earle Marks (Chief executive officer) Roman Cendrowski (Executive chairman) Zvi Kaplan (Financial director)
Independent non-executive Directors Shaun Zagnoev (Lead independent director) Avi Gluch Jonathan Bennett
LISTING CIRCULAR - SECTION ONE - INFORMATION ON RUNWAY AND THE PROPERTIES
1. NAME, ADDRESS AND INCORPORATION
1.1. Runway Property Group Limited was incorporated as a public company on 30 October 2019.
1.2. The address of the Company’s registered office is set out in the “Corporate Information” section.
1.3. The company structure including the details of the Subsidiaries are set out in Annexure 8.
2. DIRECTORS, OTHER OFFICE HOLDERS OR MATERIAL THIRD PARTIES
2.1. Directors of the Company
The Board is currently made up of six Directors, of which three are non-executives (all of whom are independent). The Company is seeking to identify and appoint additional independent Directors after its listing. There are no other office holders.
2.1.1. The full names, ages, business addresses, qualifications, positions and experience of the Directors of Runway are outlined below:
Name and age Earle Marks (52)
Business address Block A, 1st Floor, Georgian Place Office Park, 18 Southway Road, Eastgate Extension 6, Johannesburg, 2090
Qualification CA(SA)
Position Chief Executive Officer
Term of office and Appointed with effect from the Company’s listing on expiry ZAR X. No fixed term, with a two-month notice period.
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Experience Earle is a chartered accountant with 25 years’ experience. He started his working career as a retail analyst at Huysamer Stals Stockbrokers, and then went into various trading businesses. He has been actively involved in the Group (which the Marks family founded jointly with the Cendrowski family) since inception as asset and property manager of the properties. With effect from the Date of Listing he will become chief executive officer of the Company.
Name and age Roman Cendrowski (62)
Business address Block A, 1st Floor, Georgian Place Office Park, 18 Southway Road, Eastgate Extension 6, Johannesburg, 2090
Qualification Adequate
Position Chairperson
Term of office and Appointed with effect from the Company’s listing on expiry ZAR X. No fixed term, with a two-month notice period.
Experience Roman Cendrowski is a co-founder of the Group. He was previously involved in various trading business ventures before becoming fully engaged in the property sector in 1998.
Name and age Zvi Kaplan (43)
Business address Block A, 1st Floor, Georgian Place Office Park, 18 Southway Road, Eastgate Extension 6, Johannesburg, 2090
Qualification BCompt Hons, CTA, CA(SA), CIMA (ACMA and CGMA)
Position Financial director
Term of office and Appointed with effect from the Company’s listing on expiry ZAR X. No fixed term, with a two-month notice period.
Experience Zvi did his accounting articles and was employed as a trainee accountant with Fisher Hoffman PKF between 2001 and 2004. In 2002 he completed his board exams and qualified as a chartered accountant. In 2004 Zvi joined a trading company as financial manager until 2006 when he joined SAB Miller as a financial accountant and manager. Since 2010 Zvi has been employed by Exceedprops Management Services, where he is currently (until the Listing Date) employed as financial director. Exceedprops has until the Listing Date provided asset and property management services to the Group. In his spare time, Zvi volunteers as a paramedic.
The audit and risk committee has assessed and is satisfied that the financial director, Mr Z Kaplan, has 15
the necessary skills and qualifications to fulfil his responsibilities as financial director.
Name and age Shaun Zagnoev (53)
Business address 1st Floor, 11 Crescent Drive, Melrose Arch, Johannesburg, 2196
Qualification BSc (Elec Eng) – Wits, MSc (Elec Eng) – Wits, MBA – Wits
Position Independent non-executive director
Experience Shaun spent two years in strategic consulting to large listed entities with Gemini Consulting, a global management consulting firm. He was involved in strategic consulting to large listed companies. He then spent 23 years until 2018 with Ethos Private Equity, the largest private equity firm in South Africa, the last fund in which he was involved being a USD800m fund. He played a key role, mainly in capacity as a partner, sourcing investment opportunities, managing the investments and ultimately selling of them, including Sportsmans Warehouse, Cobra, Tiger Wheel & Tyre and Twinsaver. In late 2018, Shaun joined forces with Craig Lazarus and Greg Kinross to establish Evolve Capital Partners, which is an investment firm which acquires minority stakes in small to medium companies across multiple industries, also providing guidance to these companies while not playing an operational role. Prior to the formation of Evolve Capital Partners, Craig Lazarus had established a private equity portfolio comprising of high growth differentiated businesses which is also being managed by Evolve. Shaun also has extensive property experience, having personally invested in an array of local and international properties, both in the residential and retail sectors. He is currently the National Chairperson of the South African Jewish Board of Deputies, which is the political spokesbody of the Jewish community and is the umbrella body for all Jewish organisations.
Name and age Avi Gluch (45)
Business address 20th Floor, Sandton City Office Tower, 5th Street, Sandown, 2196
Qualification BA, LLB, LLM (Tax), admitted attorney
Position Independent non-executive director
Experience Avi obtained his BA degree from the University of Cape Town in December 1996, his LLB degree from the University of Cape Town in December 1999 and his LLM (Tax) degree from the University of Witwatersrand in December 2004. Avi practised as an attorney for his own account for 12 years before joining 16
TWB – Tugendhaft Wapnick Banchetti and Partners as a partner in June 2017.
Name and age Jonathan Bennett CA(SA) (45)
Business address 3 Andries Street, Bramley, Johannesburg, 2196
Qualification Bachelor of Business Science, CA(SA)
Position Independent non-executive director
Experience Jonathan graduated from the University of Cape Town with a Bachelor of Business Science (Finance) and went on to qualify as a Chartered Accountant. Jonathan has been involved in the unsecured lending as well as the debt collection industry for over 20 years. Jonathan is a serial entrepreneur who has founded and sold several businesses over his career. Jonathan is currently the operations and financial director of the Landau Group of companies which currently employs more than 250 people.
All of the Directors are South African nationals.
2.2. Property management
The Company’s properties are currently operated and managed by the Property Manager in terms of the Property Management Agreement. The management team has been responsible for the management of the properties since 2007 and has an in-depth working knowledge of the properties. The salient details of the Property Management Agreement, together with details of the Property Manager, are set out in Annexure 7 of this Listing Circular.
2.3. Runway advisors and company secretary
2.3.1. The names and business addresses of the Company Advisors are set out in the “Corporate Information” section.
2.3.2. Watermans fulfils the role of company secretary. Their business address is set out in the “Corporate Information” section.
2.3.3. The Company Advisors and the company secretary do not have any interests in Runway Shares.
2.4. Additional information related to the Directors
2.4.1. Annexure 11 contains the following information:
2.4.1.1. Directors’ emoluments;
2.4.1.2. borrowing powers of the Company exercisable by the Directors;
2.4.1.3. interests in Shares and transactions;
2.4.1.4. interests of Directors, management and promoters; and
2.4.1.5. Directors’ declarations.
2.4.2. The key provisions of the MOI with regard to the following are set out in Annexure 4:
2.4.2.1. the borrowing powers exercisable by the Directors and how such borrowing powers can be varied; and 17
2.4.2.2. retirement or non-retirement of Directors under an age limit.
3. HISTORY, STATE OF AFFAIRS AND PROSPECTS OF THE COMPANY
3.1. History and nature of business
3.1.1. Runway was incorporated as a public company on 30 October 2019. The company’s financial year-end is end February. Pursuant to the Group Restructure, the Company holds a property portfolio which, as at the year-end date, had a gross asset value of R1 145 800 000, with a loan-to-value ratio of approximately 53% (calculated as interest bearing debt divided by aggregate property values).
3.1.2. The Company is an internally asset-managed property entity (which will be a REIT, once listed on the ZAR X Stock Exchange) which holds a portfolio of income generating immovable properties focussed primarily in the retail sector, principally located in the greater Gauteng region.
3.1.3. The business began as two separate property portfolios, the one run by the Cendrowski Family since 1998 and the other run by the Marks Family since 2000. In 2009, the Cendrowski and Marks Families joined forces to create a new property portfolio which would be predominantly retail based. Over the years, the business has evolved, through acquisition and redevelopment, into a predominantly family-run quality income-generating South African property business with 28 properties, which have primarily long-term leases at market- related rentals and a diverse tenant base. It is hoped that the Listing will provide the Company with access to more attractive debt funding terms and acquisition opportunities, including through use of the Company’s Shares as future acquisition currency and for future capital raising opportunities. The Company’s investment strategy is focused on the acquisition of predominantly retail properties which are capable of either “value-addition”, distribution enhancement, or both, resulting in value enhancement for Shareholders.
3.1.4. Asset management is steered internally by the Board, which comprises a team of well-qualified and highly experienced individuals. Profiles of the Directors are set out in paragraph 2.1 of this Listing Circular. The Company’s properties are currently operated and managed by the Property Manager in terms of the Property Management Agreement. The management team has been responsible for the management of the properties since inception and has an in-depth working knowledge of the properties.
3.2. Investment mandate and growth strategy
3.2.1. The Board is responsible for the investment decisions of Runway.
3.2.2. The executive Directors shall be responsible for:
3.2.2.1. identifying, researching and evaluating potential investment opportunities for Runway;
3.2.2.2. monitoring and evaluating current Runway investments and making recommendations to the Runway Board regarding any investment decision.
3.3. Prospects
It is the Company’s intention to expand through acquisitions at attractive pricing and to take advantage of the current favourable market conditions. 18
3.4. Material changes
There have been no material changes in the business or trading objects of Runway for the period from the Company’s date of incorporation to the Last Practical Date.
3.5. Material commitments, lease payments and contingent liabilities
The company has no material commitments, lease payments and contingent liabilities, other than for the borrowings, the funding terms of which are set out in Annexure 14.
4. INFORMATION REGARDING THE PROPERTIES
4.1. The Properties have been valued by the Independent Valuer (copies of each of the valuation reports in respect of each property are available for inspection – refer to Documents available for inspection). A summarised valuation report is set out in Annexure 15.
4.2. Set out and based on the Forecast Financial Information referred to in paragraph 20.1, by both GLA and rental income are the following profiles:
4.2.1. a sectoral profile, reflecting that 85% of the portfolio (by forecast rental income) and 77% by GLA comprises retail (predominantly neighbourhood shopping centres):
Sector breakdown - Forecast rent to 2021
6% 5% 4%
85% Industrial Retail Office Residential
Sector breakdown - GLA
3% 9% 11%
77% Industrial Retail Office
Residential 4.2.2. a lease expiry profile (by forecast rental income to 2021 and below that, by GLA), reflecting well-distributed expiries over the next five years and onwards: 19
Expiring leases - Forecast rental income - 2021
Leases expiring in 2019 5% Leases expiring in 2020 29% 19% Leases expiring in 2021 14% 18% Leases expiring in 2022 15% Leases expiring in 2023
Leases expiring in 2024 +
Expiring leases - GLA
Leases expiring in 2019 5% Leases expiring in 2020 29% 19% Leases expiring in 2021 17% 16% Leases expiring in 2022 14% Leases expiring in 2023
Leases expiring in 2024 +
4.2.3. a tenant profile (by forecast rental income):
Tenant breakdown - Rental income forecast - 2021
5% A - Nationals and franchises
40% 55% B - Medium-sized businesses
C - Residential, SMEs and other
4.2.4. a tenant profile (by GLA): 20
Tenant breakdown - GLA
9% A - Nationals and franchises 51% 40% B - Medium-sized businesses
C - Residential, SMEs and other
4.3. Set out in Annexure 16 is the specific information on each of the properties, namely the description of the property (each of which are freehold), its current use and its location (all of which are based in Gauteng, other than Sasolburg Square Shopping Centre, which is located in Sasolburg in the Free State), the rentable area of the property, the date of acquisition of the property and its purchase price, and the current market value of the property as determined by the Independent Valuer. The weighted average rental for the property portfolio for the financial year ended February 2019 is R95.78 per square metre.
5. SHARE CAPITAL OF THE COMPANY
5.1. The authorised and issued Share capital of the Company as at the Last Practical Date was as follows. There will be no change immediately after the Listing. Number of Shares R’000 Authorised Share capital Ordinary Shares of no par value 1 000 000 000 -
Issued Share capital Stated capital – ordinary Shares of no par value 47 995 092 47 995
Total 47 995 092 47 995
On the Listing Date the Company will not have any founder or deferred Shares.
5.2. There are no Shares being offered pursuant to the Listing, the Listing being implemented by way of an introduction. The Shares are being listed at a listing price of R10.00 per Share.
5.3. The Company has no treasury Shares in issue and there are no restricted Shares. There have been no changes to the Company’s authorised Share capital since its incorporation. Other than the Shares which were issued upon the incorporation of the Company, pursuant to the Group Restructure and to group companies in advance of their transfer to participating staff members, there have been no other issues, repurchases or offers of securities of the Company since the date of incorporation of the Company.
5.4. No Shares have any preferential conversion or exchange rights. All Shares rank parri passu with regard to voting rights, dividends, profits or capital, rights on liquidation and distribution of capital assets. All Shares in the Company will be listed on ZAR X and will be held in dematerialised format. As such, there will be no physical certificates evidencing the Shares.
5.5. There will be no fractions of Shares in existence at the time of the Listing. 21
5.6. Neither the Company nor its Subsidiaries have offered any of its securities to the public for subscription or sale during the three years preceding the Last Practical Date.
5.7. The Group structure, together with the name, registration number, date and place of incorporation and date on which each subsidiary became a Subsidiary, beneficial Shareholding by the Company therein, nature of business and issued Share capital of each of the Subsidiaries is set out in Annexure 8. There are no Associate companies and none of the Subsidiaries is listed on any stock exchange.
5.8. Annexure 9 contains the following salient information relating to the authorised and issued Share capital:
5.8.1. authorisations;
5.8.2. rights attaching to Shares;
5.8.3. alterations to Share capital;
5.8.4. issues and repurchases of Shares in the preceding three years; and
5.8.5. statement as to listing on stock exchange.
5.9. Major and controlling Shareholders
5.9.1. Set out below are the names of Shareholders who are, directly or indirectly, beneficially interested in 5% or more of the issued Share capital as at the Last Practical Date. Number of Percentage of Name of Shareholder Shares issued Shares CEZ 15 583 530 32,47 E Cendrowska 4 170 933 8,69 R Cendrowski 4 170 933 8,69 PSM 15 583 530 32,47 Rino 8 341 866 17,38 Total 47 850 792 99,70
5.9.2. As at the Last Practical Date and at commencement of trading on the Listing Date, there is no single controlling Shareholder. In advance of any potential equity raise, subject to finalisation of associated terms, the Founding Shareholders envisage consolidating their holdings in the Company into a single holding company, Markscend Group Holdings Proprietary Limited, formed for such purpose, in terms of section 42 of the Income Tax Act.
5.9.3. The Board has undertaken to ZAR X and ZAR X has agreed as a pre-condition for the Listing that within three years after the Listing Date the Company will have utilised its best commercial endeavours to achieve a targeted 30% public spread level and that within one year of the Listing Date, it will have utilised its best commercial endeavours to achieve a 10% public spread level.
6. OPTIONS AND PREFERENTIAL RIGHTS IN RESPECT OF SHARES
There are no preferential conversion and/or exchange rights in respect of any Shares of the Company.
7. EMPLOYEE SHARE INCENTIVE SCHEME
The Company does not have an employee Share incentive scheme in place. 22
8. COMMISSIONS PAID OR PAYABLE IN RESPECT OF UNDERWRITING
8.1. There have been no commissions paid or payable in respect of underwriting by the Company for the period from the date of incorporation of the Company to the date of this Listing Circular.
8.2. No other commissions, discounts or brokerages have been paid nor have any other special terms been granted in connection with the issue or sale of any Shares in the Share capital of the Company, for the period from the date of incorporation of the Company to the date of this Listing Circular.
8.3. Runway is not subject to any royalty agreements and no royalties are payable by the Company.
8.4. Save for the Property Management Agreement, further details of which are set out in Annexure 7 of this Listing Circular, the Company is not subject to any other management agreements and does not propose to enter into other management agreements.
9. MATERIAL CONTRACTS
Save for the Property Management Agreement, further details of which are set out in Annexure 7 of this Listing Circular, the Company has not entered into any other material contract, being a contract entered into otherwise than in the ordinary course of business, within the two years prior to the date of this Listing Circular or at any time containing an obligation or settlement that is material to the Company at the date of this Listing Circular.
10. INTERESTS OF DIRECTORS AND PROMOTERS
Details of the Directors’ and promoters’ interests in the Company are set out in paragraph 3 of Annexure 11 to this Listing Circular.
11. LOANS AND BORROWINGS
11.1. Material borrowings to the Company
As at the Last Practical Date, there have been no material borrowings advanced to the Company, other than those detailed in Annexure 14.
11.2. Material loans advanced by the Company
No material loans had been advanced by the Company or any of the Subsidiaries as at the Last Practical Date.
12. SHARES ISSUED OR TO BE ISSUED OTHERWISE THAN FOR CASH
No Shares have been issued or agreed to be issued by the Company or any of its Subsidiaries since incorporation of the Company otherwise than in terms of the Group Restructure or for cash.
13. PROPERTIES, ASSETS AND BUSINESS UNDERTAKINGS ACQUIRED OR TO BE ACQUIRED
No immovable properties and/or fixed assets and/or business undertakings have been acquired by Runway since the date of incorporation of the Company or are proposed to be acquired by the Company (or which the Company has an option to acquire) in the immediate future, other than in the ordinary course of business.
14. PURPOSES OF THE LISTING
14.1. The main purposes of the Listing are to: 23
14.1.1. provide investors, both institutional and private, with an opportunity to participate over the long term in the income streams and future capital growth of the Company;
14.1.2. enhance the liquidity and tradability of the Shares;
14.1.3. provide access to bank or institutional funding on more attractive terms than are available to unlisted companies;
14.1.4. provide the Company with a platform to raise equity funding to pursue growth and investment opportunities in the future; and
14.1.5. enhance the public profile and general public awareness of Runway.
14.2. The main purposes of this Listing Circular are to provide relevant information relating to the Company and the proposed Listing on ZAR X.
15. SALIENT DATES AND TIMES
15.1. The listing will take place at commencement of trading on Tuesday, 11 February2020.
15.2. Shares may only be traded on ZAR X in electronic form (as dematerialised Shares) in a Segregated Depository Account in the name of the beneficial owner and will be trading for electronic settlement in terms of Strate immediately following the Listing.
15.3. Strate is a system of “paperless” transfer of securities. If you have any doubt as to the mechanics of Strate please consult your ZAR X market participant, CSDP or other appropriate advisor and you are referred to the Strate website (www.strate.co.za).
15.4. Some of the principal features of Strate are:
15.4.1. electronic records of ownership replace materialised certificates and physical delivery of such certificates;
15.4.2. trades executed on ZAR X must be settled on a real-time basis, or T+0;
15.4.3. all investors owning dematerialised Shares or wishing to trade their securities on ZAR X are required to appoint a ZAR X market participant and the CSDP to act on their behalf and to handle their clearing and settlement requirements;
15.4.4. an investor may only request a statement of Shareholding as confirmation of his or her Shareholding, but the account must always be held in the name of the beneficial owner at Strate; and
15.4.5. subject to the agreement between the investor and the broker / market participant, generally in terms of the rules of Strate, the investor is entitled to instruct the broker /market participant as to how he or she wishes to exercise the rights attaching to the Shares and/or to attend and vote at Shareholder meetings.
16. MINIMUM SUBSCRIPTION
The listing is by way of introduction, there being no capital raise and as such is not conditional on raising any amount.
17. STATEMENT AS TO LISTING ON STOCK EXCHANGE
ZAR X has granted Runway approval for the Listing of 47 995 092 Shares on ZAR X under ISIN: ZAEZ00000059. It is anticipated that the Listing will be effective as from the commencement of trade of ZAR X on Tuesday, 11 February 2020.
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SECTION TWO – FINANCIAL INFORMATION
18. REPORT BY DIRECTORS AS TO MATERIAL CHANGES
There have been no material changes in the assets or liabilities of the Company since the date of incorporation of the Company and the date of this Listing Circular.
19. HISTORICAL FINANCIAL INFORMATION
19.1. As the Company was incorporated on 30 October 2019, there is no audited historical financial information available on the Company.
19.2. The historical financial information for the financial year ended 28 February 2019 for each of Reflect All, Stand 278 and Linden Square, being the three entities in which all Properties (directly or indirectly) are housed, is set out in Annexure 12, on an unconsolidated basis. The Group will be consolidated for the financial year ending February 2020 onwards. All rental income reflected in the historical financial information was derived from contracts for the leasing of property.
19.3. The key accounting policies of Runway are presented in Annexure 13.
20. FORECAST FINANCIAL INFORMATION
20.1. The Forecast Financial Information, together with the Independent Reporting Accountant’s report thereon, is presented in Annexures 1 and 2, respectively.
21. PRO FORMA AGGREGATED FINANCIAL INFORMATION
21.1. The pro forma aggregated statement of financial position, pro forma aggregated statement of comprehensive income and cash flow statement for the Group, which illustrate the financial effects of the Group Restructure and the Listing, are set out in Annexure 5. The report by the Independent Reporting Accountants thereon is set out in Annexure 6.
22. LIQUIDITY
The Directors of the Company are of the opinion that the issued capital of the Company is adequate for the purposes of the business of the Company, for at least the next 12 months from the date of issue of this Listing Circular.
The planned ongoing capital raising program via the issuance of Shares, as well as the use of scrip to acquire assets will assist in meeting the Company’s planned growth projections.
Where portions of the balance sheet are locked into underlying investments that are committed for prescribed periods of time, the Directors will ensure that there are sufficient liquid assets on the balance sheet to meet ongoing capital requirements.
The Company will generate cash predominantly from rental income and dividends received from the Subsidiaries.
The allocation of cash to repurchase Shares will only be implemented if the Company has sufficient cash reserves to do so without impeding its ability to meet its working capital requirements. The are no plans to repurchase Shares in the near future.
23. ANALYSIS OF CAPITAL RESOURCES
Future property acquisitions will be funded in part through acquisition issues and through the Company’s proposed future Share issuance programme to raise cash, together with bank or financial institution funding as and when future property acquisition opportunities are identified. 25
Hence, the Directors are of the opinion that the Company will always be able to maintain a prudent level of capital resources to meet its development and business growth activities.
24. OFF-BALANCE SHEET ARRANGEMENTS
The company has not entered into any off-balance sheet arrangements as at the Last Practical Date.
25. TRANSACTIONS WITH RELATED PARTIES
Neither the Company nor its Subsidiaries has entered into any transactions with related parties over the past three years, other than for ordinary course shareholder loans (all of which will be settled during the financial year commencing 1 March 2020), details of which are set out in Annexure 14.
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SECTION THREE – ADDITIONAL MATERIAL INFORMATION
26. RISK POLICY AND FACTORS
The risk policy adopted by the Audit and risk committee together with the risk factors in relation to Runway, are set out in Annexure 3.
27. APPOINTED ADVISOR
27.1. The Appointed Advisor of the Company at the Listing Date is Ab Initio Advisory Proprietary Limited, which:
27.1.1. is a private company incorporated in accordance with the laws of South Africa. The Appointed Advisor does not own or exercise control over (directly or indirectly) any Shares in the Company;
27.1.2. is not, as at the Last Practical Date, or has not been within the ten years prior to the Last Practical Date, a director or executive officer of any person or company that, while the Appointed Advisor was acting in that capacity, or within a year of that person ceasing to act in that capacity, has become insolvent, or has made a proposal under any legislation relating to liquidation, insolvency or was subject to or instituted any proceedings, arrangements or compromise with creditors or had a custodian, judicial manager or trustee appointed to hold assets;
27.1.3. has not, within the ten years prior to the Last Practical Date, become insolvent, made a proposal under any legislation relating to insolvency or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold its assets;
27.1.4. has not been liable for any penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor in making an investment decision.
28. GOVERNMENT PROTECTION AND INVESTMENT ENCOURAGEMENT LAW
There is no government protection or any investment encouragement law pertaining to any of the businesses operated by the Company.
29. CORPORATE GOVERNANCE
The Company is fully compliant with the corporate governance principles as set out in section 6 of the ZAR X Listings Requirements The Board has outlined the corporate governance statement set out in Annexure 10, which statement is also available on the Company’s Website.
30. LEGAL PROCEEDINGS
There are no legal or arbitration proceedings, including any proceedings that are pending or threatened, of which Runway is aware, that may have or have had in the period since the date of the Company’s incorporation until the Last Practical Date, a material effect on the Company’s or any Subsidiary’s financial position.
31. REGULATORY ACTIONS
No penalties or sanctions have been imposed against the Company by a court or regulatory body and no settlement agreements have been entered into since the date of incorporation of the Company. 27
32. DIRECTORS’ RESPONSIBILITY STATEMENT
The Directors, whose names are given in paragraph 2.1.1 of this Listing Circular, collectively and individually, accept full responsibility for the accuracy of the information given herein and certify that, to the best of their knowledge and belief, no facts have been omitted which would make any statement false or misleading, and that all reasonable enquiries to ascertain such facts have been made and that this Listing Circular contains all information required by law and the ZAR X Listings Requirements.
33. CONSENTS
Each of the Company Advisors has consented in writing to act in the capacities stated and to their names appearing in this Listing Circular and have not withdrawn their consent prior to the publication of this Listing Circular.
34. INTEREST OF THE COMPANY ADVISORS
None of the Company Advisors have any direct or indirect interests in the property or Shares of the Company or of a Related Person of the Company and none of such persons is or is expected to be elected, appointed or employed as a director, officer or employee of the Company or of any associate or affiliate of the Company.
35. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents (or copies thereof) will be available for inspection on the Company’s Website and at the Company’s registered office during business hours from Tuesday, 11 February 2020 up to and including Monday, 24 February 2020:
35.1. the signed Listing Circular;
35.2. the MOI as approved by ZAR X;
35.3. the Material Contracts;
35.4. the valuation reports referred to in paragraph 4.1;
35.5. the historical financial statements referred to in paragraph 19.2 above.
35.6. the Board resolution authorising the Listing;
35.7. the letters of consent referred to in paragraph 33 above; and
35.8. a summary of the Directors’ service contracts;
35.9. the Shareholder resolutions, details of which are set out in Annexure 9.
36. CERTIFICATE AND BOARD STATEMENT
Pursuant to a resolution duly passed by its Board of Directors, Runway hereby applies for the Listing of the Company’s Shares on ZAR X. The foregoing contains full, true and plain disclosure of all material information relating to Runway. It contains no untrue statement of a material fact and does not omit to state a material fact that is required to be stated or that is necessary to prevent a statement that is made from being false or misleading in light of the circumstances in which it was made.
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By signing this Listing Circular, the chief executive officer, chairman and the financial director, duly authorised as such by resolution dated on or around Monday, 20 January 2020, hereby declare on behalf of the Company that no material changes occurred with regards to the business and financial affairs of the Company since the Company’s incorporation on 30 October 2019.
Dated at Sandton on Monday, 10 February 2020.
Roman Cendrowski Earle Marks Chairperson Chief Executive Officer
Zvi Kaplan Financial Director For: Watemans Corporate Services Proprietary Limited Company secretary
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Annexure 1
FORECAST FINANCIAL INFORMATION
Forecast Income Statement 28 February 2020 28 February 2021
Rental Income 127 558 969 142 333 800 Rental Income 127 558 969 142 333 800
Other Income 63 022 993 117 767 658 Assessment Rates Recovered 9 320 231 9 451 022 Electricity Recovered 45 127 544 46 734 995 Fair Value Adjustment - 53 047 072 Refuse Recovered 2 405 241 2 678 536 Security Recovered 685 428 758 223 Water & Sewerage Recovered 5 484 549 5 097 810
Total Expenses 103 339 803 91 808 317 Accounting Fees 449 281 711 669 Assessment Rates 14 008 501 14 145 193 Bank Charges 15 264 22 800 Cleaning 1 590 824 1 529 596 Electricity 42 019 830 42 133 547 Garden & Landscaping 134 699 139 912 Insurance 242 510 690 496 Levies 379 996 280 884 Listing Fees 2 000 000 - Management Fees 20 604 254 7 220 366 Meter Reading 303 911 313 080 Pest Control 143 495 189 867 Professional Fees 549 648 - Refuse 1 743 205 1 857 960 Repairs & Maintenance. 3 308 514 4 460 672 Salaries & Wages 2 583 594 4 333 063 Security 7 778 053 8 656 202 Water & Sewerage 5 484 224 5 123 010
Net Profit Before Interest & Tax 87 242 160 115 246 069
57 755 193 55 340 000 Interest Paid 58 272 045 56 880 000 Interest Received -516 852 -1 540 000
Distributable Income 29 486 966 59 906 069 No. of Shares 47 995 092 47 995 092
Distribution per Share 0.61 1,25
11022020 30
Notes and Assumptions 1. All revenue is assumed to be contracted, with no uncontracted income. 2. Contracted revenue is based on existing lease agreements including any escalations, all of which leases are valid and enforceable. 3. All utility recoveries are either based on meter readings or as agreed to in the leases. These recoveries are assumed to increase as council charges increase. 4. Current vacant space has been assumed to remain vacant. 5. Leases expiring during the forecast period have been assumed to renew at current market rates. 6. Property operating expenditure has been forecast on a line-by-line basis for each property based on management's review of historical expenditure. Forecast expenditure is not expected to vary materially from historic expenditure except for the line items in note 7. 7. Accounting and audit fees have increased due to the Listing. Property management fees have decreased due to project management fees having historically been included in management fees (this not being the case going forward), together with the conclusion of a new property management agreement at lower fees and certain salaries, previously incurred by the property manager, being assumed by Runway. 8. A fair value adjustment of 4,7% has been assumed for the year ending 28 February 2021. No fair value adjustment has been assumed in the 2020 year due to recent valuations and the adoption of a prudent approach. 9. An average interest rate of 9% (nominal annual compounded monthly) has been assumed to be incurred on all bank funding.
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Annexure 2
INDEPENDENT REPORTING ACCOUNTANT’S REPORT ON THE FORECAST FINANCIAL INFORMATION
To the directors of Runway Property Group Limited
6 February 2020
Report on the identified property forecast information We have undertaken a reasonable assurance engagement in respect of the accompanying property forecast of Runway Property Group Limited for the years ending 28 February 2020 and 28 February 2021 set out in Annexure 1, comprising the forecast statement of profit or loss and other comprehensive income and the vacancy and lease expiry profile of the property portfolio as a whole (the forecast information), as required by the ZAR X Listings Requirements (the “Forecast Financial Information”).
We have also undertaken a limited assurance engagement in respect of the Directors’ assumptions used to prepare and present the Forecast Financial Information, disclosed in the assumptions to the Forecast Financial Information, as required by the ZAR X Listings Requirements (the “Assumptions”).
Directors’ responsibility for the Forecast Financial Information and for the assumptions used to prepare the Forecast Financial Information The Directors are responsible for the preparation and presentation of the Forecast Financial Information and for the reasonableness of the Assumptions in accordance with the ZAR X Listings Requirements. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the Forecast Financial Information on the basis of those Assumptions that is free from material misstatement, whether due to fraud or error.
Inherent Limitations Actual results are likely to be different from the Forecast Financial Information since anticipated events frequently do not occur as expected and the variation may be material. Consequently, readers are cautioned that this Forecast Financial Information may not be appropriate for purposes other than described in the purpose of the report paragraph below.
Our independence and quality control We have complied with the independence and other ethical requirements of Sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018) and parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes), which are founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively.
De Vos Richards (The firm) applies International Standard on Quality Control 1 and, accordingly, maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
Limited assurance engagement on the reasonableness of the Directors’ Assumptions Reporting accountant’s responsibility Our responsibility is to express a limited assurance conclusion on whether anything has come to our attention that causes us to believe that the Assumptions do not provide a reasonable basis for the preparation and presentation of the Forecast Financial Information in accordance with the ZAR X Listings Requirements, based on the procedures we have performed and the evidence we have obtained. We conducted our limited assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3400, The Examination of Prospective Financial Information (ISAE 3400), issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to obtain limited
32
assurance about whether the Directors’ Assumptions provide a reasonable basis for the preparation and presentation of the Forecast Financial Information. A limited assurance engagement undertaken in accordance with ISAE 3400 involves assessing the source and reliability of the evidence supporting the Assumptions. Sufficient appropriate evidence supporting such Assumptions would be obtained from internal and external sources including consideration of the Assumptions in the light of historical information and an evaluation of whether they are based on plans that are within the entity’s capacity. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. The procedures we performed were based on our professional judgement and included inquiries, observations of processes performed, inspection of documents, analytical procedures, evaluating the reasonableness of best- estimate assumptions and agreeing or reconciling with underlying records. Our procedures included evaluating the Directors’ best-estimate assumptions on which the Forecast Financial Information is based for reasonableness. The procedures performed in a limited assurance engagement vary in nature from, and are less in extent than for, a reasonable assurance engagement. As a result, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance opinion about whether the Assumptions provide a reasonable basis for the preparation and presentation of the Forecast Financial Information.
Limited assurance conclusion on the reasonableness of the Directors’ Assumptions Based on the procedures we have performed and evidence we have obtained, nothing has come to our attention that causes us to believe that the Assumptions do not provide a reasonable basis for the preparation and presentation of the Forecast Financial Information for the years ending 28 February 2020 and 28 February 2021.
Reasonable assurance engagement on the Forecast Financial Information Reporting accountant’s responsibility Our responsibility is to express an opinion based on the evidence we have obtained about whether the Forecast Financial Information is properly prepared and presented on the basis of the Assumptions and in accordance with the ZAR X Listings Requirements. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3400, The Examination of Prospective Financial Information (ISAE 3400), issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether such Forecast Financial Information is properly prepared and presented on the basis of the Assumptions to the Forecast Financial Information and in accordance with the ZAR X Listings Requirements. A reasonable assurance engagement in accordance with ISAE 3400 involves performing procedures to obtain evidence that the Forecast Financial Information is properly prepared and presented on the basis of the Assumptions and in accordance with the ZAR X Listings Requirements. The nature, timing and extent of procedures selected depend on the reporting accountant’s judgement, including the assessment of the risks of material misstatement, whether due to fraud or error, of the Forecast Financial Information. In making those risk assessments, we considered internal control relevant to the Company’s preparation and presentation of the Forecast Financial Information.
Our procedures included: Inspecting whether the Forecast Financial Information is properly prepared on the basis of the Assumptions;
Inspecting whether the Forecast Financial Information is properly presented and all material assumptions are adequately disclosed, including a clear indication as to whether they are best-estimate assumptions; and
Inspecting whether the forecast statement of profit or loss and other comprehensive income is prepared on a consistent basis with the historical financial statements, using appropriate accounting policies.
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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Opinion on the Forecast Financial Information In our opinion, the Forecast Financial Information is properly prepared and presented on the basis of the Assumptions and in accordance with the ZAR X Listings Requirements for the years ending 28 February 2020 and 28 February 2021.
Purpose of the report This report has been prepared for the purpose of satisfying the requirements of the ZAR X Listings Requirements and for no other purpose.
De Vos Richards Per: L de Vos Partner Registered Auditors Chartered Accountants (SA)
Clearview Office Park, Block C, Unit 11 77 Wilhelmina Avenue Constantia Kloof 1709
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Annexure 3
RUNWAY RISK POLICY AND RISK FACTORS
With the assistance of the audit and risk committee, the Board monitors the significant risks to which the Company is exposed. It also ensures that risks are taken within a reasonable appetite and that sufficient safeguards are put in place to mitigate such risks.
Runway’s risk policy will be further formalised and enhanced in the future to define and provide detailed parameters around the Company’s risk appetite, which will contribute to the Company achieving its strategic objectives.
The significant risks facing the Company, as well as the impact of these risks, are set out below:
MATERIAL STAKEHOLDER POTENTIAL MITIGATION RESPONSE MATTER RISK GROUP IMPACT AFFECTED
1. Above average › Investors › Failure to recover › Vigilant credit control by levels of arrears, › Providers of amounts owing the Property Manager legal handovers and capital › Negative impact on › Attorneys following up bad debts › Employees cash flow hand-overs in conjunction › Large write-offs in with Property Manager the income statement. › Screening and vetting of new tenants, including rigorous credit checks › Appropriate and conservative provisioning › Provision for bad debts regularly reviewed › Continued engagement with tenants › Willingness to negotiate lease terms to retain tenants › Deposits and suretyships / guarantees required from tenants. 2. Above average › Investors › › Negative impact on › Incentives put in place to vacancies in Providers of capital the Company’s encourage brokers to focus on properties and › Tenants › revenue stream, vacancies failure to retain Employees resulting in failure to › Management of expiry tenants meet budgets profiles: spread over a › Deteriorating number of years with a building values and maximum tolerance level of net asset value. 30% of all leases expiring in any one year › Emphasis on retention of existing tenants on lease expiries and tracking successful retentions with a minimum of 70% of all tenants to be retained › Regular contact with external leasing brokers › Monthly and weekly analysis performed on current and projected vacancy levels,
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taking expiring leases into account › Continued engagement with tenants › Willingness to negotiate leases to retain tenants › Continual review of information systems and data analysis tools to ensure accurate information is available on demand › Leasing strategy per property › Tenant incentives such as relocation options. 3. Liquidation of › Investors › Immediate negative › Significant diversification in major tenant › Providers of impact on financial tenant mix with regard to type capital results of premises and geographical › Tenants › Difficulty in re- location. letting large areas. 4. Underperforming › Investors › Reduction in share › Ad hoc strategic sessions vs. the market: › Providers of price › Setting of financial targets distribution growth, capital › Potential takeover and strategic priorities and capital growth and › Employees target at a price not monitoring of these goals by market reflective of the the Board capitalisation underlying asset › Purchase of new properties growth value › Disposal of › Unable to attract underperforming and non- new capital. core properties › Effective asset management including redevelopments and/or refurbishments › Targeting distribution growth. 5. Municipalities fail › Investors › Buildings may be › Pre-paid meters in all to take actual › Providers of undercharged, residential properties readings and bill on capital resulting in accruals › dedicated staff regularly estimates › Tenants being raised, which liaise with councils and › Property managers may be inaccurate. municipalities› External › Service providers meter reading consultants allow accurate billing to tenants › Tenants are advised on the methods of calculating their usage, which could result in savings being achieved, if usage patterns are improved. 6. Disruption of › Investors › Inability of tenants › Installation of generators at electricity and › Providers of to trade, which may certain buildings to keep water supply capital result in their electricity supplies available through load › Tenants inability to pay › Solar under consideration shedding, droughts › Property managers rentals and operating for retail properties and water cuts › Service providers costs, thus negatively › Installation of water tanks impacting the for water harvesting under Company’s net consideration. income. 7. Increases in the cost › Investors › Significant utility › Various methods of of utilities › Providers of cost increases will achieving savings on utility capital impact tenants’ costs are being investigated › Tenants ability to service
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› Property managers rental liabilities and and introduced, including › Service providers operating costs, solar increasing lease › Tenants are being advised default risk which on the methods of calculating would negatively their usage, which could impact the result in savings being Company’s net achieved, if usage patterns are income. improved › Utility management with a minimum of 100% recovery expected. 8. Interest rate risk › Investors › Increase in interest › Debt to asset ratio is limited › Providers of rates will have a to 60% capital negative impact on › Continual monitoring of the Company’s hedging options. financial results and returns to investors. 9. Changes to forecast › Investors › Reduction in › Monthly analysis of distributions are not › Providers of distributions with projected income and picked up timeously capital related effect on expenses share price. › Forecasts prepared, including current financial year and future periods › Quarterly Board reporting on forecast distributions and variances to budget and prior period forecasts › Risks to forecast distributions highlighted and quantified at quarterly Board meeting. 10. Properties are › Investors › › Reductions in › Municipal publications undervalued for Providers of capital distributions due to reflecting updated valuations rates purposes › Property managers an increase in rates are constantly monitored expenses, which › Where municipal valuations cannot all be passed are materially lower than the on to tenants. Company’s values, these are noted as future risks to future income › Objections are filed when council unreasonably increases valuations for rates purposes › Will consider engaging with industry bodies such as SAPOA to deal with councils as a group › External rating consultant engaged to liaise with council where required. 11. Properties › Investors › › Achieving lower › Thorough due diligence purchased at a Providers of capital than anticipated conducted for all acquisitions. premium to market returns › Acquisitions are firstly › Carrying value of considered by the Investment property could be Committee, comprising Earle written down on Marks and Roman revaluation. Cendrowski, which thereafter recommends the purchases to the Board
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› Properties purchased are compared against valuations › Director valuations performed annually› One third of the portfolio is valued externally each year. 12. Inadequate › Investors › Reduced pay-out Regular review of insurance insurance cover › Providers of being received from cover by the Board and the over the property capital insurers in the event funders. portfolio › Property Manager of a claim resulting in inadequate funds being available for distributions to shareholders. 13. Cash flow or › Investors › Insufficient cash Cash flow forecasts are drawn liquidity risk › Providers of resources to meet up to monitor timing of capital interest payments on interest payments and capital › Service providers due dates. requirements. 14. Refinancing risk › Investors › Inability to Continual monitoring of › Providers of refinance debt funding and refinancing capital facilities will have a requirements. negative effect on the Company’s ability to acquire properties, as well as its reputation › The Company may be forced to dispose of properties below their market value to access capital. 15. Leases not signed › Investors › Lack of proper Strict controls ensure that all by tenants › Providers of signed documentation leases are signed prior to capital could result in beneficial occupation. inability to enforce landlord’s rights. 16. Failure of IT › Investors › Inability to access Continual backing up of data. systems › Providers of information, record capital transactions or send out rent statements, which would negatively impact the financial performance of the Company. 17. Attraction and › Investors › The shortage of Continual monitoring of retention of skilled › Providers of skilled, experienced incentives and salary levels. staff capital candidates may lead to inexperienced replacement staff being employed or vacancies remaining open for long periods, which could result in increased workloads being placed on existing staff that may negatively impact the financial performance of the Company.
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18. Conflicts of interest › Investors If conflicts of interest Maintenance of a conflicts › Providers of are not disclosed and register, declaration and capital appropriately monitoring of any potential managed, this could conflicts. negatively impact the financial performance of the Company.
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Annexure 4
EXTRACTS FROM THE MOI
The MOI of Runway contains, inter alia, provisions with the effect of providing for the borrowing powers, retirement of Directors and dividends as set out in the extracts below:
30. “EXECUTIVE DIRECTORS
30.1 The Directors may from time to time appoint a chief executive officer, executive financial Director and such other executive Directors for such term and at such remuneration as they may think fit (subject only to the requirements of section 66(8) and (9) of the Act, and may revoke such appointment subject to the terms of any agreement entered into in any particular case and it may be made a term of his or her appointment that he or she be paid a pension, gratuity and/or other benefit on his retirement from office.
30.2 Subject to the provisions of any contract between himself and the Company, a managing Director shall be subject to the same provisions as to disqualification and removal as the other Directors of the Company.
30.3 The Directors may from time to time entrust to and confer upon a managing Director for the time being such of the powers exercisable in terms of this Memorandum of Incorporation by the Directors as they may think fit, and may confer such powers for such time and to be exercised for such objects and purposes, and upon such terms and conditions, and with such restrictions, as they think expedient; and they may confer such powers either collaterally with or to the exclusion of and in substitution for all or any of the powers of the Directors in that behalf, and may from time to time revoke, withdraw, alter or vary all or any of such powers.”
32. “BORROWING POWERS
32.1. Subject to the provisions of clause 32.2 and the other provisions of this Memorandum of Incorporation, the Directors may from time to time –
32.1.1. borrow for the purposes of the Company such sums as they think fit; and
32.1.2. secure the payment or repayment of any such sums, or any other sum, as they think fit, whether by the creation and issue of Securities, mortgage or charge upon all or any of the property or assets of the Company.
32.2. The Directors shall procure, but only insofar as by the exercise of voting and other rights or powers of control exercisable by the Company they can so procure, that the borrowings of any subsidiary of the Company from time to time shall not exceed the amount authorised by the Company.”
36. “DISTRIBUTIONS
36.1. Subject to the provisions of the Act, and particularly section 46 of the Act, the Company may make a proposed distribution if such distribution –
36.1.1. is pursuant to an existing legal obligation of the Company, or a court order; or
36.1.2. is authorised by resolution of the Board, in compliance with the ZAR X Listings Requirements,
provided that if such distribution is a repayment of capital, the Company shall not be entitled to require the subsequent subscription of such amount. No distribution shall bear interest against the Company, except as otherwise provided under the conditions of issue of the Shares in
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respect of which such distribution is payable.
36.2. Distributions may be declared either free of or subject to the deduction of income tax and any other tax or duty in respect of which the Company may be chargeable.
36.3. The Directors may from time to time declare and pay to the Shareholders such interim distributions as the Directors consider to be appropriate.
36.4. All distributions are to be declared by the Directors in accordance with the provisions of the Act.
36.5. All unclaimed distributions (other than monetary distributions) may be invested or otherwise made use of by the Directors for the benefit of the Company until claimed, provided that distributions unclaimed for a period of 3 (three) years (or such other period as the law may prescribe for the prescription of a claim) from the date on which they were declared may be declared by the Directors as forfeited for the benefit of the Company. The Directors may at any time annul such forfeiture upon such conditions (if any) as they think fit. All unclaimed monetary distributions due to any Shareholder/s shall be held by the Company in trust until lawfully claimed by such Shareholder/s, provided that such unclaimed monetary distributions shall be subject to the laws of prescription.
36.6. Any distribution, interest or other sum payable in cash to the holder of a Share may only be paid by electronic transfer of immediately available and freely transferable funds, free of any deductions or set-off whatsoever, in the currency of the Republic of South Africa. A distribution may also be paid in any other way determined by the Directors including without limitation by means of electronic funds transfer, and if the directives of the Directors in that regard are complied with, the Company shall not be liable for any loss or damage which a Shareholder may suffer as a result thereof.
36.7. Without detracting from the ability of the Company to issue capitalisation Shares, any distribution may be paid wholly or in part -
36.7.1. by the distribution of specific assets; or
36.7.2. by the issue of Shares, debentures or Securities of the Company or securities of any other company; or
36.7.3. in cash; or
36.7.4. in any other way which the Directors or the Company in general meeting may at the time of declaring the distribution determine.
36.8. Where any difficulty arises in regard to such distribution, the Directors may settle that difficulty as they think expedient, and in particular may fix the value which shall be placed on such specific assets on distribution.
36.9. The Directors may -
36.9.1. determine that cash payments shall be made to any Shareholder on the basis of the value so fixed in order to secure equality of distribution; and
36.9.2. vest any such assets in trustees upon such trusts for the benefit of the persons entitled to the distribution as the Directors deem expedient.
36.10. Any distribution must be made payable to Shareholders registered as at a record date subsequent to the date of declaration thereof or the date of confirmation thereof, whichever is the later date.
36.11. A repayment of capital to Shareholders may not be made on the basis that it may be called up again.”
37. “REAL ESTATE INVESTMENT TRUST
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The Company intends to engage primarily, directly or indirectly, in property activities and to obtain and maintain the status of a Real Estate Investment Trust (REIT) as contemplated in the ZAR X Listings Requirements. For as long as the Company has that status, the Directors shall ensure that the Company complies with any relevant legislation, regulations and/or rules which may from time to time be applicable to such an entity.”
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Annexure 5
PRO FORMA AGGREGATED FINANCIAL INFORMATION
The pro forma aggregated financial information, comprising the pro forma aggregated statement of financial position, statement of comprehensive income and cash flow statement for the Group, which illustrates the financial effects of the Group Restructure and the Listing, is available at https://runwaypropertygroup.co.za/listing-documents/ and has been reported on by the Independent Reporting Accountants, whose report is set out in Annexure 6.
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Annexure 6
INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF AGGREGATED FINANCIAL INFORMATION
To the Directors of Runway Property Group Limited 6 February 2020 Report on the Assurance Engagement on the Compilation of Aggregated Financial Information included in a Listing Circular We have completed our assurance engagement to report on the compilation of aggregated financial information of Runway Property Group Limited by the Directors. The aggregated financial information, as set out in Annexure 5 of the Listing Circular consists of the aggregated net asset statement, aggregated income statement as well as the aggregated cash flow statement as at 28 February 2019 and related notes. The applicable criteria on the basis of which the Directors have compiled the aggregated financial information are specified in the ZAR X Listings Requirements. The aggregated financial information has been compiled by the Directors and to illustrate the impact of the Restructure and Listing on the Company’s financial position as at 28 February 2019 and the financial performance of the Company for the period then ended, as if the Restructure and Listing had taken place at 28 February 2019 . As part of this process, information about the Company’s financial position and financial performance has been extracted by the Directors from the financial statements of the following companies for the period ended 28 February 2019, on which an auditor’s report was issued on 1 July 2019: 1. Linden Square Shopping Centre Proprietary Limited 2. Stand 278 Strijdompark Proprietary Limited 3. Tensing Trading Proprietary Limited 4. Thistledown Properties 16 Proprietary Limited 5. Reflect-all 1025 Proprietary Limited 6. New Heights 224 Proprietary Limited 7. New Heights 226 Proprietary Limited Directors’ Responsibility for the Aggregated Financial Information The Directors are responsible for compiling the aggregated financial information on the basis of the applicable criteria specified in the ZAR X Listings Requirements. Our Independence and Quality Control We have complied with the independence and other ethical requirements of Sections 290 and 291 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised January 2018) and parts 1 and 3 of the Independent Regulatory Board for Auditors’ Code of Professional Conduct for Registered Auditors (Revised November 2018) (together the IRBA Codes), which are founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. The IRBA Codes are consistent with the corresponding sections of the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants and the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence Standards) respectively. De Vos Richards applies the International Standard on Quality Control 1, Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.
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Reporting Accountant’s Responsibility Our responsibility is to express an opinion about whether the aggregated financial information has been compiled, in all material respects, by the Directors on the basis specified in the ZAR X Listings Requirements based on our procedures performed. We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3420, Assurance Engagements to Report on the Compilation of Aggregated Financial Information Included in a Prospectus issued by the International Auditing and Assurance Standards Board. This standard requires that we plan and perform procedures to obtain reasonable assurance about whether the aggregated financial information has been compiled, in all material respects, on the basis specified in the ZAR X Listings Requirements. For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the aggregated financial information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the aggregated financial information. The purpose of aggregated financial information included in a Listing Circular is solely to illustrate the impact of a significant corporate action or event on unadjusted financial information of the entity as if the corporate action or event had occurred or had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the corporate action or event at 28 February 2019 would have been as presented. A reasonable assurance engagement to report on whether the aggregated financial information has been compiled, in all material respects, on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the aggregated financial information provide a reasonable basis for presenting the significant effects directly attributable to the corporate action or event, and to obtain sufficient appropriate evidence about whether: The related aggregated adjustments give appropriate effect to those criteria; and The aggregated financial information reflects the proper application of those adjustments to the unadjusted financial information. Our procedures selected depend on our judgement, having regard to our understanding of the nature of the Company, the corporate action or event in respect of which the aggregated financial information has been compiled, and other relevant engagement circumstances. Our engagement also involves evaluating the overall presentation of the aggregated financial information. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Opinion In our opinion, the aggregated financial information has been compiled, in all material respects, on the basis of the applicable criteria specified in the ZAR X Listings Requirements.
De Vos Richards Per: L de Vos Partner Registered Auditors Chartered Accountants (SA)
Clearview Office Park, Block C, Unit 11 77 Wilhelmina Avenue Constantia Kloof 1709
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Annexure 7
THE PROPERTY MANAGER AND EXTRACTS FROM THE PROPERTY MANAGEMENT AGREEMENT
The Property Manager is Leopard Property Management Proprietary Limited (registration number 2019/209595/07) a private company incorporated and registered in accordance with the laws of South Africa and the registered address of which is Block A, 1st Floor, Georgian Place Office Park, 18 Southway Road, Eastgate Extension 6, Johannesburg, 2090. The sole shareholder and director of the Property Manager is Peter Marks, who has been involved in managing properties for in excess of 20 years and is Earle Marks’ father. Earle’s brother, Wayne Marks is an employee of the Property Manager.
The Property Management Agreement is available in its full form on the Company’s Website.
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Annexure 8
GROUP STRUCTURE INCLUDING THE SUBSIDIARIES
Set out below is the Group structure of Runway and a table in which are set out the name, registration number and date and place of incorporation of each of the Subsidiaries, all of which are and have since incorporation been wholly-owned (either directly or indirectly) by the Company, other than Reflect All, which was acquired in 2012. Each of the Subsidiaries is a property owning entity. .
The Subsidiaries Name of subsidiary Directors Registration Date of Length of % Share- number incorporation time holding by (all Subsidiaries business has the were been carried Company incorporated in on (years) on Listing RSA) Roman Cendrowski Linden Square Earle Marks 2002/027189/07 30/10/2002 17 100% Zvi Kaplan Roman Cendrowski New Heights 224 Earle Marks 2000/021246/07 24/08/2000 19 100% Zvi Kaplan Roman Cendrowski New Heights 267 Earle Marks 2000/023377/07 13/09/2000 19 100% Zvi Kaplan Roman Cendrowski Reflect All Earle Marks 2016/348963/07 11/10/2004 15 100% Zvi Kaplan
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Roman Cendrowski Stand 278 Earle Marks 1998/010700/07 04/06/1998 21 100% Zvi Kaplan Roman Cendrowski Tensing Earle Marks 2006/013709/07 08/05/2006 13 100% Zvi Kaplan Roman Cendrowski Thistledown Earle Marks 2006/018434/07 14/06/2006 13 100% Zvi Kaplan
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Annexure 9
CAPITAL STRUCTURE AND AUTHORISATIONS
1. CAPITAL STRUCTURE
Details relating to the capital structure of Runway are set out below.
1.1. Rights attaching to Shares
Extracts of the Company’s MOI relating to rights attaching to Shares are set out in Annexure 4.
In accordance with the Company’s MOI, during any vote at any general meeting every person present and entitled to exercise voting rights shall be entitled to one vote on a show of hands, irrespective of the number of voting rights that person would otherwise be entitled to exercise or on a poll any person who is present at the meeting, whether as a Shareholder or as proxy for a Shareholder, has the number of votes determined in accordance with the voting rights associated with the securities held by that Shareholder.
Shareholders are entitled to participate proportionally in any distribution made by the Company and to receive proportionally the net assets of the Company upon its liquidation.
Any variation in rights attaching to Shares will require the consent of at least 75% of Shareholders in a general meeting in accordance with the Company’s MOI.
Only such Shareholders that are registered in the Company’s register on the day when a distribution is declared or on such other day as may be determined by the Board as the last date for registration for the distribution, will be entitled to receive the distribution so declared.
1.2. Alterations to authorised Share capital
The Company was incorporated as a public company on 30 October 2019 with an authorised Share capital of 1 000 000 000 ordinary Shares of no par value.
There have been no sub-divisions or consolidations of Shares since the incorporation of the Company.
Other than for the Group Restructure, there have been no other alterations to the authorised Share capital of the Company for the period from the date of incorporation of the Company to the Last Practical Date.
1.3. Issues and repurchases of Shares
Other than the Shares which were issued upon the incorporation of the Company and pursuant to the Group Restructure, there have been no other issues, repurchases or offers of securities of the Company since the date of incorporation of the Company until the Last Practical Date.
2. AUTHORISATIONS
The following Shareholder resolutions were passed at the last meeting of Shareholders held on 4 February 2020:
“SPECIAL RESOLUTION NUMBER 1: APPROVAL TO ISSUE SHARES IN TERMS OF SECTION 41(1) OF THE COMPANIES ACT
RESOLVED THAT, in accordance with section 41(1) of the Companies Act, the issue by the Company of Shares, securities convertible into any Shares or grant of options or rights exercisable for Shares to any director, future director, prescribed officer or future prescribed officer of the Company, or to a person related or inter- related to the Company, or to a person related or inter-related to a director or prescribed officer of the Company, or to any nominee of such person in terms of any placement, offer, bookbuild or similar capital raising, at the same price and at the same terms as those upon which Shares are issued to other investors in terms of such capital raising, be and is hereby approved.
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The reason for and effect of special resolution number 1 is to authorise the issue of Shares or related securities or rights in terms of subsequent capital raisings if and to the extent that such Shares are issued to Directors of the Company and similar or related persons.
This resolution required and was approved by at least 75% (seventy five percent) of the voting rights of Shareholders exercised on the resolution.”
“SPECIAL RESOLUTION NUMBER 2: APPROVAL TO ISSUE SHARES IN TERMS OF SECTION 41(3) OF THE COMPANIES ACT
RESOLVED THAT, in accordance with section 41(3) of the Companies Act, the issue by the Company of Shares pursuant to the Group Restructure, be and is hereby approved.
The reason for and effect of special resolution number 2 is to authorise the issue of Shares in terms of the Group Restructure.
This resolution requires and was approved by at least 75% (seventy five percent) of the voting rights of Shareholders exercised on the resolution.”
“SPECIAL RESOLUTION NUMBER 3: APPROVAL OF PROVISION OF FINANCIAL ASSISTANCE FOR THE ACQUISITION OF SHARES
RESOLVED THAT, in terms of section 44(3) of the Companies Act, the Company be and is hereby authorised, at any time and from time to time during the period of 2 (two) years commencing on the date of adoption of this special resolution, to provide direct or indirect financial assistance to any person for the purpose of, or in connection with, the subscription of any option, or any Shares or securities, issued or to be issued by the Company or a related or inter-related company, or for the purchase of any Shares or securities of the Company or a related or inter-related company, provided that –
- the recipient or recipients of such financial assistance, and the form, nature and extent of such financial assistance, and the terms and conditions under which such financial assistance is provided, are determined by the Board of Directors of the Company from time to time; and
- the Board of Directors of the Company may not authorise the Company to provide any financial assistance pursuant to this special resolution unless the Board is satisfied that all those requirements of section 44 of the Companies Act which are required to be met in order to authorise the Company to provide such financial assistance, have been met.
In terms of section 44(3)(a)(ii) of the Companies Act the Board of Directors of a company may not authorise any financial assistance unless pursuant to a special resolution of the Shareholders adopted within the previous two years, either as a general or specific authority, the Shareholders of the Company have approved such financial assistance.
The reason for and effect of this special resolution is to grant the Board of Directors of the Company the general authority to provide such direct or indirect financial assistance. This authority will be in place for a period of 2 (two) years from the date of adoption of this resolution.
This resolution requires and was approved by at least 75% (seventy five percent) of the voting rights of Shareholders exercised on the resolution.”
“SPECIAL RESOLUTION NUMBER 4: FINANCIAL ASSISTANCE FOR RELATED OR INTER- RELATED COMPANIES, DIRECTORS OR PRESCRIBED OFFICER OF THE COMPANY
RESOLVED THAT, in terms of section 45(3) of the Companies Act the Company be and is hereby authorised, at any time and from time to time during the period of 2 (two) years commencing on the date of adoption of this special resolution, to provide any direct or indirect financial assistance as contemplated in such section of the Companies Act, to any director or prescribed officer of the Company or of a related or inter-related company, or to a related or inter-related company or corporation, or to a member of a related or inter-related company or corporation, or to a person related to any such company, corporation, director, prescribed officer or member, provided that –
- the recipient or recipients of such financial assistance, and the form, nature and extent of such financial
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assistance, and the terms and conditions under which such financial assistance is provided, are determined by the Board of Directors of the Company from time to time; and
- the Board of Directors of the Company may not authorise the Company to provide any financial assistance pursuant to this special resolution unless the Board is satisfied that all those requirements of section 45 of the Companies Act which are required to be met in order to authorise the Company to provide such financial assistance, have been met; and
- such financial assistance to a recipient thereof is, in the opinion of the Board of Directors of the Company, required for the purpose of (i) meeting all or any of such recipient's operating expenses (including capital expenditure), and/or (ii) funding the growth, expansion, reorganisation or restructuring of the businesses or operations of such recipient, and/or (iii) funding such recipient for any other purpose which in the opinion of the Board of Directors of the Company is directly or indirectly in the interests of the Company.
In terms of section 45(3)(a)(ii) of the Companies Act, the Board of Directors of a company may not authorise any financial assistance unless pursuant to a special resolution of the Shareholders adopted within the previous two years, either as general or specific authority, the Shareholders of the Company have approved such financial assistance.
The reason for and effect of this special resolution is to grant the Board of Directors of the Company the general authority to provide such direct or indirect financial assistance, including in the form of loans or guarantees. This authority will be in place for a period of two years from the date of adoption of this resolution.
This resolution requires and was approved by at least 75% (seventy five percent) of the voting rights of Shareholders exercised on the resolution.”
“ORDINARY RESOLUTION NUMBER 1: GENERAL AUTHORITY TO ISSUE SECURITIES OR SHARES FOR CASH
RESOLVED THAT the Company be and is hereby authorised, by way of a general authority, to issue securities or ordinary Shares in the capital of the Company upon such terms and conditions and in such amounts as the Directors may from time to time determine, in terms of and subject to –
- the Companies Act and any Shareholder approvals required in terms thereof;
- the applicable provisions of the Memorandum of Incorporation; and
- once the Listing has taken place, the ZAR X Listings Requirements, being, as at the date of this resolution, that –
o the Securities which are the subject of the issue for cash must be of a class already in issue or, where this is not the case, must be limited to such Securities or rights that are convertible into a class already in issue;
o the Securities must be issued to Public Security Holders and not to Related Parties;
o Securities which are the subject of a general issue for cash may not exceed 15% (fifteen percent) of the applicant Issuer’s listed Securities as at the date of the notice of general/annual general meeting seeking the general issue for cash authority, provided that:
. the authority shall be valid until the Issuer’s next annual general meeting or for 15 (fifteen) months from the date on which the general issue for cash Ordinary Resolution was passed;
. the specific number of Securities representing the number up to 15% (fifteen percent) of the applicant’s listed Securities as at the date of the notice of general/annual general meeting must be stated in the resolution seeking the general issue for cash authority;
. any Securities issued under the authority during the period contemplated above, must be deducted from such number; and
. in the event of a sub-division or consolidation of issued Securities during the period
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contemplated above, the existing authority must be adjusted accordingly to represent the same allocation ratio; and
o the maximum discount at which Securities may be issued is 10% (ten percent) of the Weighted Average Traded Price of such Securities measured over the 30 (thirty)Business Days prior to the date that the price of the issue is agreed between the Issuer and the party subscribing for the Securities. ZAR X should be consulted for a ruling if the applicant’s Securities have not traded in such 30 (thirty) Business Day period.
This resolution is an ordinary resolution that requires and was approved by at least 75% (seventy five percent) of the voting rights of Shareholders exercised on the resolution.”
“ORDINARY RESOLUTION NUMBER 2: APPOINTMENT OF MEMBERS OF THE AUDIT AND RISK COMMITTEE
RESOLVED THAT the Company appoints the following Directors as members of the Company's audit and risk committee –
- Jonathan Bennett (chair);
- Shaun Zagnoev; and
- Avi Gluch.
The reason and effect of this ordinary resolution is to appoint the committee members of the audit and risk committee of the Company.
This resolution requires and was approved by more than 50% (fifty percent) of the voting rights of Shareholders exercised on the resolution.”
“ORDINARY RESOLUTION NUMBER 3: LISTING ON ZAR X
RESOLVED THAT, all of the Company’s issued Shares be listed on the stock exchange operated by ZAR X and that within three years after the Listing Date the Company will have utilised best commercial endeavours to achieve a targeted 30% public spread level and within one year after the Listing Date the Company will have utilised best commercial endeavours to achieve a targeted 10% public spread level.
This resolution requires and was approved by more than 50% (fifty percent) of the voting rights of Shareholders exercised on the resolution.”
“ORDINARY RESOLUTION NUMBER 4: REVIEW OF INTERIMS
RESOLVED THAT, the Company’s interim financial results are not required to be reviewed by the auditors.”
This resolution requires and was approved by more than 50% (fifty percent) of the voting rights of Shareholders exercised on the resolution.
“ORDINARY RESOLUTION NUMBER 5: APPROVAL OF GROUP RESTRUCTURE AGREEMENTS RESOLVED THAT, Notwithstanding the personal financial interests disclosed by certain of the Directors, the Group Restructure Agreements be and are hereby approved.”
This resolution requires and was approved by more than 50% (fifty percent) of the voting rights of Shareholders exercised on the resolution.
“ORDINARY RESOLUTION NUMBER 6: SIGNATURE OF DOCUMENTATION
RESOLVED THAT, any director of the Company or any other person to whom a director has delegated his/her authority to do so, be and is hereby authorised to sign all such documentation and do all such things as may be necessary for or incidental to the implementation of the resolutions contained herein; and if and to the extent that any director has already signed all or any of the documents necessary for the implementation of the resolutions prior to the passing of the resolutions in this document, such and anything already done in good faith
52 in relation thereto be and are hereby approved of and ratified by the Company to the extent permissible in law.”
This resolution requires and was approved by more than 50% (fifty percent) of the voting rights of Shareholders exercised on the resolution.
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Annexure 10
CORPORATE GOVERNANCE STATEMENT
The Board recognises the importance of sound corporate governance and endorses and monitors compliance with the King IV. The Board confirms that the Company will, from the date of the ZAR X listing, be compliant with the provisions of King IV in all material respects.
The Directors recognise that, through good governance, the Company will realise an ethical culture, good performance, effective control and legitimacy. The Directors in particular recognise the need to manage the Company with integrity and to provide effective leadership based on an ethical foundation. This includes timely, relevant and meaningful reporting to Shareholders and other stakeholders, that provide a proper and objective overview on the Company and its activities, directing the strategy and operations of the Company with the intention of continuing to build a sustainable business, and considering the short and long-term impact of this strategy on the economy, society and the environment. The Board will ensure that the Company is a responsible corporate citizen through the corporate governance policies detailed below.
BOARD OF DIRECTORS
The Board comprises three non-executive Directors, all of whom are independent, and three executive Directors. The roles of chairman and chief executive officer are clearly defined to ensure a balance of power. The Board’s main functions include:
adopting strategic plans and ensuring they are carried out by management; considering and approving major issues, including investment opportunities; monitoring Runway’s operational performance, and overseeing the effectiveness of the internal controls designed to ensure that assets are safeguarded, proper accounting records are maintained and that the financial information on which business decisions are made and which is issued for publication is reliable.
The Directors’ varied backgrounds and experience provide Runway with an appropriate mix of knowledge and expertise that is necessary to manage the business effectively. Furthermore, a clear division of responsibilities at Board level will ensure a balance of power and authority, so that no individual can take unilateral decisions. The Board aims to meet formally at least quarterly. Company policies and procedures will be adopted by all Subsidiaries.
The Board is confident that the Company has established an effective framework and processes for compliance with laws, codes, rules and standards.
The Board has constituted the following committees:
1. Remuneration and nomination committee
Members: Shaun Zagnoev (chair), Jonathan Bennett and Avi Gluch.
The remuneration and nomination committee assesses and recommends to the Board the remuneration and incentivisation of the Company’s Directors and oversees the process for nominating, electing and appointing members of the Board, succession planning for Directors and the evaluation of the performance of the Board. The remuneration and nomination committee meets at least two times per financial year. Ad hoc meetings are held to consider special business, as required. The chief executive officer attends meetings of the remuneration and nomination committee, or part thereof, if needed to contribute pertinent insights and information.
2. Audit and risk committee
Members: Shaun Zagnoev, Jonathan Bennett (chair) and Avi Gluch.
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The audit and risk committee (the “committee”), comprising three independent non-executive Directors, meets at least twice a year and is primarily responsible for:
providing independent oversight of among others, the effectiveness of the Company’s assurance functions and services, with particular focus on combined assurance arrangements, external assurance service providers, internal audit (if this becomes applicable) and the finance function, as well as the integrity of the annual financial statements and external reports issued by the Company. The committee adopts a model that incorporates and optimises all assurance services and functions so that, taken as a whole, an effective control environment is achieved, the integrity of information used for internal decision-making by management, the Board and its committees is supported, and the integrity of external reports is supported. The committee further oversees that this combined assurance model is implemented so as to effectively cover the Company’s significant risks and material matters; and
developing a risk management policy and monitoring its implementation. The company’s risk management policies identify and analyse company risks, set appropriate limits and controls and monitor risks and adherence to limits. The Directors have overall responsibility for the Company’s internal control and for reviewing its effectiveness. The controls identify and manage company risks rather than completely eliminating failure. Therefore, internal controls provide reasonable, but not absolute, assurance against material misstatement or loss. The implementation and operation of these systems is the responsibility of management and processes are communicated regularly to employees informing them of their responsibilities. Systems include strategic planning, appointment of qualified staff, regular reporting and monitoring of performance and effective control over investments. Internal financial control is appropriate for the size and activities of the Company. Significant risks identified are communicated to the Board, together with the recommended actions.
The Financial Director (the “FD”) may attend committee meetings by invitation. The committee ensures that the Company’s financial performance is being properly reported on and monitored, including reviewing the annual and interim accounts, results announcements, internal control systems and procedures, and accounting policies. All members of the Board should have adequate financial literacy skills. The committee further oversees the management of financial and other risks that affect the integrity of external reports issued by the Company and monitors whether the Company’s assurance model is effective and sufficiently robust to ensure that the Board is able to place reliance on the assurance underlying statements that the Board makes concerning the integrity of the Company’s external reports. Internal financial controls are based on comprehensive and regular reporting. Detailed revenue, cash flow and capital forecasts are prepared and updated throughout the year and approved by the Board.
Once the Company has gained sufficient size to justify an internal audit function, the Board will approve an internal audit charter that defines the role and associated responsibilities and authority of internal audit on an annual basis.
The committee oversees and makes recommendations to the Board regarding the appointment, re- appointment and removal of the independent external auditor. In assessing the suitability for appointment of a current or prospective audit firm and designated individual auditor, the committee will (unless unlawful) request and consider:
(i) the decision letter and findings report of the inspection performed by the professional/regulatory body for auditors in the relevant jurisdiction, on both the audit firm and the designated individual auditor;
(ii) the findings report of the internal engagement monitoring inspection performed by the audit firm on their designated individual auditor; and
(iii) the outcome and details of any legal or disciplinary proceedings instituted by any professional body of which they are a member or regulatory body to whom they are accountable.
The committee ensures the scope of the auditor’s work is sufficient and that they are fairly remunerated. In accordance with Company policy, the committee also supervises the appointment of the auditor for non-audit services and reviews external audit plans and the results of their work. The committee meets
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with the external auditor at least annually to facilitate an exchange of views and concerns that may not be appropriate for discussion in an open forum, as well as to discuss and review the accounts and audit procedures.
The Board has concluded that committee members have the necessary financial literacy, skills and experience to execute their duties effectively and make worthwhile contributions to the committee’s deliberations. Additionally, the Chair has the requisite accounting and financial management experience. The committee has considered and found the expertise and experience of the FD appropriate for the position. In order to fulfil its responsibility of monitoring the integrity of financial reports issued to Shareholders, the committee will review the accounting principles, policies and practices adopted during the preparation of financial information and examine documentation relating to any Annual Reports and interim financial statements of the Company. The clarity of disclosures included in financial statements will also be reviewed by the committee, as well as the basis for significant estimates and judgements.
The committee meets at least two times a year. Ad hoc meetings are held to consider special business, as required. The chief executive officer and/or other executive Directors attend meetings of the committee, or part thereof, if needed to contribute pertinent insights and information.
3. Social and Ethics Committee
Members: Earle Marks, Zvi Kaplan and Shaun Zagnoev (Chair)
The social and ethics committee oversees and reports on the Company’s organisational ethics, responsible corporate citizenship (including the promotion of equality, prevention of unfair discrimination, the environment, health and public safety, including the impact of the Company’s activities and of its products or services), sustainable development and stakeholder relationships. The committee also ensures that the Company’s transformation objectives are achieved within its underlying investments. The transformation and social and ethics committee draws to the attention of the Board matters within its mandate as occasion requires and reports to Shareholders at the Company’s annual general meeting.
The social and ethics committee meets a minimum of two times per financial year. Ad hoc meetings are held to consider special business, as required. 4. Appointment of Directors
Directors are appointed by the Board or at the Company’s annual general meeting (“AGM”). Board appointed Directors need to be re-appointed by the Shareholders at the subsequent AGM. The longest serving third of the Directors must be re-appointed by the Shareholders annually. Board appointments are conducted in a formal and transparent manner by the entire Board following recommendations made by the remuneration and nomination committee.
5. Directors’ dealings
Dealing in the Company’s Shares by Directors, their associates, and company officials is regulated and monitored in accordance with the ZAR X Listings Requirements and the requirements on any other stock exchange on which the Company is listed from time to time. Runway will maintain a closed period from the end of each financial period to publication of the financial results.
6. Insider trading
The Company prohibits all Directors and employees from using confidential information, not generally known or available to the public, for personal gain.
7. Employees
The Company’s employees are essential to its success and the Company is committed to treating them with dignity, trust and respect, and to build long-term relationships based on enforceable employment legislation and respect for human rights.
8. Shareholders
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Shareholder satisfaction is an overriding concern for the Company. In the current highly competitive environment, the Company’s success depends on meeting Shareholders’ needs.
9. Government
The Company seeks to build and manage a sound relationship with governmental authorities on an arm’s length basis. No attempts to improperly influence governmental decisions by offering, paying, soliciting, or accepting bribes, in any shape or form are tolerated.
10. Social and environmental responsibility
The Company is an integral part of the community in which it operates and is committed to building sound relationships, based on trust, honesty, and fairness. Not only is environmental compliance legally obligatory, but it is also an important component of the Company’s commitment to the community and developing its good reputation. Runway therefore is dedicated to minimising the environmental impact of its activities by reducing waste, emissions and discharges, and using energy efficiently.
11. King IV
So as to allow Shareholders to make an informed assessment of the quality of governance insofar as the application of each of the 17 principles of King IV is concerned, set out below is a narrative explanation of the Company’s application of each principle.
11.1. The Board of Directors should lead ethically and effectively
Runway is committed to ethical behaviour throughout its business, adopting the principles of integrity, competence, responsibility, accountability, fairness and transparency in order to offer effective leadership that achieves the Company’s strategic objectives and positive outcomes over time. The Directors of the Company are required to individually and collectively exhibit the following characteristics in their conduct.
11.1.1. Integrity
Individuals are responsible for their own ethical behaviour, and are expected to act, at all times and in all ways, in good faith and in the best interests of the Company, and ethical behaviour beyond mere legal compliance is encouraged. A conflict of interest arises whenever there is a direct or indirect conflict, in fact or in appearance, between the interests of an individual and that of the Company or where an individual’s position or responsibilities present an opportunity for personal gain inconsistent with the Company’s best interest. Conflicts of interest should be avoided. If and when a conflict of interest does arise, the company secretary is to be notified immediately, such that it can be proactively managed. A dedicated conflicts register is regularly updated and submitted to the Board for review and approval.
11.1.2. Competence
Directors are required to take steps to ensure that they have sufficient working knowledge of the Company, its industry, the context of the economy, society and environment in which it operates, the capitals (financial, manufactured, intellectual, human, social and relationship) it uses and affects as well as of the key laws, rules, codes, and standards applicable to the Company. Directors must act with due care, skill and diligence, and take reasonably diligent steps to become informed about matters for decision. Directors are also required to continuously develop their competence to lead effectively.
11.1.3. Responsibility
Directors of the Company assume collective responsibility for steering and setting the direction of the Company; approving policy and planning; overseeing and monitoring of implementation and execution by management; and ensuring accountability for organisational performance. Directors are also responsible for
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anticipating, preventing and otherwise ameliorating the negative outcomes of the organisation’s activities and outputs on the context of the economy, society and environment in which it operates, and the capitals (financial, manufactured, intellectual, human, social and relationship) that it uses and affects.
Risks are taken and opportunities sought in a responsible manner and in the best interests of the Company. Directors attend Board meetings and Board committee meetings and devote sufficient time and effort to prepare for those meetings.
11.1.4. Accountability
Directors are willing to answer for the execution of their responsibilities, even when these were delegated.
11.1.5. Fairness
Directors adopt a stakeholder-inclusive approach in the execution of their governance role and responsibilities, and the Company is directed in a way that does not adversely affect the natural environment, society or future generations.
11.1.6. Transparency
Directors are transparent in the manner in which they exercise their governance role and responsibilities.
11.2. The Board of Directors should govern the ethics of the Company in a way that supports the establishment of an ethical culture
The Directors of the Company recognise that they are ultimately responsible for the governance of ethics within the Company, and for setting the direction for how ethics are approached and addressed, and that it is their role to set the tone for an ethical organisational culture where the above characteristics are cultivated across the business and adopted by all employees. For this purpose, the Company will adopt a code of conduct and ethics policy to provide for arrangements that familiarise employees and other stakeholders with the Company’s ethical standards.
The company maintains the highest ethical standard and complies with all applicable legislation, rules, and regulations. The company’s continued success depends on employing the most qualified people and establishing a working environment free from discrimination, harassment, intimidation or coercion based on race, religion, gender, age, nationality or disability.
The Board has delegated the responsibility for implementation and execution of the codes of conduct and ethics policies to management, however exercises ongoing oversight of the management of ethics.
11.3. The Board of Directors should ensure that the Company is and is seen to be a responsible corporate citizen
The company’s core purpose and values, strategy and conduct are consistent with it being a responsible corporate citizen in all markets in which it conducts business, and the strategy and operations of the Company are intended to build a sustainable business that is considerate of the short and long-term impact on the economy, society and the environment.
It is recognised that the Company is an integral part of the communities in which it operates and is committed to building sound relationships, based on trust, honesty, and fairness. Not only is environmental compliance legally obligatory, but it is also an important component of the Company’s commitment to the community and developing its good reputation. Runway is therefore dedicated to minimising the environmental impact of its activities by reducing waste, emissions and discharges, and using energy efficiently.
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The Board of Directors is responsible for ensuring the Company’s corporate citizenship on an ongoing basis and sets the direction for how the achievement of this corporate citizenship is to be approached and addressed, ensuring that the Company’s efforts in this regard are in compliance with all applicable laws, leading standards and its own codes of conduct and policies. The oversight and monitoring of the Company’s corporate citizenship is performed against measures and targets agreed with management in terms of the workplace, the economy, society and the environment.
11.4. The Board of Directors should appreciate that the Company’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process
Responsibility for the organisation performance of the Company lies with the Board of Directors, which steers and sets the direction of the Company for the realisation of its core purpose and values through its strategy. The formulation and development of the Company’s short, medium and long-term strategy, including policies and operational plans to give effect to this strategy, has been delegated to management, for approval by the Board of Directors. Actual implementation and execution of approved policies and operational plans has also been delegated to management, with ongoing oversight against agreed performance measures and targets.
11.5. The Board of Directors should ensure that reports issued by the Company enable stakeholders to make informed assessments of the Company’s performance and its short, medium and long-term prospects
The Board of Directors approves management’s determination of the Company’s reporting frameworks and reporting standards to be used, taking into account legal requirements and the intended audience and purpose of each report. In particular, the Board oversees that annual financial statements, sustainability reports, social and ethics committee reports and other information or reports that are issued comply with legal requirements and meet the legitimate and reasonable information needs of material stakeholders.
The Board accepts its accountability to Shareholders for the Company’s performance and activities. Runway communicates with Shareholders principally through the Company Website, Annual Report and announcements. The annual general meeting and any other general meetings give the Directors the opportunity to inform Shareholders about current, and proposed, operations and enables them to express their views on business activities.
The Board of Directors also ensures the integrity of external reports.
11.6. The Board of Directors should serve as the focal point and custodian of corporate governance in the Company
The Board of Directors exercises its leadership role by:
11.6.1. steering the organisation and setting its strategic direction;
11.6.2. approving policy and planning that gives effect to the direction provided;
11.6.3. overseeing and monitoring implementation and execution by management; and
11.6.4. ensuring accountability for organisational performance by means of, amongst others, reporting and disclosure.
The roles, responsibilities, membership requirements and procedural conduct of the Board of Directors is documented in the Board charter, which is regularly reviewed in order to guide its effective functioning.
The Board aims to meet formally at least quarterly. There are no external advisors (other than the Company Secretary) who will regularly attend, or be invited to attend, Board committee meetings. Company policies and procedures will be adopted by all Subsidiaries.
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The Board is confident that the Company has established an effective framework and processes for compliance with laws, codes, rules and standards.
11.7. The Board of Directors should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively
The Board of Directors comprises a three non-executive Directors, all of whom are independent. There are three executive Directors, being the chief executive officer, the executive chairman and the financial director, ensuring multiple points of direct interaction with management.
The lead independent Director, Shaun Zagnoev, leads the Board of Directors in the objective and effective discharge of its governance roles and responsibilities.
The Board of Directors will at all times maintain an appropriate balance of power, skills and experience (including business, commercial and industry experience), diversity and independence to objectively and effectively discharge its governance role and responsibilities. In determining the make-up of the Board of Directors, factors considered include the appropriate mix of executive, non-executive and independent non-executive Directors, regulatory requirements, and diversity targets.
The Board of Directors promotes diversity in its membership across a variety of attributes relevant for promoting better decision-making and effective governance. The company supports the principles of race and gender diversity at Board level. No voluntary targets have yet been set, however the Board is analysing and discussing the implementation of an appropriate policy in this respect
11.7.1. Nomination, election and appointment of Directors
Directors are appointed by the Board or at the Company’s annual general meeting (“AGM”), with Board appointed Directors re-appointed by Shareholders at the Company’s next AGM. The longest serving third of the Directors must be reappointed by the Shareholders annually. Board appointments are conducted in a formal and transparent manner by the entire Board following recommendations made by the remuneration and nomination committee.
11.7.2. Independence and conflicts
Each director is required to submit to the Board a declaration of all financial, economic and other interests held by that director and related parties at least annually, or whenever there are significant changes.
Directors are required to declare whether any of them has any conflict of interest in respect of any matter on the agenda of any meeting of the Board or Board committee. Conflicts of interest are managed as set out under Principle 1 above.
11.8. The Board of Directors should ensure that its arrangements for delegation within its own structures promote independent judgment, and assist with balance of power and the effective discharge of its duties
The Board has delegated particular roles and responsibilities to the committees set out below, each of which has the collective knowledge, skills, experience and capacity to execute its duties effectively. Such delegation is subject to formal terms of reference that are approved and renewed annually by the Board. The delegation by the Board of Directors of its responsibilities to any committee does not by or of itself constitute a discharge of the Board’s accountability, and the Board will continue to apply its collective mind to the information, opinions, recommendations, reports and statements presented by any committee or director.
Executive Directors and senior management will be invited to attend committee meetings on an ad hoc basis to provide pertinent information and insights in their areas of responsibility. Every director is entitled to attend any committee meeting as an observer.
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11.9. The Board of Directors should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness
The Board is responsible for evaluating its own performance, that of its committees, chair and individual members, and determines how such evaluation is to be approached and conducted in terms of a formal process undertaken at least every two years where performance is considered, reflected on and discussed so as to ensure that performance and effectiveness is always improving.
11.10. The Board of Directors should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibility
The Board has appointed Earle Marks, as chief executive officer, to be responsible for leading the implementation and execution of the Company’s approved strategy, policy and operational planning, and to serve as a link between management and the Board. The chief executive officer is accountable and reports to the Board of Directors.
The Board has access to professional and independent guidance on corporate governance and its legal duties, as well as support to coordinate the functioning of the Board and its committees. All Directors have access to the advice of the Company secretary, who provides professional corporate governance services and guidance to the Board and to individual members regarding how to properly discharge their responsibilities. The Board has considered and endorsed the Company secretary's ability to perform its duties, including the qualifications, experience, competence, effectiveness, gravitas and objectivity of the Company secretary, and will continue to do so on an annual basis. While the Company secretary has unfettered access to the Board, the Directors have concluded that the relationship with the Company secretary, which is not be a member of the Board of Directors and is not involved in the day to day management of the Company, is at arm’s length and that there is no conflict of interests. The Board is also satisfied that the office of the Company secretary is empowered and carries the necessary authority.
The Company secretary reports to management on all duties performed and administrative matters.
The direction and parameters for the powers of the Board of Directors, and those delegated to management via the chief executive officer, including a delegation of authority framework that contributes to role clarity and the effective exercise of authority and responsibilities, are set out in a Board charter. The Board is responsible for ensuring that key management functions are headed by an individual with the necessary competence and authority and adequately resourced.
While there is currently no succession planning in place, succession planning for the chief executive officer position, executive management and other key positions is reviewed by the Board of Directors periodically, providing for succession in emergency situations and continuity of leadership over the longer term. The performance of the chief executive officer is formally evaluated against agreed performance measures and targets at least annually.
11.11. The Board of Directors should govern risk in a way that supports the Company in setting and achieving its strategic objectives
The company treats risk as integral to the way it makes decisions and executes its duties. The company’s risk governance encompasses both the opportunities and associated risks in developing strategy and the potential positive and negative effects of such risks on the achievement of its organisational objectives. While the Board exercises ongoing oversight of risk management, the Company’s risk governance function is delegated to the audit and risk committee on the terms of reference set out above, with the responsibility for implementing and executing effective risk management delegated to management.
11.12. The Board of Directors should govern technology and information in a way that supports the Company setting and achieving its strategic objectives
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The Board is responsible for the governance of and ongoing oversight of technology and information and the management thereof, and confirms that processes exist ensuring timely, relevant, accurate and accessible reporting, communication and data storage. Management is in turn responsible for implementing and executing effective technology and information management.
11.13. The Board of Directors should govern compliance with applicable law and adopted, non- binding rules, codes and standards in a way that supports the Company being ethical and a good corporate citizen
Compliance with applicable laws and adopted non-binding rules, codes and standards is the responsibility of the Board. Management is in turn responsible for implementing and executing effective compliance management. Where the Company incurs material or repeated regulatory penalties, sanctions or fines for contraventions of, or non-compliance with, statutory obligations, this will be disclosed to Shareholders.
11.14. The Board of Directors should ensure that the Company remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objects and positive outcomes in the short, medium and long term
The Board has adopted and oversees the implementation and execution of a policy that articulates and gives effect to fair, responsible and transparent remuneration across the Company. Responsibility for the governance of remuneration has been delegated to the remuneration and nomination committee, on the terms of reference set out above. The remuneration policy is aligned with the Company’s strategic objective of creating long- term sustainable value for Shareholders. Directors will initially receive base pay only. Executive salaries are competitive and increases are determined by reference to individual performance, inflation and market-related factors.
11.15. The Board of Directors should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the Company’s external reports
The Board has delegated responsibility for overseeing that arrangements for assurance services and functions are effective in:
(i) enabling an effective internal control environment;
(ii) supporting the integrity of information used for internal decision-making by management, the Board and its committee; and
(iii) supporting the integrity of external reports
to the audit and risk committee, on the terms of reference set out above. The Board and its committees will assess the output of the Company’s combined assurance with objectivity and professional scepticism, and by applying an enquiring mind, form their own opinion on the integrity of information and reports and the degree to which an effective control environment has been achieved.
11.15.1. External audit
The external auditor is required to confirm to the audit and risk committee its independence from the Company during each financial year. The committee considers the information pertaining to the external auditor’s relationships with the Company that might reasonably have a bearing on the external auditor’s independence and the audit engagement partner and employees’ objectivity, as well as related safeguards and procedures, in order to concluded whether the external auditor’s independence is impaired. The committee is also responsible for approving the external auditor’s terms of engagement and scope of work.
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11.15.2. Internal audit
Once the Company has gained sufficient size to justify an internal audit function, the audit and risk committee will recommend to the Board the appointment of an internal auditor. The Board will then approve an internal audit charter that defines the role and associated responsibilities and authority of internal audit on an annual basis.
11.16. In the execution of its governance role and responsibilities, the Board of Directors should adopt a stakeholder-inclusive approach that balances the needs, interests and expectation of material stakeholders in the best interests of the Company over time
The Board exercises ongoing oversight of stakeholder relationship management, but responsibility for implementation and executive of effective stakeholder relationship management has been delegated by the Board to management. The Company’s main stakeholders are considered to be Shareholders, employees, banks, tenants and external service providers. Runway has a transparent information communication policy, to enable stakeholders to assess the Company’s economic value and prospects.
The company encourages proactive engagement with Shareholders, including at the Company’s annual general meetings, where all Directors are available to respond to Shareholders’ queries on how the Board has executive its governance duties.
The Board is responsible for governance across the Company and ensures that a Company governance framework is implemented across the Company.
11.17. The governing body of an institutional investor organisation should ensure that responsible investment is practiced by the organisation to promote the good governance and the creation of value by the companies in which it invests
This principle applies to institutional investors only and therefore does not apply to the Company.
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Annexure 11
INFORMATION ON THE DIRECTORS, MANAGEMENT AND MATERIAL THIRD PARTIES
1. DIRECTORS’ EMOLUMENTS
1.1. The Directors were not paid any fees from the date of incorporation of the Company to the Listing Date.
1.2. The emoluments of the executive Directors anticipated to be paid for the year ending 29 February 2021 (and on a pro rata basis for the balance of the 2020 year) are set out in the table below: Director Basic salaries Total Executive Directors Earle Marks R1,200,000 R1,200,000 Roman Cendrowski R300,000 R300,000 Zvi Kaplan R1,200,000 R1,200,000 Total R2,700,000 R2,700,000
1.3. The initial remuneration for non-executive Directors for the years ending 29 February 2020 and end February 2021 will be R8 000 per meeting, with four meetings for the Board and each committee scheduled for each complete financial year and R10 000 per meeting for the heads of each of the committees. As and when the Company reaches scale, these director fees will be aligned with the prevailing best practice in the market. There are currently no bonuses or other performance payments envisaged.
2. BORROWING POWERS
2.1. The borrowing powers of the Company exercisable by the Directors are unlimited, but subject to the restrictions imposed on REITs in terms of the ZAR X Listings Requirements and the Income Tax Act. The borrowing powers of the Company may not be varied unless a special resolution has been passed by Shareholders with the support of 75% of voting rights excerised.
2.2. The borrowing powers have not been exceeded during the period from the date of incorporation of the Company to the Last Practical Date. There is no exchange control or, save as set out above, other restriction on the borrowing powers of the Company. Further information relating to the borrowing powers of Directors is set out in Annexure 3.
3. INTERESTS OF DIRECTORS
3.1. Details of the Company’s Directors’ attributable indirect beneficial interests in the Runway Shares in issue as at the Last Practical Date are set out below.
Directors Beneficially held Directly Indirectly Total % Avi Gluch - - - - Earle Marks - 11 962 698 11 962 698 24,93 *Held Jonathan Bennett - - - - Roman Cendrowski 8 341 866* 15 583 530 23 925 396 49,85 Shaun Zagnoev - - - - Zvi Kaplan 46 000 - 46 000 0,01 Total 8 341 866 27 546 228 35 934 094 74,79 personally and via his wife, Ela Cendrowska, with whom he is married in community of property in terms of the matrimonial laws of Poland.
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3.2. None of the Directors hold any beneficial interest, whether direct or indirect, in relation to any property held by the Company or to be acquired by the Company.
3.3. No amount has been paid, or is accrued as payable, within the date of incorporation of the Company to the Last Practical Date, or is proposed to be paid to any promoter or to any partnership, syndicate or other association of which any promoter is or was a member and no other benefit has been given or is proposed to be given to such promoter, partnership, syndicate or other association within the said period.
3.4. Neither the Directors nor management of the Company have received any material beneficial interest, direct or indirect, in the promotion of the Company during the period from the date of incorporation of the Company to the date of this Listing Circular. This includes a partnership, company, syndicate or other association.
3.5. No amount has been paid, or has been agreed to be paid, within the period from the date of incorporation of the Company to the date of this Listing Circular, to any Director or manager of the Company or to any company in which such director or manager is beneficially interested, directly or indirectly, or of which he is a director (“the associate company”) or to any partnership, syndicate or other association of which he is a member (“the associate entity”), in cash, securities or otherwise, by any person, either to induce him to become, or to qualify him as a director or manager or otherwise for services rendered by him or by the associate company or the associate entity in connection with the promotion or formation of the Company.
4. CONFLICTS OF INTEREST
4.1. The Cendrowski Family has various property investment interests, only one of which is their interest in Runway.
4.2. The Cendrowksi Family intend shortly pursuing a listing of the CEZ property portfolio in which Roman Cendrowski will continue in his role as CEO, whilst being an executive director on the board of Runway.
4.3. Due to Earle Marks’ active role over many years in assisting in the management of, inter alia, the financial aspects of the CEZ property portfolio, Earle will remain involved on the board of the CEZ listed entity for the initial phase of its listing, until such time as either Runway is of sufficient scale that it becomes necessary for Earle to focus solely on Runway or, if sooner, until the CEZ listed entity is sufficiently sizeable such that a successor may be appointed in Earle’s place on the board thereof.
4.4. Both Roman Cendrowski and Earle Marks and the remainder of the Company’s board are satisfied that despite these executives’ involvement mentioned above, neither of them is or will be conflicted as regards either Runway or the CEZ listed entity or their respective group companies, for reasons including the following:
4.4.1. Runway focuses predominantly on retail properties, with any other property sectors being represented only by virtue of historical portfolio purchases and with industrial, office and residential property being non-core to the Group. The industrial properties have reduced over the years, as the Company makes disposals as opportunities to do so arise.
4.4.2. The CEZ property portfolio comprises predominantly industrial properties, any retail acquisition opportunities always being offered to Runway prior to the CEZ group considering these, whilst similarly the CEZ group has preference in respect of any industrial acquisition opportunities. Any non-industrial properties forming part of the CEZ property portfolio are as a result of historic portfolio acquisitions.
5. INTEREST IN MATERIAL TRANSACTIONS
None of the Directors or officers of the Company, nor any person or company that is the direct or indirect beneficial owner of, or who exercises control or direction over, more than 10 percent of the Shares; or
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any associate or affiliate of any of the persons or companies referred to above has or had within the 3 (three) years before the date of the Listings Circular, any Material interest, direct or indirect, in any transaction, or in any proposed transaction, that has Materially affected or will Materially affect the Company or a Subsidiary.
6. DIRECTORS’ DECLARATIONS 6.1. None of the Directors or officers of the Company or a Shareholder holding a sufficient number of Shares of the Issuer to affect Materially the control of the Issuer, is, or within 10 years before the date of the Listings Circular has been, a director or officer of any other listed entity that, while that person was acting in that capacity:
6.1.1. has ever been convicted of an offence resulting from dishonesty, fraud or embezzlement;
6.1.2. has ever been found guilty in disciplinary proceedings by an employer or regulatory body, due to dishonest activities;
6.1.3. became insolvent or sequestrated, made a compromise under any legislation relating to insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a curator, liquidator or trustee appointed to hold its assets, state the fact; or
6.1.4. within a year of that person ceasing to act in that capacity, became insolvent or sequestrated, made a proposal under any legislation relating to insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a curator, liquidator or trustee appointed to hold its assets, state the fact;
6.1.5. been subject to any penalties or sanctions imposed by a court relating to South African securities legislation or by a South African securities regulatory authority or has entered into a settlement agreement with a South African securities’ regulatory authority; or
6.1.6. been subject to any other penalties or sanctions imposed by a court or regulatory body that would be likely to be considered important to a reasonable investor making an investment decision.
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Annexure 12
HISTORICAL FINANCIAL INFORMATION
The historical financial information of the Company and its Subsidiaries is available on the Company’s Website at the following link: https://runwaypropertygroup.co.za/investors/
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Annexure 13
KEY ACCOUNTING POLICIES OF RUNWAY
Significant accounting policies:
The principal accounting policies applied in the preparation of the annual financial statements are set out below.
1. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
2. Changes in accounting policies and disclosures
2.1 Adoption of new and revised pronouncements
In the current year, the company has adopted all new and revised IFRSs that are relevant to its operations and effective for annual reporting periods beginning on or after 1 January 2014.
At the date of authorisation of these financial statements for the year ended 28 February 2019, the following IFRSs were adopted:
IFRS 9 Financial Instruments
A finalised version of IFRS 9 which contains accounting requirements for financial instruments, replacing IAS 39 Financial Instruments: Recognition and Measurement. The standard contains requirements in the following areas: • Classification and measurement. Financial assets are classified by reference to the business model within which they are held and their contractual cash flow characteristics. The 2014 version of IFRS 9 introduces a 'fair value through other comprehensive income' category for certain debt instruments. Financial liabilities are classified in a similar manner to under IAS 39, however there are differences in the requirements applying to the measurement of an entity's own credit risk. • Impairment. The 2014 version of IFRS 9 introduces an 'expected credit loss' model for the measurement of the impairment of financial assets, so it is no longer necessary for a credit event to have occurred before a credit loss is recognised. • Hedge accounting. Introduces a new hedge accounting model that is designed to be more closely aligned with how entities undertake risk management activities when hedging financial and non-financial risk exposures. • Derecognition. The requirements for the derecognition of financial assets and liabilities are carried forward from IAS 39.
IFRS 15 Revenue from Contracts with Customers IFRS 15 provides a single, principles based five-step model to be applied to all contracts with customers. The five steps in the model are as follows: • Identify the contract with the customer • Identify the performance obligations in the contract • Determine the transaction price • Allocate the transaction price to the performance obligations in the contracts • Recognise revenue when (or as) the entity satisfies a performance obligation.
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Guidance is provided on topics such as the point in which revenue is recognised, accounting for variable consideration, costs of fulfilling and obtaining a contract and various related matters. New disclosures about revenue are also introduced.
2.2 New standards and interpretations not yet adopted
The company has not applied the following new, revised or amended pronouncements that have been issued by the IASB as they are not yet effective for the annual financial year beginning 1 March 2018 (the list does not include information about new requirements that affect interim financial reporting since they are not relevant to the company). The directors anticipate that the new standards, amendments and interpretations will be adopted in the company's financial statements when they become effective. The company has assessed, where practicable, the potential impact of all these new standards, amendments and interpretations that will be effective in future periods.
IFRS 16 Leases IFRS 16 specifies how an IFRS reporter will recognise, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or finance, with IFRS 16's approach to lessor accounting substantially unchanged from its predecessor, IAS 17.
The company is required to adopt IFRS 16 Leases from 1 March 2019. The company has assessed the estimated impact that initial application of IFRS 16 will have on its financial statements, as described below.
The company as a lessor: The company will reassess the classification of leases in which the company is a lessor. Based on the information currently available, the company does not expect there to be any adjustments due to the implementation of the standard.
Transition The company plans to adopt IFRS 16 initially on 1 March 2019 , using the modified retrospective approach. Therefore, the cumulative effect of adopting IFRS 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 March 2019, with no restatement of comparative information.
The company plans to apply the practical expident to grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 March 2019 and identified as leases in accordance with IAS 17 and IFRIC 4.
The mandatory implementation required by the standard is for years beginning on or after 1 January 2019. This change in accounting policy will be implemented for the first time for the financial year ending 29 February 2020.
3. Property, plant and equipment . .
Definition Property, plant and equipment are tangible items that: • are held for use in the production or supply of goods or services, for rental to others, or for administrative purposes; and • are expected to be used during more than one period.
Recognition Property, plant and equipment is recognised as an asset when:
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• it is probable that future economic benefits associated with the asset will flow to the entity; and • the cost of the asset can be measured reliably.
Initial measurement An item of property, plant and equipment that qualifies for recognition as an asset is initially measured at its cost.
The cost of an item of property, plant and equipment includes: • its purchase price, including import duties and non-refundable purchase taxes, after deducting trade discounts and rebates. • any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. • the initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located, the obligation for which an entity incurs either when the item is acquired or as a consequence of having used the item during a particular period for purposes other than to produce inventories during that period.
Subsequent measurement - Cost model After initial recognition, property, plant and equipment is measured at cost less any accumulated depreciation and any accumulated impairment losses.
Depreciation Depreciation of an asset commences when it is available for use, and ceases at the earlier of the date that the asset is classified as held for sale, or the date that the asset is derecognised.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.
The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. The depreciable amount of an asset shall be allocated on a systematic basis over its useful life. The depreciable amount of an asset is determined after deducting its residual value.
Residual values, useful lives and depreciation methods are reviewed at each financial year end. Where there are significant changes in the expected pattern of economic consumption of the benefits embodied in the asset, the relevant changes will be made to the residual values and depreciation rates, and the change will be accounted for as a change in accounting estimate.
4. Investment property . . . .
Definition Investment property is property (land or a building—or part of a building—or both) held by the entity to earn rentals or for capital appreciation or both, rather than for: • use in the production or supply of goods or services or for administrative purposes; or • sale in the ordinary course of business.
Recognition Investment property is recognised as an asset when: • it is probable that the future economic benefits that are associated with the investment property will flow to the entity; and • the cost of the investment property can be measured reliably.
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Initial measurement Investment property is initially measured at cost, with transaction costs and other directly attributable expenditure being included in the initial measurement.
Subsequent measurement - Fair value model After initial recognition, investment property is measured at fair value.
5. Financial assets . . . .
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A financial asset is any asset that is: • cash; • an equity instrument of another entity; • a contractual right to receive cash or another financial asset from another entity or to exchange financial assets or financial liabilities with another entity under conditions that are potentially favourable to the entity. • a contract that will or may be settled in the entity's own equity instruments and is a non-derivative for which the entity is or may be obliged to receive a variable number of the entity's own equity instruments; or • a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments. For this purpose the entity's own equity instruments do not include puttable financial instruments classified as equity instruments in accordance with paragraphs 16A and 16B, instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation and are classified as equity instruments in accordance with paragraphs 16C and 16D, or instruments that are contracts for the future receipt or delivery of the entity's own equity instruments.
6. Investment in subsidiary, joint venture or associate
Consolidation
Subsidiaries Subsidiaries are all entities (including structured entities) over which the company has control. The company controls an entity when the company is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the company. They are deconsolidated from the date that control ceases.
The company applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the company. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The company recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets.
Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously
71 held equity interest in the acquiree is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit or loss.
Any contingent consideration to be transferred by the company is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is accounted for within equity.
Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been adjusted to conform with the company's accounting policies.
7. Loans to group companies
These can include loans between holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs.
The loans to group companies are classified as financial assets at amortised cost and are measured at amortised cost using the effective interest method.
For further details about the accounting policies and classifications made related to loans to group companies, please refer to the financial assets note 6.
8. Trade and other receivables
Trade receivables are measured at initial recognition at fair value plus transaction costs. They are subsequently measured at amortised cost using the effective interest rate method, less allowance for expected credit losses. For trade receivables and contract assets, a simplified approach is applied in calculating expected credit losses. Instead of tracking changes in credit risk, a loss allowance is recognised based on lifetime expected credit losses at each reporting date. A provision matrix was established that is based on the company's historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Trade and other receivables are classified as debt instruments and loan commitments at amortised cost.
9. Cash and cash equivalents
Classification and recognition Cash and cash equivalents are classified as non-derivative financial assets and are recognised on the statement of financial position when the company becomes party to the contractual provisions of the instruments.
Measurement Cash and cash equivalents comprise cash held at bank. The carrying amount of these assets approximates their fair value.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
10. Deferred tax
Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.
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Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.
Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of: • deductible temporary differences; • the carry forward of unused tax losses; and • the carry forward of unused tax credits.
Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from: • the initial recognition of goodwill; or • the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that: • is not a business combination; and • at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).
10. Financial liabilities . . . .
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
A financial liability is any liability that is: • a contractual obligation to deliver cash or another financial asset to another entity to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the entity. • a contract that will or may be settled in the entity's own equity instruments and is a non-derivative for which the entity is or may be obliged to deliver a variable number of the entity's own equity instruments or a derivative that will or may be settled other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of the entity's own equity instruments. For this purpose, rights, options or warrants to acquire a fixed number of the entity's own equity instruments for a fixed amount of any currency are equity instruments if the entity offers the rights, options or warrants pro rata to all of its existing owners of the same class of its own non-derivative equity instruments. Also, for these purposes the entity's own equity instruments do not include puttable financial instruments that are classified as equity instruments in accordance with paragraphs 16A and 16B, instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation and are classified as equity instruments in accordance with paragraphs 16C and 16D, or instruments that are contracts for the future receipt or delivery of the entity's own equity instruments. As an exception, an instrument that meets the definition of a financial liability is classified as an equity instrument if it has all the features and meets the conditions in paragraphs 16A and 16B or paragraphs 16C and 16D of ISA32.
11. Operating lease liabilities . . . .
Operating leases as lessee Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term unless another systematic basis is more representative of the pattern of the benefit obtained.
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12. Other financial liabilities . . . .
Other financial liabilities are recognised initially when the company becomes party to the contractual provisions of the instruments. They are classified as either at amortised cost or at fair value through profit or loss in accordance with the substance of the contractual arrangement, and are initially measured at at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs. Other financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss are subsequently measured at fair value through profit or loss. Other financial liabilities that are interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.
For further details about the accounting policies and classifications made related to other financial liabilities, please refer to the financial liabilities note 10.
13. Loans from group companies . .
These can include loans between holding companies, fellow subsidiaries, subsidiaries, joint ventures and associates and are recognised initially at fair value plus direct transaction costs.
The loans to group companies are classified as financial liabilties at amortised cost and are measured at amortised cost using the effective interest method.
For further details about the accounting policies and classifications made related to loans from group companies, please refer to the financial liabilities note 10.
14. Trade and other payables.
Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method.
Fair value of trade and other payables The fair value of trade and other payables approximates their carrying amounts.
15. Current tax liabilities
Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.
Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period.
Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. The amount already paid in respect of current and prior periods which exceeds the amount due for those periods, is recognised as an asset.
The benefit relating to a tax loss that can be carried back to recover current tax of a previous period is recognised as an asset.
Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to (recovered from) the taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the end of the reporting period.
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Current tax assets and liabilities are offset only where: • there is a legally enforceable right to set off the recognised amounts; and • there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Tax expense (income) Current and deferred tax is recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: • a transaction or event which is recognised, in the same or a different period, outside profit or loss, either in other comprehensive income or directly in equity. • a business combination other than the acquisition by an investment of a subsidiary that is required to be measured at fair value through profit or loss.
Current tax and deferred tax is recognised outside profit or loss if the tax relates to items that are recognised, in the same or a different period, outside profit or loss. Therefore, current tax and deferred tax that relates to items that are recognised, in the same or a different period: • in other comprehensive income, will be recognised in other comprehensive income; • directly in equity, will be recognised directly in equity.
16. Revenue
Revenue is income arising in the course of an entity's ordinary activities.
The company is in the business of financial intermediation, insurance, real estate and business services.
A contract with a customer is recognised when all of the following criteria are met: • the contract has been approved and all parties to the contract are committed to performing their respective obligations; • each party's rights regarding the goods or services to be transferred are identifiable; • payment terms for the goods or services to be transferred are identifiable; • the contract has commercial substance; and • it is probable that the consideration in exchange for the goods or services that will be transferred will be collected.
At the inception of a contract, the goods or services promised in the contract are assessed and a performance obligation is identified for each promise to transfer to the customer either: • a good or service that is distinct; or • a series of distinct goods or services that are substantially the same and that have the same pattern of transfer.
Revenue is is recognised when or as the performance obligation is satisfied by transferring a promised good or service to a customer. Assets are transferred when or as the customer obtains control of that asset.
Measurement When a performance obligation is satisfied, revenue is recognised as the amount of the transaction price that is allocated to the performance obligation, but excluding estimates of variable consideration that are constrained and any amounts collected on behalf of third parties. The transaction price may include fixed amounts, variable amounts, or both.
The company allocates the transaction price to each performance obligation (or distinct good or service) in an amount that depicts the amount of consideration to which the company expects to be entitled in exchange for transferring the promised goods or services to the customer.
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The company recognises as an asset the incremental costs of obtaining a contract with a customer if the company expects to recover those costs.
If the costs incurred in fulfilling a contract with a customer are not within the scope of another Standard (for example, IAS 2 Inventories, IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets), the company recognises an asset from the costs incurred to fulfil a contract only if those costs meet all of the following criteria: • the costs relate directly to a contract or to an anticipated contract that the company can specifically identify (for example, costs relating to services to be provided under renewal of an existing contract or costs of designing an asset to be transferred under a specific contract that has not yet been approved); • the costs generate or enhance resources of the company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future; and • the costs are expected to be recovered.
17. Finance costs.
Borrowing costs are interest and other costs that an entity incurs in connection with the borrowing of funds.
18. Income tax
Tax expense (tax income) is the aggregate amount included in the determination of profit or loss for the period in respect of current tax and deferred tax.
Current and deferred tax is recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: • a transaction or event which is recognised, in the same or a different period, outside profit or loss, either in other comprehensive income or directly in equity; • a business combination other than the acquisition by an investment of a subsidiary that is required to be measured at fair value through profit or loss.
Current tax and deferred tax is recognised outside profit or loss if the tax relates to items that are recognised, in the same or a different period, outside profit or loss. Therefore, current tax and deferred tax that relates to items that are recognised, in the same or a different period: • in other comprehensive income, will be recognised in other comprehensive income; • directly in equity, will be recognised directly in equity.
19. Related parties . . . .
A related party is a person or entity that is related to the entity that is preparing its financial statements (in this standard referred to as the 'reporting entity'). • A person or a close member of that person's family is related to a reporting entity if that person: - has control or joint control of the reporting entity; - has significant influence over the reporting entity; or - is a member of the key management personnel of the reporting entity or of a parent of the reporting entity. • An entity is related to a reporting entity if any of the following conditions apply: - The entity and the reporting entity are members of the same group (which means that each parent, subsidiary and fellow subsidiary is related to the others); - One entity is an associate or joint venture of the other entity (or an associate or
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joint venture of a member of a group of which the other entity is a member); - Both entities are joint ventures of the same third party; - One entity is a joint venture of a third entity and the other entity is an associate of the third entity; - The entity is a post-employment benefit plan for the benefit of employees of either the reporting entity or an entity related to the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also related to the reporting entity; - The entity is controlled or jointly controlled by a person identified as a related party; - A person identified as having control or joint control over the reporting entity has significant influence over the entity or is a member of the key management personnel of the entity (or of a parent of the entity); - The entity, or any member of a group of which it is a part, provides key management personnel services to the reporting entity or to the parent of the reporting entity;
A related party transaction is a transfer of resources, services or obligations between a reporting entity and a related party, regardless of whether a price is charged.
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Annexure 14
SUMMARY OF LOAN ACCOUNTS, FUNDING AND FUNDING TERMS
Set out below is a summary of the inter-company, shareholder and bank funding loan accounts as at 31 December 2019. The shaded amounts represent inter-company loans, which, from the Listing Date, are interest free and which upon consolidation into Runway, will be eliminated. The shareholder loan accounts, which bear interest at 8% per annum (nominal annual compounded monthly) are to be settled in full during the financial year commencing 1 March 2020.
Stand 278 Linden NH 224 NH 267 Tensing Thistledown Reflect All Total Lending entity 192 853 693 -3 045 867 13 729 475 3 155 211 -118 896 -1 072 750 405 312 499 610 813 366 Linden Square 3 045 867 ------3 045 867 NH 224 -10 110 157 ------10 110 157 NH 267 10 540 404 ------10 540 404 Reflect All -85 212 074 ------85 212 074 Stand 278 - -3 045 867 10 110 157 -10 540 404 -118 896 -1 072 750 85 212 074 80 544 315 Tensing 118 896 ------118 896 Thistledown 1 072 750 ------1 072 750 CEZ Investments 21 562 748 ------21 562 748 PSM 7 033 070 ------7 033 070 Nedbank 207 725 064 227 712 449 435 437 513 Investec 37 077 126 - 3 619 318 13 695 615 - - 92 387 977 146 780 035
Set out below is a summary of the current Investec funding terms, all of which have a 5-year tenure, expiring during 2021. The Company is in the process of re-financing these loans on more favourable terms.
Borrower: Reflect All Type: Amortising credit facility Initial Capital: R63,75m Interest rate: Prime less 0,25% Security: Mortgage bonds to the value of the initial capital over Erven 807, 809, 7942 and Rem Ext of Erf 7987, Kensington (Darras Centre) Shareholder guarantees and suretyships to the value of R59,5m Cession of rentals and any proceeds from disposal
Borrower: Reflect All Type: Amortising credit facility Initial Capital: R49,87m Interest rate: Prime less 0,25% Security: Covering mortgage bonds to the value of R37m over Erven 678 and Portion 1 of Erf 847, Dowerglen Ext 3 (Dowerglen Plaza) and to the value of R12,875m over Erven 305 and 1524 Selcourt (Selcourt Centre) Shareholder guarantees and suretyships to the value of R35,4m Cession of rentals and any proceeds from disposal
Borrower: New Heights 267 Type: Amortising credit facility Initial Capital: R16,125m Interest rate: Prime less 0,25% Security: Covering mortgage bonds to the value of R16,18m over Erf 1999 Valhalla (Valhalla neighbourhood shopping centre) Shareholder guarantees and suretyships to the value of R9m Cession of rentals and any proceeds from disposal
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Borrower: New Heights 224 Type: Amortising credit facility Initial Capital: R5,9m Interest rate: Prime less 0,25% Security: Covering mortgage bonds to the value of R15m over Erf 206 Boksburg East Ext 3 (Commissioner Street Building) Founding Shareholder guarantees and suretyships to the value of R10,5m Cession of rentals and any proceeds from disposal
Borrower: Stand 278 Type: Amortising credit facility Initial Capital: R15,96m Interest rate: Prime less 0,25% Security: Covering mortgage bonds to the value of R17m over Erf 329 Sharon Park (Sharon Park Shopping Centre) Founding Shareholder guarantees and suretyships to the value of R15,34m Cession of rentals and any proceeds from disposal
Borrower: Stand 278 Type: Amortising credit facility Initial Capital: R29,9m Interest rate: Prime less 0,25% Security: Covering mortgage bonds to the value of R31m over Erven 221, 222, 225, 226 and 900 South Germiston (Southern Shopping Centre) Founding Shareholder guarantees and suretyships to the value of R25m Cession of rentals and any proceeds from disposal
Set out below is a summary of the current Nedbank funding terms. All of which have a five year tenure, expiring during 2021. The Company is in the process of re-financing these loans on more favourable terms.
Borrower: Stand 278 Type: Amortising credit facility Initial Capital: R211,53m Interest rate: 3-month JIBAR plus 2,93% Security: Covering mortgage bond to the value of R98m over Erf 2112 Ferndale (Ferndale Village Shopping Centre) Covering mortgage bond to the value of R5,75m over Erf 52 Florida (Tensing Trading, Florida) Covering mortgage bonds to the value of R11,3m over Erf 109 Melville (7 th Street, Melville) Covering mortgage bond to the value R12,5m over Erf Portion 3 and 4 of Erf 258 Linden (Linden Square Shopping Centre) Covering mortgage bond to the value R102m over Portion 2 of Erf 24824 Sasolburg (Sasolburg Shopping Centre) Covering mortgage bond to the value R17,4m over Erf 851 Parktown (Palmer Place) Covering mortgage bond to the value R2,1m over Portion 8 (a portion of portion 7) of Erf 144 Heidelberg Township (Voortrekker Street) Covering mortgage bond to the value R55m over Erf 1781 Triomf (Sophiatown Shopping Centre) Founding Shareholder guarantees and suretyships to the value of R369,6m
Borrower: Reflect All Type: Amortising credit facility Initial Capital: R236,59m Interest rate: 3-month JIBAR plus 2,53% Security: Covering mortgage bond to the value of R11,1m over Portion 19 of Erf 181 Edenburg (Norbuy Office Park) Covering mortgage bond to the value of R102,5m over Erf 3562 Noordheuwel Extension 4 (Noordheuwel Shopping Centre) Covering mortgage bonds to the value of R3,7m over Portion 1 of Erf 1622 Boksburg (Leeuwpoort Street) Covering mortgage bond to the value of R3,65m over Erf 726 Woodmead Ext 14 (Stirrup Lane, Woodmead) Covering mortgage bond to the value of R107,7m over Erven 7, 9 Cramerview Ext 40, Portion 1 of Erf 8 Cramerview and Erf 4832 Bryanston Ext (Cramerview Village Centre) Covering mortgage bond to the value of R61m over Portion Erf 2544 Primrose (Primrose Square Shopping Centre) Covering mortgage bond to the value of R32,7m over Sections 1-8, 10, 13-16 Sectional Scheme Laser Downs (Laser Downs Industrial Park) Covering mortgage bond to the value of R7,7m over Erf 433 Wynberg Ext 3 (Thora Crescent) Covering mortgage bond to the value of R1,1m over Erf 105 Laser Park Ext 6 (Boat Turn Road) Covering mortgage bond to the value of R3m over Erf 175 Laser Park Ext 6 (Boat Turn Road) Covering mortgage bond to the value of R1,45m over Erf 114 Laser Park Ext 6 (Battleship Road) Covering mortgage bond to the value of R1,3m over Erf 115 Laser Park Ext 6 (Boat Turn Road) Founding Shareholder guarantees and suretyships to the value of R197,5m
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Annexure 15
VALUATION SUMMARY
11 November 2019
The Directors Runway Property Group Limited Georgian Place Office Park 18 Southway Road Kelvin
Dear Sirs
RE: INDEPENDENT PROPERTY VALUERS’ REPORT OF THE PROPERTY PORTFOLIO FOR RUNWAY PROPERTY GROUP LIMITED (“RUNWAY PROPERTY”) AS DETAILED IN THE SUMMARY SCHEDULE ATTACHED AND FOR WHICH THERE ARE DETAILED VALUATION REPORTS HELD BY RUNWAY PROPERTY
In accordance with your instruction of 25 August 2019, I confirm that I have visited and inspected the 27 properties listed in the attached schedule (“the properties”) during September and October 2019. I have all the necessary details required to perform an update on the previous valuations. These valuations are at 28 February 2019.
1. INTRODUCTION
The valuation of the properties has been carried out by Peter Parfitt who has considered all aspects of all the properties. These properties each have a detailed valuation report which has been given to the management of Runway Property. The detailed reports include commentary on the current economy, nature of the properties, locality, tenancy, risk profile, forward rent and earning capability and exposure to future expenses and property risk. All these aspects have been considered in the individual valuation reports of the properties. The detailed reports have further addressed the tenancy income capability and expenditure for each property and tenant. Historic expenditure profile as well as future expenditure increases have been considered. The value therefore indicates the fair market value for each property which is detailed in the attached report and which has been summarised on a schedule as attached hereto. There are 27 properties in total comprising the portfolio. All essential aspects of information of all the properties have been summarised in the attached schedule.
2. BASIS OF VALUATION
The valuation is based on market value.
Market value is “The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.” (IVS 7th edition).
Furthermore the principles of fair value measurement have been applied in the determination of value which is defined as “The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” (IFRS 13)
Note that the values and calculation methodology have been sensitivity tested by way of quantitative analysis by analysing the capitalisation rates, discount rates, rental growth potential, expenditure increase, risk consideration and other inputs in various discounted cash flow models.
3. VALUE CALCULATION
The calculation of the market value of these properties has been based on discounted cash flows for the income producing properties and comparable land sales for the land portions. This is an accurate value calculation basis
80 which considers future streams of annuity income for larger commercial properties that are traded in the South African market. This is due to there being strong supporting evidence of market rental rates, escalations, appropriate expenses and therefore accurate net revenue potential determination. This method also relies on capitalisation rates which are frequently reported in the market. This rate may also be determined by simple analysis of sales in the market.
Properties traded in the current market reflect a future yield rate relationship between net revenue and capital value. This rate is an accurate determinant of the capitalisation rate.
The discounted cash flow value has then been calculated for each property with reference to fair value reporting in order to ensure that the reported value is consistent with the current market.
The considerations for the valuations are as follows:
3.1. calculating the forward cash flow of all contractual and other income derived from the properties;
3.2. calculating the forward contractual and other expenditure as well as provisions for various expenses in order to provide for void or future capital expenditure to which the property may be exposed;
3.3. The current area vacancy as a percentage of the properties is approximately 3.77%. Retail has a 3.14% vacancy rate, and offices have an 9.70% vacancy rate, Industrial 7.33%. The current vacancy is higher than the weighted average at approximately 3.6% for industrial properties - SAPOA September 2019, Retail 4.7 % 11.00% for offices.
3.4. In the cash flow calculations I have created a provision for non-recovery of income due to vacancy, tenant failure, refitting period or other reason. Approximately 2.65% of the net rental income (R 3 097 936.26) has been deducted as a provision for rental that may not be collected as a consequence of vacancy, tenant failure or tenant refitting cost i.e. voids. This has penalised the property in perpetuity. Management should be able to improve on this aspect in future indicating good internal growth potential from the properties themselves if managed well.
3.5. There is no loss of rental due to renovations or refurbishments currently being carried out on the buildings. There is some external maintenance work on various buildings and some tenant installation fitting that is currently in progress. There is no loss of rental as a result of these activities.
3.6. Generally the rentals are market related. Some rentals are marginally lower than market. The portfolio is a mix of developments and a mix of property grades.
The rental relationships to market have been determined by comparing similar buildings in comparable areas to the properties valued, in terms of rental per square metre. The rental rate has also been checked against various published indices including the South African Property Owners Association (SAPOA) index. There are no properties that are highly over-rented, or that cannot be re-rented at the same or higher rental rate should such property become vacant. There is therefore average potential for rental flow reversion. This is provided that the economy remains in a slow growth pattern as currently being experienced and that there are no major economic fluctuations which may upset the economy. Current growth rate projected at approximately 0.75% for 2019.
3.7. Values have been determined by discounting the net income derived from the properties for a period of 5 years in advance, calculated from 1 March 2019;
3.8. The valuation has considered published market statistics regarding rental rates and expenditure for the different types of properties. It has also considered numerous other portfolios of similar properties in order to benchmark and determine if any properties are over rented or have excessive expenditure.
3.9. Various capital provisions for repairs, tenant installation, loss of rental and commissions were calculated. These provisions amount to R 1 129 308.00 for loss of rental on vacant space, R 1 317 526.00 for tenant installation and R 350 000.00 for commissions which were deducted from the DCF value of the properties.
3.10. The portfolio is a mixed combination of retail, industrial and office properties. These properties generally fall into B and C grade category which are not high end rental stock but for which there is continued market
81 demand. The properties are reasonably well located and represent the general affordable rental market. Due to the age of the properties there is a higher repairs and maintenance consideration given to the expenditure. The returns have been calculated to represent a high yield portfolio where there is some reasonable capital appreciation.
4. SPARE LAND
There is no property with vacant and /or spare land and that is being held for development.
5. PROPERTY NAME PHYSICAL NATURE BUILDIN Value at ADDRESS G AGE 01/03/2019 (YEARS) 23 Thora Cres Wynberg 23 Thora Crescent Multi storey 39 R19 000 000 Wynberg office building with warehouse component Cramerview Village 277 Main Road, Marginally 68 R156 500 000 Centre Bryanston disjointed retail centre with office component Darras Centre 65 Juno Street Neighbourhood 43 R97 000 000 Kensington Shopping Johannesburg Centre Dowerglen Plaza 73 Sycamore Small 38 R65 000 000 Drive, Dowerglen Neighbourhood Shopping Centre Laser Downs Industrial Corner Johan and Mini Unit 24 R14 750 000 Park Brigatyn Streets Industial Park - Laser Park Sectional Scheme Erf 114, Laser Park 4 Battleship Road, Free Standing 14 R2 100 000 Alsef AH, Mini Industrial Roodepoort Unit Erf 115, Laser Park 3 Boat Turn Free Standing 14 R2 050 000 Street, Laser Park, Mini Industrial Roodepoort Unit Erf 175, Laser Park Boat Turn Road Free Standing 13 R3 200 000 Laser Park Mini Industrial Roodepoort Unit Erf 105, Laser Park 6 Boat Turn Free Standing 14 R2 000 000 Street, Laser Park, Mini Industrial Roodepoort Unit Erf 726, Woodmead 22 Stirrup Lane, Gated cluster 26 R3 300 000 Woodmead East, owned office Sandton park complex Noordheuwel Shopping Cnr Robert Neighbourhood 28 R120 000 000 Centre Broom Drive and Shopping Lud Hersch Street Centre Noordheuwel Norbuy Office Park 372 Rivonia Small Office 29 R10 500 000 Boulevard, Building Edenburg, Sandton Primrose Square Corner Shamrock Neighbourhood 9 R82 000 000 Shopping Centre and Churchill Shopping Streets Primrose Centre
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Selcourt Centre 200 - 202 Nigel Small 36 R24 500 000 Road, Selcourt, Neighbourhood Springs Shopping Centre Ferndale Village 47 Oxford Street, Neighbourhood 11 R113 000 000 Shopping Centre Ferndale, Shopping Randburg Centre Palmer Place 2 Park Lane, Residential 60 R24 000 000 Parktown, Multi Unit High Johannesburg Rise Sasolburg Square John Voster Neighbourhood 43 R120 000 000 Shopping Centre Avenue Sasolburg Shopping Centre Sharon Park Shopping Corner Maitland Neighbourhood 42 R37 500 000 Centre Avenue and Nigel Shopping Road Sharon Park Centre Sophiatown Shopping 60 Millar Street, Neighbourhood 39 R92 000 000 Centre Sophiatown, Shopping Johannesburg Centre Southern Shopping 7 Webber Road, Neighbourhood 33 R54 000 000 Centre Germiston Shopping Centre Voortrekker Street, 45 Voortrekker Small 50 R2 200 000 Heidelberg Street, Heidelberg Neighbourhood Shopping Centre Linden Square Shopping Corner 4th Ave Small 36 R18 100 000 Centre and 8th Street, Neighbourhood Linden Shopping Centre New Heights 224 - Trichardts Road, Small 47 R6 500 000 Leeuwport Str Boksburg Corner Neighbourhood Leeuwpoort St, Shopping Boksburg Centre National Truck 514 C Grade 35 R10 300 000 Commissioner Industrial / Street, Boksburg warehouse / East, Boksburg with offices New Heights 267 - 20 Broadway E, Small 40 R39 000 000 Valhalla Valhalla, Neighbourhood Centurion Shopping Centre Tensing Trading (Pty) Corner Goldman Small 44 R12 000 000 Ltd Street and 2nd Neighbourhood Avenue, Florida Shopping Centre Thistledown 3 Seventh Street, Ground floor 65 R15 300 000 Melville, retail and upper Johannesburg residential
Please note all properties are in South Africa.
6. VALUATION QUALIFICATIONS
Qualifications are usually detailed as a consequence of: -Leases under negotiation that have not yet been formalised; -leases of a large nature where the premises are difficult to re-let; -specialised properties; -large exposure to a single tenant;
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-potential tenant failure due to over-rent; -expenses required for major repairs; -maintenance or other exposure to maintain the lettability of the building; -contingent expropriations or servitudes that may be enforced; poor lease recordals whereby the lease may be disputed or rendered invalid.
I have, to the best of my knowledge, considered all of these aspects in the valuation of all the properties. There are no properties that are prejudiced in value by the influence of the above factors.
I am however not responsible for the competent daily management of these properties that will ensure that this status is maintained, or for the change of any laws, services by local authority or economic circumstances that may adversely impact on the integrity of the buildings or the tenant profile, or legal dispute which may result in any cash flow hiatus.
7. OPTIONS OR BENEFIT / DETRIMENT OF CONTRACTUAL ARRANGEMENTS
To my knowledge there are no contractual arrangements on the properties other than the leases as detailed in the report that have a major benefit or are detrimental to the fundamental value base of the properties. To the best of my knowledge, there are no options in favour of any parties for any purchase arrangement on any of the properties.
8. INTRA-GROUP OR RELATED PARTY LEASES
Having inspected all the tenant schedules and leases it is noted that there are no intra-group or related party leases. The current management of the portfolio is carried out at offices located at Georgia Place. The management company leases small premises here at market related rent.
9. CURRENT STATE OF DEVELOPMENT
There are no properties which are currently being developed. Note various properties may have some minor repairs and alternations taking place. Note, however, that there is spare land capacity for expansion on certain properties as set out under paragraph 4 of this report.
10. EXTERNAL PROPERTY
None of the properties are situated outside the Republic of South Africa.
11. RENTALS USED IN VALUATIONS
Market related rentals have been applied to any vacant space. It is noted that there are no large leases with a potential for rental reversion and that the rentals for all the properties increase on average by approximately 7.82% compounding per annum.
12. OTHER GENERAL MATTERS AND VALUATION SUMMARY
A full valuation report is available on a property by property basis detailing tenancy, town planning, valuer’s commentary, expenditure and other details. This has been given to the directors of Runway Property.
13. ALTERNATIVE USE FOR A PROPERTY
The properties have all been valued in accordance with their existing use which represents their best use and market value. No alternative uses for the properties have been considered in the determination of value.
14. OTHER COMMENTS
Our valuation excludes any amounts of Value-added Tax, transfer duty, or securities transfer duty.
15. CAVEATS
15.1. Source of information and verification
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Information on the properties regarding rental income, recoveries, turnovers and other income detail has been provided to me by the current owners and their managing agents. I have received copies of all of the leases of the existing properties where such leases are the major tenant or tenants comprising anything higher than 5% occupancy of the property. The leases have been read to check against management detail records, in order to ensure that management has correctly captured tenant information as per the contractual agreements. This has been done to test management information accuracy against the underlying lease agreements.
I have further compared certain expenditures given to me, to the market norms of similar properties. This has also been compared to historic expenditure levels of the properties themselves. Historical contractual expenditures and municipal utility services were compared to the past performance of the properties in order to assess potential expenditure going forward. The municipal values on the properties are generally market related and reasonable with little potential to increase dramatically.
15.2. Full disclosure This valuation has been prepared on the basis that full disclosure of all revenue and expenditure information and factors that may affect the valuation have been made to myself. I have to the best of my ability researched the market as well as taken the steps detailed in paragraph 15.3 below.
15.3. Leases Our valuation has been based on a review of actual tenants’ leases (which includes material terms such as repair obligations, escalations, break options etc.) and other pertinent details which have been supplied to us by the managing agents and by Runway Property. These have been detailed in the tenant schedules attached to each individual valuation report.
All recovery details in respect of the existing leases e.g. utility cost and other recoveries as provided for in the leases have been disclosed by way of the monthly tenant invoices and summary schedule supplied to us. Option terms and other lease information have been supplied to us by the owners and managing agents and we are familiar with such documents.
15.4. Lessee’s credibility In arriving at our valuation, cognizance has been taken of the lessee’s security and rating. In some cases this has influenced the capitalisation rate by way of a risk consideration. The current portfolio is 34% occupied by national or international tenant base.
15.5. Mortgage bonds, loans, etc. The properties have been valued as if wholly-owned with no account being taken of any outstanding monies due in respect of mortgage bonds, loans and other charges. No deductions have been made in our valuation for costs of acquisition. Proportionate shareholding has been detailed.
The valuation is detailed in a completed state and no deductions have been made for retention or any other set- off or deduction for any purposes which may be made at the discretion of the purchaser when purchasing the properties.
15.6. Calculation of areas All areas quoted within the detailed valuation reports are those stated in the information furnished and verified from leases and where plans were available. To the extent that plans were not available, reliance was placed on the information submitted by the managing agents and lease information. Aerial and onsite checking of sizes has also been calculated to check information provided. Updated plans were not available for all the properties in respect of internal configuration. The properties generally appear to have the stated square meterage as per lease, which could only be more accurately determined if remeasured by a professional.
15.7. Structural condition The properties have been valued in their existing state. I have not carried out any structural surveys, nor inspected those areas that are unexposed or inaccessible, neither have I arranged for the testing of any electrical or other services.
15.8. Contamination
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The valuation assumes that a formal environmental assessment is not required and further that none of the properties are environmentally impaired or contaminated, unless otherwise stated in our report.
15.9. Town planning Full town planning details and title deeds have been noted in the detailed valuation reports including conditions and restrictions and the properties have been checked against such conditions. This is to ensure that they comply with town planning regulations and title deeds. There do not appear to be any infringements of local authority regulations or deeds by any of the properties.
The valuation has further assumed that the improvements have been erected in accordance with the relevant Building and Town Planning Regulations and on inspection it would appear that the improvements are in accordance with the relevant town planning regulations for these properties. Certificates of occupation are available and on file for each building. There is no contravention of any statutory regulation, or town planning local authority regulation or contravention of title deed relating to any of the properties which infringement could decrease the value of the properties as stated as at current date of local authority legislation.
16. MARKET VALUE
I am of the opinion that the aggregate market value of the property portfolio value as at 1 March 2019 is R1 145 800 000 (excluding VAT). A summary of the individual valuations and details of each of the properties is attached.
I have more than 30 years’ experience in the valuation of all nature of property and I am qualified to express an opinion on the fair market value of the properties.
I trust that I have carried out all instructions to your satisfaction and thank you for the opportunity of undertaking this valuation on your behalf.
Yours faithfully,
Peter Parfitt
Quadrant Properties (Pty) Ltd Dunkeld Court 16 North Road, corner Jan Smuts Avenue Dunkeld West, 2196 Professional Valuer Dip. Val. MIV(SA) (RICS) Registered Professional Property Valuer (no. 2712/2) (Registered without restriction in terms of the Property Valuers Act, No. 47 of 2000)
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Annexure 16
PROPERTY DETAILS
Property name Physical address Nature and use Acquisition Acquisition GLA Independent date cost (m) (m2) valuation as at 1 March 2019 (m) 23 Thora 23 Thora Crescent Multi-story office 2014/04/03 R14,5 2 400 R19 Crescent, Wynberg building with Wynberg warehouse component Cramerview 277 Main Road, Retail centre with 2014/07/23 R120 13 588 R156,5 Village Centre Bryanston office component Darras Centre 65 Juno Street Neighbourhood 2016/07/01 R85 8 688 R97 Kensington shopping centre Johannesburg Dowerglen Plaza 73 Sycamore Small 2014/12/08 R42,7 3 155 R65 Drive, Dowerglen Neighbourhood shopping centre Laser Downs Corner Johan and Mini-unit 2014/06/25 R16, 25 2 758 R14,75 Industrial Park Brigatyn Streets industial park - Laser Park sectional scheme Erf 114, Laser 4 Battleship Road, Free standing 2014/06/25 R1,15 294 R2,1 Park Alsef AH, mini industrial Roodepoort unit Erf 115, Laser 3 Boat Turn Free standing 2014/06/25 R1,21 310 R2,05 Park Street, Laser Park, mini industrial Roodepoort unit Erf 175, Laser Boat Turn Road Free standing 2014/06/25 R1,27 326 R3,2 Park Laser Park mini industrial Roodepoort unit Erf 105, Laser 6 Boat Turn Free standing 2014/06/25 R2,63 674 R2 Park Street, Laser Park, mini industrial Roodepoort unit Erf 726, 22 Stirrup Lane, Gated cluster 2014/04/03 R6 417 R3,3 Woodmead Woodmead East, owned office park Sandton complex Noordheuwel Cnr Robert Neighbourhood 2014/04/03 R108 7 865 R120 Shopping Centre Broom Drive and shopping centre Lud Hersch Street Noordheuwel Norbuy Office 372 Rivonia Small office 2014/04/03 R11,5 1 488 R10,5 Park Boulevard, building Edenburg, Sandton Primrose Square Corner Shamrock Neighbourhood 2007/08/06 R52,8 6 074 R82 Shopping Centre and Churchill shopping centre Streets Primrose Selcourt Centre 200 - 202 Nigel Small 2015/08/20 R14,5 2 314 R24,5 Road, Selcourt, neighbourhood Springs shopping centre Ferndale Village 47 Oxford Street, Neighbourhood 2009/11/18 R90 7 012 R113 Shopping Centre Ferndale, shopping centre Randburg
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Palmer Place 2 Park Lane, Residential multi- 2009/08/01 R7,3 3 119 R24 Parktown, unit high rise Johannesburg Sasolburg Square John Voster Neighbourhood 2012/03/23 R72,6 9 152 R120 Shopping Centre Avenue shopping centre Sasolburg, Free State Sharon Park Corner Maitland Neighbourhood 2011/08/30 R20,5 7 471 R37,5 Shopping Centre Avenue and Nigel shopping centre Road Sharon Park Sophiatown 60 Millar Street, Neighbourhood 2010/03/31 R25,1 6 810 R92 Shopping Centre Sophiatown, shopping centre Johannesburg Southern 7 Webber Road, Neighbourhood 2011/08/28 R33,2 5 425 R54 Shopping Centre Germiston shopping centre Voortrekker 45 Voortrekker Small 2005/01/03 R1 459 R2,2 Street, Street, Heidelberg neighbourhood Heidelberg shopping centre Linden Square Corner 4th Small 2003/07/24 R5 2 037 R18,1 Shopping Centre Avenue and 8th neighbourhood Street, Linden shopping centre New Heights 224 Trichardts Road, Small 2011/05/03 R4,8 836 R6,5 - Leeuwport Str Corner neighbourhood Boksburg (KFC) Leeuwpoort St, shopping centre Boksburg National Truck 514 C Grade industrial 2011/08/04 R11,8 4 831 R10,3 (Commissioner Commissioner / warehouse / with Street) Street, Boksburg offices East, Boksburg New Heights 267 20 Broadway E, Small 2001/06/29 R4,5 2 518 R39 - Valhalla Valhalla, neighbourhood Centurion shopping centre Tensing Trading Corner Goldman Small 2006/12/13 R7 2 226 R12 Street and 2nd neighbourhood Avenue, Florida shopping centre Thistledown 3 Seventh Street, Ground floor 2007/12/13 R6,1 R1 327 R15,3 (Melville Melville, retail and upper Gardens) Johannesburg residential
Runway Property Group
Aggregated pro forma financials for the year end February 2019 Based on the audited financials for each entity for the year end February 2019 But adjusted to depict what the group would have looked like if it had been consolidated at that point as a REIT Income Statement Runway Property Group For the Year End February 2019
Account Stand 278 NH 224 NH 267 Tensing Thistledown Reflect All Linden Adjustments Total Group Rental Income 52 496 149.00 1 455 697.00 2 795 123.47 1 767 731.00 1 608 424.00 63 674 160.41 3 469 252.76 127 266 537.64 Rental Income 52 496 149.00 1 455 697.00 2 795 123.47 1 767 731.00 1 608 424.00 63 674 160.41 3 469 252.76 127 266 537.64
Other Income 27 117 443.95 154 438.68 2 056 270.52 1 500.00 - 32 439 136.59 1 724 357.23 63 493 146.97 Assesment Rates Recovered 2 196 930.16 87 165.28 79 480.12 5 392 149.12 154 787.99 7 910 512.67 Electricity Recovered 21 102 765.77 32 511.00 1 858 040.36 20 130 995.78 1 390 908.10 44 515 221.01 Lease Fees 64 850.00 3 000.00 3 500.00 1 500.00 88 650.00 5 500.00 167 000.00 Refuse Recovered 928 682.40 10 148.60 78 010.69 1 040 704.80 26 553.08 2 084 099.57 Security Recovered 124 503.26 7 192.80 422 811.81 554 507.87 Service Charges Recovered 11 930.46 11 930.46 Operating Cost 393 582.36 263 623.04 657 205.40 Other Income 86 726.70 2 340 318.43 1 255.99 2 428 301.12 Water & Sewerage Recovered 2 219 403.30 14 421.00 37 239.35 2 747 953.15 145 352.07 5 164 368.87
Total Expense 46 470 590.37 921 207.50 3 140 661.50 545 994.59 1 098 158.59 46 721 197.38 2 841 948.69 101 739 758.62 Accounting Fees 87 268.67 8 704.35 10 207.40 215.26 2 749.32 99 235.02 5 304.35 213 684.37 Assesment Rates 7 786 565.18 410 504.04 90 437.95 110 461.00 67 034.32 6 612 879.62 290 288.32 15 368 170.43 Bad Debts 2 272 203.00 2 272 203.00 Bank Charges 529 773.34 1 381.41 1 194.43 1.00 448.11 620 623.44 1 290.96 1 154 712.69 Cleaning 558 344.47 1 196.00 1 011 782.51 1 571 322.98 Collection Fees 34 715.88 29 547.16 630.50 488 669.24 553 562.78 Depreciation 414 971.00 172 500.00 1 120 645.00 45 656.04 1 753 772.04 Electricity 17 962 358.35 1 858 039.73 330 782.00 448 453.27 20 417 349.78 1 296 644.45 42 313 627.58 Garden & Landscaping 88 024.92 100 656.64 188 681.56 General Expenses 341.00 1 525.55 1 866.55 Insurance 614 717.85 614 717.85 Levies 540 183.56 289 784.07 829 967.63 Management Fees 9 055 862.48 65 690.89 606 975.92 98 117.80 335 335.45 4 264 727.62 522 378.09 14 949 088.25 Meter Reading 121 633.08 4 870.34 6 937.02 3 467.54 10 733.52 131 791.45 8 870.58 288 303.53 Pest Control 43 712.00 9 582.00 57 075.73 8 081.00 118 450.73 Professional Fees 141 500.00 22 400.00 98 370.00 68 006.61 330 276.61 Raising Fee 239 840.00 15 000.00 254 840.00 Refuse 637 837.49 42 441.09 145 864.80 - 35 343.68 812 502.66 220.17 1 674 209.89 Repairs & Maint. 547 342.09 157 063.40 36 110.71 2 608.99 177.03 678 613.73 139 571.24 1 561 487.19 Salaries & Wages 2 220 225.12 2 220 225.12 Security 2 681 372.35 164 101.82 120 517.33 3 891 128.53 246 059.76 7 103 179.79 Service Charges 292 705.78 21 903.00 - 6 074.02 375 187.34 46 760.78 742 630.92 Water & Sewerage 1 871 636.76 58 698.21 - 189 653.82 3 377 972.00 162 816.34 5 660 777.13
Nett Profit Before Interest andTax 33 143 002.58 688 928.18 1 710 732.49 1 223 236.41 510 265.41 49 392 099.62 2 351 661.30 89 019 925.99
Fair Value Adjustment 16 200 000.00 -5 200 001.00 17 500 000.00 -400 000.00 -700 000.00 92 375 935.00 -3 800 000.00 115 975 934.00
18 884 240.88 1 173 243.18 101 512.45 115 356.67 -84 954.21 39 071 183.92 -60 499.84 59 200 083.05 Interest Paid 26 553 582.42 1 173 311.78 922 639.83 116 026.14 806.18 39 485 273.88 864.98 68 252 505.21 Interest Received -7 669 341.54 -68.60 -821 127.38 -669.47 -85 760.39 -414 089.96 -61 364.82 -9 052 422.16
Tax 2 329 932.00 - 326 322.00 325 329.00 379 797.00 2 893 304.00 698 413.00 -6 953 097.00 - Deferred Tax 5 291 324.00 -1 026 939.00 3 795 740.00 -104 723.00 -369 936.00 21 458 782.00 -874 208.00 -28 170 040.00 -
Nett Profit After Tax 22 837 505.70 -4 657 377.00 14 987 158.04 487 273.74 -114 641.38 78 344 764.70 -1 212 043.86 35 123 137.00 145 795 776.94
Page 1 Balance Sheet Runway Property Group For the Year End February 2019
Assets Stand 278 NH 224 NH 267 Tensing Thistledown Reflect All Linden Adjustments Total Group Non-current assets Property, plant and equipment 770 018.00 6 555 000.00 2 963 194.00 736 953.00 11 025 165.00 Investment property 465 380 644.00 16 800 000.00 39 000 000.00 12 000 000.00 15 300 000.00 601 900 000.00 18 100 000.00 1 168 480 644.00 Investment in subsidiary 420.00 420.00 Operating lease receivables 1 039 502.00 443 783.00 410 683.00 53 359.00 1 947 327.00 Loans to group companies 102 463 646.00 11 687 783.00 234 889.00 1 873 676.00 116 259 994.00 Total non-current assets 568 614 728.00 17 839 502.00 57 686 566.00 12 410 683.00 15 534 889.00 604 863 194.00 20 763 988.00 - 1 297 713 550.00
Current assets Trade and other receivables 1 572 872.00 361 496.00 20 847.00 37 714.00 3 559 120.00 67 546.00 5 619 595.00 Current tax assets 184 000.00 501 878.00 46 085.00 731 963.00 Cash and cash equivalents 394 173.00 43 366.00 2 096.00 14 242.00 25 168.00 587 159.00 1 464.00 1 067 668.00 Total current assets 1 967 045.00 588 862.00 2 096.00 35 089.00 62 882.00 4 648 157.00 115 095.00 - 7 419 226.00 - Total assets 570 581 773.00 18 428 364.00 57 688 662.00 12 445 772.00 15 597 771.00 609 511 351.00 20 879 083.00 - 1 305 132 776.00
Equity and liabilities Equity Issued capital 200.00 120.00 100.00 100.00 100.00 100.00 100.00 820.00 Opening Retained Income 161 958 564.00 7 200 152.00 13 461 667.00 8 928 336.00 10 959 333.00 44 724 547.00 18 121 887.00 53 290 940.00 318 645 426.00 Current Income 22 837 505.70 -4 657 377.00 14 987 158.04 487 273.74 -114 641.38 78 344 764.70 -1 212 043.86 28 170 040.00 138 842 679.94 Total equity 184 796 269.70 2 542 895.00 28 448 925.04 9 415 709.74 10 844 791.62 123 069 411.70 16 909 943.14 81 460 980.00 457 488 925.94
Total equity 184 796 269.70 2 542 895.00 28 448 925.04 9 415 709.74 10 844 791.62 123 069 411.70 16 909 943.14 81 460 980.00 376 027 945.94
Liabilities Non-current liabilities Deferred tax liabilities 41 854 074.00 319 154.00 7 591 119.00 1 227 929.00 1 462 316.00 26 068 247.00 2 938 141.00 -81 460 980.00 - Operating lease liabilities 4 657 750.00 2 052 525.00 7 795 185.00 14 505 460.00 Other financial liabilities 263 559 144.00 4 373 648.00 9 050 045.00 331 222 996.00 608 205 833.00 Loans from Shareholders 36 386 907.00 36 386 907.00 Loans from group companies 13 796 348.00 10 351 057.00 1 024 939.00 91 087 650.00 116 259 994.00 Total non-current liabilities 360 254 223.00 15 043 859.00 16 641 164.00 2 252 868.00 3 514 841.00 456 174 078.00 2 938 141.00 -81 460 980.00 856 819 174.00
Current liabilities Trade and other payables 24 743 652.30 841 610.00 12 517 922.96 567 232.26 1 193 652.38 29 067 137.30 1 030 998.86 69 962 206.06 Current tax liabilities 787 628.00 80 650.00 209 962.00 44 486.00 - - 1 122 726.00 Other financial liabilities 156.00 156.00 Loan from external company 1 200 568.00 1 200 568.00 Total current liabilities 25 531 280.30 841 610.00 12 598 572.96 777 194.26 1 238 138.38 30 267 861.30 1 030 998.86 - 72 285 656.06
Total liabilities 385 785 503.30 15 885 469.00 29 239 736.96 3 030 062.26 4 752 979.38 486 441 939.30 3 969 139.86 -81 460 980.00 929 104 830.06
Total equity and liabilities 570 581 773.00 18 428 364.00 57 688 662.00 12 445 772.00 15 597 771.00 609 511 351.00 20 879 083.00 - 1 305 132 776.00
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Page 3 Cash Flow Statement Runway Property Group For the Year End February 2019
Stand 278 NH 224 NH 267 Tensing Thistledown Reflect All Linden Adjustments Total Group Cash Flows from Operations (Loss) / Profit for the year 22 837 505.70 -4 657 377.00 14 987 158.04 487 273.74 -114 641.38 78 344 764.70 -1 212 043.86 35 123 137.00 145 795 776.94 Adjustments to reconcile (Loss) /Profit - Adjustments for income tax expense 7 621 256.00 -1 026 939.00 4 122 062.00 220 606.00 9 861.00 24 352 086.00 -175 795.00 -35 123 137.00 - Adjustments for finance income -7 669 341.54 -68.60 -821 127.38 -669.47 -85 760.39 -414 089.96 -61 364.82 Adjustments for finance costs 26 553 582.42 1 173 311.78 922 639.83 116 026.14 806.18 39 485 273.88 864.98 68 252 505.21 Adjustments for decrease / (increase) in trade 4 415.00 141 925.00 182 461.00 179 453.00 -349 295.00 accounts receivable -857 549.00 Adjustments for (decrease) / increase in trade -141 037.00 15 789 694.00 24 437.00 390 033.00 9 053 616.00 -454 596.00 29 041 432.00 accounts payable 4 379 285.00 Adjustments for depreciation 414 971.00 172 500.00 1 120 645.00 45 656.00 1 753 772.00 Adjustments for increase / (decrease) in other 10 311.00 -7 746 101.00 -2 953 618.00 -11 293 815.00 operating payables -604 407.00 Adjustments for increase / (decrease) in other -443 783.00 -443 783.00 operating receivables Adjustments for gains on disposal of Assets -2 220 158.00 Movements in Operating lease assets -18 507 410.00 -492 364.00 54 011.00 761 200.00 2 737 760.00 -414 245.00 -15 861 048.00 Adjsutments for fair value gains -16 200 000.00 5 200 001.00 -17 500 000.00 400 000.00 700 000.00 -92 375 935.00 3 800 000.00 -115 975 934.00 Total Adjustments to reconcile (Loss) /Profit -4 869 613.12 4 723 215.18 -5 499 700.55 814 410.67 1 918 064.79 -21 031 959.08 2 919 973.16 -35 123 137.00 -21 025 608.95
Net Cash flows from operations 17 967 892.58 65 838.18 9 487 457.49 1 301 684.41 1 803 423.41 57 312 805.62 1 707 929.30 - 89 647 030.99
Interest Paid -26 553 582.42 -1 173 311.78 -922 639.83 -116 026.14 -806.18 -39 485 273.88 -864.98 -68 252 505.21 Interest Received 7 669 341.54 68.60 821 127.38 669.47 85 760.39 414 089.96 61 364.82 9 052 422.16 Income tax Paid -2 147 265.00 -106 530.00 -359 757.00 -133 948.00 -243 176.00 -1 751 556.00 -846 016.00 -5 588 248.00 Deferred Tax Impact on Income -3.00 -1.00 -2.00 -1.00 -7.00 Net Cash flows from operating activities -3 063 616.30 -1 213 935.00 9 026 188.04 1 052 379.74 1 645 200.62 16 490 063.70 922 412.14 - 24 858 692.94 - Cash flows used in investing activities Purchase of Property -21 535 034.00 -6 727 500.00 -4 556 571.00 -782 609.00 -33 601 714.00 Operating lease receivables advanced 18 507 410.00 390 002.00 18 897 412.00 Loans to group companies -4 244 513.00 -1 575 218.00 -635 687.00 -6 455 418.00 Cash flows used in investing activities -7 272 137.00 - -8 302 718.00 - - -4 556 571.00 -1 028 294.00 - -21 159 720.00
Cash flows from financing activites Proceeds from operating lease liablities -5 937 579.00 -722 689.00 106 415.00 -6 553 853.00 Repayment of borrowings - Movement in other financial liabilities 13 516 230.00 -843 149.00 -13 906 749.00 -1 233 668.00 Loans received from group companies 3 138 039.00 2 099 202.00 -1 054 105.00 -1 622 437.00 2 737 760.00 5 298 459.00 Cash flows from financing activites 10 716 690.00 1 256 053.00 -722 689.00 -1 054 105.00 -1 622 437.00 -11 168 989.00 106 415.00 - -2 489 062.00
Net increase / (decrease) in cash and cash 380 936.70 42 118.00 781.04 -1 725.26 22 763.62 764 503.70 533.14 1 209 910.94 equivalents - Cash and Cash Equivalents at Begining of year 13 236.00 1 248.00 1 315.00 15 968.00 2 405.00 -177 345.00 931.00 -142 242.00 Cash and Cash Equivalents at End of year 394 172.70 43 366.00 2 096.04 14 242.74 25 168.62 587 158.70 1 464.14 - 1 067 668.94 -0.30 -0.00 0.04 0.74 0.62 -0.30 0.14 - 0.94
Page 3 RUNWAY PROPERTY GROUP
Forecast for the year ending February 2020
For the Year End February 2020 Income Statement RUNWAY PROPERTY GROUP For the Year to Date February 2020
Account Stand 278 Linden NH 224 NH 267 Tensing Thistledown Reflect All Listed / Adj Total Rental Income 49 364 029 2 238 270 1 902 124 3 085 092 1 540 244 1 675 069 67 754 140 - 127 558 969 Rental Income 49 364 029 2 238 270 1 902 124 3 085 092 1 540 244 1 675 069 67 754 140 127 558 969 Rental Residential - - Lease Straight Line - -
Other Income 26 385 231 1 589 581 329 774 1 782 465 427 426 812 552 31 695 964 - 63 022 993 Assesment Rates Recovered 2 458 520 156 869 228 850 95 215 28 172 34 707 6 317 898 9 320 231 Discount Received - Electricity Recovered 20 659 137 1 269 958 68 405 1 511 535 334 114 423 636 20 860 760 45 127 544 Dividends - Insurance Recovered - Lease Fees - Refuse Recovered 1 032 285 28 948 11 713 90 735 33 371 82 056 1 126 133 2 405 241 Security Recovered 137 634 547 794 685 428 Service Charges Recovered - Operating Cost - Other Income - Water & Sewerage Recovered 2 097 655 133 807 20 807 84 980 31 767 272 154 2 843 378 5 484 549
Total Expense 50 702 738 2 243 420 730 609 1 094 631 586 633 1 386 175 46 595 596 - 103 339 802 Accounting Fees 169 258 12 705 17 104 20 003 8 688 10 273 211 251 449 281 Assesment Rates 5 736 220 204 636 327 472 102 969 84 018 42 945 7 510 239 14 008 501 Bad Debts - Bank Charges 10 467 1 728 915 551 528 -75 1 149 15 264 Cleaning 555 341 4 000 2 000 2 000 400 1 027 083 1 590 824 Collection Fees - Commission - Consulting - Depreciation - Electricity 18 564 293 1 233 831 194 849 178 106 316 475 763 867 20 768 409 42 019 830 Garden & Landscaping 107 701 26 997 134 699 General Expenses - Insurance 108 154 3 619 3 517 5 005 2 409 3 219 116 586 242 510 Legal Expenses - Levies 99 108 280 888 379 996 Lift Maintenance 59 682 204 833 264 514 Fire Expense - Management Fees 13 364 412 267 821 49 404 355 593 99 913 231 454 6 235 656 20 604 254 Marketing - Meter Reading 127 508 8 316 3 775 7 074 3 777 10 369 143 092 303 911 Parking Charges - Pest Control 45 824 7 944 9 655 80 073 143 495 Professional Fees 277 163 6 930 84 000 181 555 549 648 Raising Fees - Refuse 705 576 7 160 43 871 111 470 25 578 39 021 810 531 1 743 205 Registration Fees - Repairs & Maint. 897 120 45 568 28 767 34 419 10 187 27 150 2 000 788 3 044 000 Salaries & Wages 2 248 962 14 104 14 000 13 780 2 000 13 901 276 847 2 583 594 Security 3 257 951 286 386 140 289 4 093 427 7 778 053 Secretarial Fees - Service Charges - Valuation Fee - Water & Sewerage 2 367 998 138 672 44 935 29 716 32 660 244 052 2 626 190 5 484 224 Loss on Investment - Listing Costs 2 000 000 2 000 000
Nett Profit Before Interest andTax 25 046 523 1 584 431 1 501 290 3 772 926 1 381 037 1 101 446 52 854 508 - 87 242 160
Fair Value Adjustment
25 441 065 -14 636 401 928 1 078 875 -203 6 377 30 841 789 - 57 755 194 Interest Paid 25 576 284 87 402 001 1 079 098 66 48 407 31 166 102 58 272 045 Interest Received -135 219 -14 723 -73 -223 -269 -42 030 -324 314 -516 852
Nett Profit Before Tax -394 542 1 599 067 1 099 362 2 694 051 1 381 240 1 095 069 22 012 719 - 29 486 966
Dividends -
-394 542 1 599 067 1 099 362 2 694 051 1 381 240 1 095 069 22 012 719 - 29 486 966 Balance Sheet RUNWAY PROPERTY GROUP For the Year to Date February 2020
Stand 278 Linden NH 224 NH 267 Tensing Thistledown Reflect All Listed / Adj Total
Fixed Assets 442 960 420 18 836 953 16 800 000 45 585 797 12 000 000 15 300 000 606 675 192 - 1 158 158 361 Linden Square Shopping Centre - 18 100 000 - - - - - 18 100 000 Tennants Installation - 736 953 - - - - - 736 953 Stand 278 - Ferndale 113 000 000 ------113 000 000 Stand 278 - Germiston 54 000 000 ------54 000 000 Stand 278 - Heidelberg 2 200 000 ------2 200 000 Stand 278 - Parktown 24 000 000 ------24 000 000 Stand 278 - Sasolburg 120 000 000 ------120 000 000 Stand 278 - Sharon 37 500 000 ------37 500 000 Stand 278 - Triomf 92 000 000 ------92 000 000 Stand 278 - Tr L/l 260 000 ------260 000 NH 224 - National Truck - - 10 300 000 - - - - 10 300 000 NH 224 - Boksburg - - 6 500 000 - - - - 6 500 000 Valhalla - - - 39 000 000 - - - 39 000 000 Tennant Installation - - - 6 585 797 - - - 6 585 797 Florida - - - - 12 000 000 - - 12 000 000 Melville - - - - - 15 300 000 - 15 300 000 Reflect - Cramerview ------156 500 000 156 500 000 Reflect - Darras ------97 000 000 97 000 000 Reflect - Dowerglen ------65 000 000 65 000 000 Reflect - Laser Downs ------24 100 000 24 100 000 Reflect - Noordheuwel ------102 861 101 102 861 101 Reflect - Noordheuwel - Extension ------17 138 899 17 138 899 Reflect - Norbuy ------10 500 000 10 500 000 Reflect - Primrose ------82 000 000 82 000 000 Reflect - Selcourt ------24 500 000 24 500 000 Reflect - Tenant Installation ------3 254 653 3 254 653 Reflect - Woodmead ------3 300 000 3 300 000 Reflect - Wynberg ------19 000 000 19 000 000 Reflect - Servest ------1 520 539 1 520 539 Investments in Subsidiaries 420 ------420
Current Assets -1 108 162 900 515 1 772 705 819 370 915 818 -836 121 2 131 994 - 4 596 120 Current Account 326 319 8 641 71 26 127 15 -1 003 854 -668 655 Call Account 1 257 1 239 1 256 1 257 - 1 257 1 241 7 509 Straight Line Accrual -4 657 750 53 359 1 039 502 443 783 410 683 -2 092 525 -7 795 185 -12 598 133 Listing Costs 400 000 ------400 000 Deposit Service Prov 572 701 7 907 12 740 - 20 847 18 219 2 576 102 3 208 517 Tennant Allowance 510 018 ------510 018 Receivables Control 576 174 287 219 323 973 -113 293 44 835 654 109 -472 236 1 300 780 Sundry Receivable (Balancing) 1 163 119 542 150 395 163 487 597 439 325 582 805 8 825 926 12 436 085
Total Assets 441 852 258 19 737 468 18 572 705 46 405 167 12 915 818 14 463 879 608 807 186 - 1 162 754 481
Stand 278 Linden NH 224 NH 267 Tensing Thistledown Reflect All Listed / Adj Total Equity 226 255 801 21 447 151 3 961 412 33 427 541 12 024 879 13 402 177 171 150 377 - 481 669 338 Net Profit (Accumulated) 184 796 070 16 909 843 2 542 775 28 448 825 9 415 610 10 844 692 123 069 312 376 027 126 Share Capital 200 100 120 100 100 100 100 820 Deferred Tax Reversed 41 854 074 2 938 141 319 154 2 284 565 1 227 929 1 462 316 26 068 247 76 154 426 Net Profit (Current Year) -394 542 1 599 067 1 099 362 2 694 051 1 381 240 1 095 069 22 012 719 - 29 486 966
Long Term Liabilities 240 457 660 - 3 775 642 12 571 047 - - 324 374 795 - 581 179 144 52.95% Investec 30 450 516 - 3 775 642 12 571 047 - - 93 897 702 140 694 907 Nedbank 210 007 144 - - - - - 230 477 093 - 440 484 237
Shareholders and Other Loans -47 276 827 -2 965 275 10 179 207 -9 849 104 118 362 -1 012 380 83 165 434 - 32 359 418 CEZ Investments 23 307 748 ------23 307 748 Linden Square 2 965 275 ------2 965 275 New Heights 224 -10 179 207 ------10 179 207 New Heights 267 10 122 704 ------10 122 704 Reflect All -83 165 434 ------83 165 434 Stand 278 Strijdompark - -2 965 275 10 179 207 -10 122 704 118 362 -1 012 380 83 165 434 79 362 644 Tensing Trading -118 362 ------118 362 Thistledown Properties 1 012 380 ------1 012 380 Really Useful Investments 139 - - - 273 600 - - - 273 600 PSM Investments 8 778 070 ------8 778 070 Thistledown Properties 6 (Sable) ------
Current Liabilities 22 415 624 1 255 592 656 444 10 255 682 772 577 2 074 083 30 116 580 - 67 546 581 Deposit Tennants 2 690 547 647 445 293 094 107 486 101 500 151 000 4 972 496 8 963 568 Credit Card 3 775 439 146 420 62 096 - - 141 161 2 636 102 6 761 218 Provision for Bad Debts ------Payables Control 2 524 874 217 214 69 091 9 785 44 842 1 425 643 2 421 253 6 712 702 Vat Control 375 112 23 839 54 520 68 102 37 601 -148 955 990 332 1 400 551 Vat Clearing 46 957 ------46 957 Sundry Payables 12 976 085 292 226 361 643 10 098 162 378 672 472 997 19 598 274 44 178 058 Dividends - Deferred Tax - Tax Payable 26 610 -71 553 -184 000 -27 852 209 962 32 237 -501 878 -516 473
Total Equity and Liabilities 441 852 258 19 737 468 18 572 705 46 405 167 12 915 818 14 463 879 608 807 186 - 1 162 754 481 ------RUNWAY PROPERTY GROUP
Forecast for the year ending February 2021
For the Year End February 2021 Income Statement RUNWAY PROPERTY GROUP For the Year to Date February 2021
Account Stand 278 Linden NH 224 NH 267 Tensing Thistledown Reflect All Listed / Adj Total Rental Income 53 925 651 2 392 729 2 476 350 3 284 665 1 619 765 2 140 714 76 493 925 - 142 333 800 Rental Income 53 925 651 2 392 729 2 476 350 3 284 665 1 619 765 2 140 714 76 493 925 142 333 800 Rental Residential - - Lease Straight Line - -
Other Income 27 656 350 1 529 822 394 820 1 815 826 446 129 842 751 32 034 889 - 64 720 587 Assesment Rates Recovered 2 706 387 175 251 286 189 100 434 31 261 36 370 6 115 131 9 451 022 Discount Received - Electricity Recovered 21 746 517 1 160 839 60 000 1 560 000 342 000 476 060 21 389 579 46 734 995 Dividends - Insurance Recovered - Lease Fees - Refuse Recovered 1 122 682 34 312 12 631 98 392 37 468 84 321 1 288 730 2 678 536 Security Recovered 158 748 599 475 758 223 Service Charges Recovered - Operating Cost - Other Income - Water & Sewerage Recovered 1 922 016 159 420 36 000 57 000 35 400 246 000 2 641 974 5 097 810
Total Expense 39 711 139 2 138 242 937 194 1 216 090 626 123 1 056 746 46 122 782 - 91 808 316 Accounting Fees 269 628 11 964 12 382 16 423 8 099 10 704 382 470 711 669 Assesment Rates 5 011 971 226 370 348 618 109 149 88 924 45 453 8 314 708 14 145 193 Bad Debts - Bank Charges 11 760 1 800 1 200 1 440 1 200 1 200 4 200 22 800 Cleaning 490 536 12 000 6 000 6 000 1 300 1 013 760 1 529 596 Collection Fees - Commission - Consulting - Depreciation - Electricity 18 926 517 1 107 196 240 000 360 000 324 000 476 060 20 699 774 42 133 547 Garden & Landscaping 139 912 - 139 912 General Expenses - Insurance 261 601 11 611 12 016 15 932 7 856 10 383 371 096 690 496 Legal Expenses - Levies - 280 884 280 884 Lift Maintenance 40 095 150 562 190 658 Fire Expense - Management Fees 2 849 814 137 289 100 491 178 517 72 306 104 421 3 777 527 7 220 366 Marketing - Meter Reading 132 070 8 105 3 894 6 842 3 900 10 344 147 925 313 080 Parking Charges - Pest Control 54 062 9 825 9 762 116 218 189 867 Professional Fees - Raising Fees - Refuse 732 821 7 740 36 303 151 486 28 045 42 780 858 785 1 857 960 Registration Fees - Repairs & Maint. 1 617 770 71 782 74 291 98 540 48 593 64 221 2 294 818 4 270 014 Salaries & Wages 3 340 397 45 838 42 000 41 340 6 500 45 180 811 808 4 333 063 Security 3 910 168 327 302 163 658 4 255 073 8 656 202 Secretarial Fees - Service Charges - Valuation Fee - Water & Sewerage 1 922 016 159 420 60 000 57 000 35 400 246 000 2 643 174 5 123 010 Loss on Investment - Listing Costs -
Nett Profit Before Interest andTax 41 870 863 1 784 309 1 933 976 3 884 401 1 439 770 1 926 719 62 406 032 - 115 246 070
Fair Value Adjustment 20 806 900 850 700 789 600 1 833 000 564 000 719 100 27 483 772 53 047 072
26 900 000 - - - - - 28 440 000 - 55 340 000 Interest Paid 28 440 000 28 440 000 56 880 000 Interest Received -1 540 000 -1 540 000
Nett Profit Before Tax 35 777 763 2 635 009 2 723 576 5 717 401 2 003 770 2 645 819 61 449 804 - 112 953 142
Dividends -
35 777 763 2 635 009 2 723 576 5 717 401 2 003 770 2 645 819 61 449 804 - 112 953 142 Balance Sheet RUNWAY PROPERTY GROUP For the Year to Date February 2021
Stand 278 Linden NH 224 NH 267 Tensing Thistledown Reflect All Listed / Adj Total
Fixed Assets 463 767 320 19 687 653 17 589 600 47 418 797 12 564 000 16 019 100 634 158 963 - 1 211 205 433 Linden Square Shopping Centre - 18 950 700 - - - - - 18 950 700 Tennants Installation - 736 953 - - - - - 736 953 Stand 278 - Ferndale 118 311 000 ------118 311 000 Stand 278 - Germiston 56 538 000 ------56 538 000 Stand 278 - Heidelberg 2 303 400 ------2 303 400 Stand 278 - Parktown 25 128 000 ------25 128 000 Stand 278 - Sasolburg 125 640 000 ------125 640 000 Stand 278 - Sharon 39 262 500 ------39 262 500 Stand 278 - Triomf 96 324 000 ------96 324 000 Stand 278 - Tr L/l 260 000 ------260 000 NH 224 - National Truck - - 10 784 100 - - - - 10 784 100 NH 224 - Boksburg - - 6 805 500 - - - - 6 805 500 Valhalla - - - 40 833 000 - - - 40 833 000 Tennant Installation - - - 6 585 797 - - - - 6 585 797 Florida - - - - 12 564 000 - - 12 564 000 Melville - - - - - 16 019 100 - 16 019 100 Reflect - Cramerview ------163 855 500 163 855 500 Reflect - Darras ------101 559 000 101 559 000 Reflect - Dowerglen ------68 055 000 68 055 000 Reflect - Laser Downs ------25 232 700 25 232 700 Reflect - Noordheuwel ------107 695 573 107 695 573 Reflect - Noordheuwel - Extension ------17 138 899 17 138 899 Reflect - Norbuy ------10 993 500 10 993 500 Reflect - Primrose ------85 854 000 85 854 000 Reflect - Selcourt ------25 651 500 25 651 500 Reflect - Tenant Installation ------3 254 653 3 254 653 Reflect - Woodmead ------3 455 100 3 455 100 Reflect - Wynberg ------19 893 000 19 893 000 Reflect - Servest ------1 520 539 1 520 539 Investments in Subsidiaries 420 ------420
Current Assets 13 862 701 2 684 825 3 706 681 4 703 771 2 355 588 1 090 598 36 098 026 - 64 502 190 Current Account 326 319 8 641 71 26 127 15 -1 003 854 - -668 655 Call Account 1 257 1 239 1 256 1 257 - 1 257 1 241 7 509 Straight Line Accrual -4 657 750 53 359 1 039 502 443 783 410 683 -2 092 525 -7 795 185 -12 598 133 Listing Costs 400 000 ------400 000 Deposit Service Prov 572 701 7 907 12 740 - 20 847 18 219 2 576 102 3 208 517 Tennant Allowance 510 018 ------510 018 Receivables Control 576 174 287 219 323 973 -113 293 44 835 654 109 -472 236 1 300 780 Sundry Receivable (Balancing) 16 133 982 2 326 459 2 329 139 4 371 997 1 879 096 2 509 523 42 791 958 72 342 155
Total Assets 477 630 021 22 372 477 21 296 281 52 122 568 14 919 588 17 109 698 670 256 990 - 1 275 707 623
Stand 278 Linden NH 224 NH 267 Tensing Thistledown Reflect All Listed / Adj Total Equity 262 033 564 24 082 160 6 684 988 39 144 942 14 028 649 16 047 996 232 600 181 - 594 622 480 Net Profit (Accumulated) 184 401 528 18 508 910 3 642 137 31 142 876 10 796 849 11 939 761 145 082 031 405 514 092 Share Capital 200 100 120 100 100 100 100 - 820 Deferred Tax Reversed 41 854 074 2 938 141 319 154 2 284 565 1 227 929 1 462 316 26 068 247 76 154 426 Net Profit (Current Year) 35 777 763 2 635 009 2 723 576 5 717 401 2 003 770 2 645 819 61 449 804 112 953 142
Long Term Liabilities 240 457 660 - 3 775 642 12 571 047 - - 324 374 795 - 581 179 144 50.63% Investec 30 450 516 - 3 775 642 12 571 047 - - 93 897 702 - 140 694 907 Nedbank 210 007 144 - - - - - 230 477 093 440 484 237
Shareholders and Other Loans -47 276 827 -2 965 275 10 179 207 -9 849 104 118 362 -1 012 380 83 165 434 - 32 359 418 CEZ Investments 23 307 748 ------23 307 748 Linden Square 2 965 275 ------2 965 275 New Heights 224 -10 179 207 ------10 179 207 New Heights 267 10 122 704 ------10 122 704 Reflect All -83 165 434 ------83 165 434 Stand 278 Strijdompark - -2 965 275 10 179 207 -10 122 704 118 362 -1 012 380 83 165 434 79 362 644 Tensing Trading -118 362 ------118 362 Thistledown Properties 1 012 380 ------1 012 380 Really Useful Investments 139 - - - 273 600 - - - 273 600 PSM Investments 8 778 070 ------8 778 070 Thistledown Properties 6 (Sable) ------
Current Liabilities 22 415 624 1 255 592 656 444 10 255 682 772 577 2 074 083 30 116 580 - 67 546 581 Deposit Tennants 2 690 547 647 445 293 094 107 486 101 500 151 000 4 972 496 8 963 568 Credit Card 3 775 439 146 420 62 096 - - 141 161 2 636 102 6 761 218 Provision for Bad Debts ------Payables Control 2 524 874 217 214 69 091 9 785 44 842 1 425 643 2 421 253 6 712 702 Vat Control 375 112 23 839 54 520 68 102 37 601 -148 955 990 332 1 400 551 Vat Clearing 46 957 ------46 957 Sundry Payables 12 976 085 292 226 361 643 10 098 162 378 672 472 997 19 598 274 44 178 058 Dividends - Deferred Tax - Tax Payable 26 610 -71 553 -184 000 -27 852 209 962 32 237 -501 878 -516 473
Total Equity and Liabilities 477 630 021 22 372 477 21 296 281 52 122 568 14 919 588 17 109 698 670 256 990 - 1 275 707 623 ------