annexure 1 - marketing...

Annexure 1 - Marketing Brief

Content

1. The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. The Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

3. The Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Asset Value

Cashflow

Returns

Projected Cash Return per Year

Capital Growth

Internal Rate of Return

4. The Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

5. The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Opportunity Statement

Projects Status

Management

Vision and Mission

Cranbrook Asset Class

6. Contact Details & References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Contact Details

References

Share Issue (Executive Summary)

Cranbrook Limited

DOCUMENT NUMBER: 01/Share/2012

Date: 31 January 2012

This document is an executive summary to investors interested in

exercising a share option within Cranbrook Limited. This document is

not for general distribution, rather to a select audience, extending an

invitation to participate in the opportunity.

Cranbrook Limited 1 Marketing Brief 2012

Annexure 1

1. The Offering

Cranbrook is issuing 2 300 000 shares in order to raise R260 million. The capital will be used to build 283 strategic housing units and 13 light industrial units for the rental market. The housing and commercial units will service the high demand for mining and infrastructure development in our selected geographies.

The underlying asset value of the Company after raising the capital and completing the building programme is R793 million. This consists primarily of:

• serviced and proclaimed commercial, residential and industrial stands in three developments;

• zoned land for future expansion;

• 300 housing units for rental market;

• 13 commercial factories for rental

• and cash.

An issued new share of R113.04 has an underlying property asset value of R155.86 per share.

The current shareholders and directorsofCranbrookareconfidentthat, adding to the underlying asset value of the share, their efforts in the market will enable the Company to return value to existing and new shareholders.

The projected average return on the investment is 18.02% per year, consisting of an average dividend of R9.06 per share and capital growth of 10% on the investment amount.

This document is an executive summary for investors to purchase shares (securities) valued at R113.04 per share in Cranbrook Limited.

In Short• A share option is exercised through an investment of R113.04 per share at a minimum of 100 shares.

• The underlying market value of the property asset is R155.86 per share, consisting primarily of serviced and proclaimed stands.

• Capital raised will be used to build strategic housing and industrial rental stock. This would improve Cranbrook’s ability to generate additional income through property rentals and sales.

• Capital raised will be used to build additional rental units for clients, increasing sustainable income for the Group.

• The extent of invitation is limited to personal invitation only.

• Ultimately the harvesting strategy is to list the Company in an Initial Public Offering (IPO), once the income generative asset class and pipeline has been developed.

• The average projected dividend on the shareholder’s investment is R9.06 per share.

• The projected capital growth per year over a 10-year investment period is 10% per annum.

2 300 000 sharesat R113.04 each

Underlying asset value of R155.86 per share

High projected return on investment


Annexure 1

Step 1 – Raise Capital

Raise R260 million through the issuing of 2 300 000 shares. A share of R113.04 is underpinned by net cash and a net property value of R155.86 per share after the capital is utilised.

Step 2 – Build Rental Stock

Use capital to release property and construct an additional 300 housing units and 13 industrial units for rental to clients within the mining sector. In addition to the above, mobilising the light industrial park with the expansion of the construction activity currently on the project.

Step 3 – Dividends to Shareholders as Income is generated

As income is derived through commercial, industrial and residential sales, servitude sales, as well as commercial, industrial and residential rental income, dividends will be declared to the shareholders.

Step 4 - Listing through IPO

IPO is expected to take place between 5-8 years from issue of this document or as determined by the shareholders.

2. The Plan

The following steps are envisaged by the Directors of Cranbrook...

A policy of retained earnings will be used to expand the rentable stock of the Group in order to meet client demand. As Cranbrook has been operating since 2006, it is able to provide an immediate return on investment to shareholders.


Annexure 1

3. The Numbers

A description of the asset and liability values of the Group after the capital has been raised. This section also shows a 10-year projection on the cashflow status of the Group before dividends.

Asset Value - BeforeBefore the R260 million is raised, the net asset value of the Group, as shown in the following sheet, is R451 million. With the provision for deferred tax and a 40% discount to allow for new shareholderprofit,thisnetvalueisR263 million. It is against this value that the capital will be raised.

Description Assets Liabilities Description Net Value

Motaganeng Development 90%

Listed Market Value of Serviced Properties R 239,669,270.95 R 1,586,576.95 ABSA

Rental House x 1 R 1,058,860.00 R 2,500,000.00 Bulk Service Payments

R 2,500,000.00 Informal Settlement (Provision)

R 540,054.00 General & Other (Provision)

R 23,524,333.26 Anglo Operations Limited 2nd Bond

R 3,249,000.00 Access Intersection 2 (Provision)

R 3,898,800.00 Light Industrial Completion (Provision)

R 240,728,130.95 R 37,798,764.21 R 182,636,430.06

Spekboom Development 100%

Listed Market Value of Serviced Properties R 147,218,986.00 R 145,905,308.01 DBSA

Remainder of estate R 95,855,599.21 R 2,628,803.44 Lonerock Construction

Rental House x 6 R 3,684,234.00 R 6,000,000.00 General & Other (Provision)

R 10,704,000.00 Bulk Service Payments

R 6,258,000.00 Alicia Zandir 2nd Bond

R 246,758,819.21 R 171,496,111.45 R 75,262,707.76

Ledibeng Development 100%


Remainder of estate R 123,334,838.71 R 11,307,114.31 Bulk Service Payments

EskomHousingProject(profit) R 8,000,000.00 R 15,000,000.00 CED Project Management

Rental House x 3 R 2,174,104.00 R 4,000,000.00 General & Other (Provision)

R 263,252,990.66 R 82,556,106.05 R 180,696,884.61

Cranbrook Limited 100%

Cash R 1,200,000.00 R 612,593.27 Erf 3007 ABSA loan

Pre BEE transaction R -

Cranbrook Goodwill R -

Cranbrook Assets - other (as per Zurich insurance company)

R 11,436,154.00

Erf 3007 Nylstroom as per Deed R 887,938.63

R 13,524,092.63 R 612,593.27 R 12,911,499.36

TOTAL GROUP R 764,264,033.45 R 292,463,574.98 R 451,507,521.80


Annexure 1

Asset Value - AfterAfter the R260 million is raised and the building programme is completed, the net asset value of the Group, as shown in the following sheet is R793 million.

Description Assets Liabilities Description Net Value

Motaganeng Development 90%

Listed Market Value of Serviced Properties R 207,773,770.95 - ABSA

Rental House x 1 R 2,500,000.00 Bulk Service Payments

R 2,500,000.00 Informal Settlement (Provision)

R 540,054.00 General & Other (Provision)

R 19,188,938.54 Anglo Operations Limited 2nd Bond

R 3,249,000.00 Access Intersection 2 (Provision)

R 3,898,800.00 Light Industrial Completion (Provision)

R 207,773,770.95 R 31,876,792.54 R 158,307,280.57

Spekboom Development 100%


Remainder of estate R 95,855,599.21 - Lonerock Construction

R 4,000,000.00 General & Other (Provision)

- Bulk Service Payments

R 6,258,000.00 Alicia Zandir 2nd Bond

R 190,574,585.21 R 87,517,808.01 R 103,056,777.20

Ledibeng Development 100%


Remainder of estate R 123,334,838.71 R 807,114.31 Bulk Service Payments

EskomHousingProject(profit) R 8,000,000.00 R 15,000,000.00 CED Project Management

Rental House x 3 - R 4,000,000.00 General & Other (Provision)

R 226,078,886.66 R 47,556,106.05 R 178,522,780.61

Sustainable Housing Solutions 100%

Listed Value Existing 17 Rented Housing Units R 17,884,577.98 R 150,950,511.25 40% Commercial Bank gearing

Newly built 283 Rentable Housing Units R 315,562,197.86 -

Newly built 13 Rentable Industrial Units R 61,814,080.25 -

R 395,260,856.10 R 150,950,511.25 R 244,310,344.85

Cranbrook Limited 100%

Cash R 37,356,379.53 R 612,593.27 Erf 3007 ABSA loan

Post BEE transaction R 59,843,724.99

Cranbrook Goodwill R -

Cranbrook Assets - other (as per Zurich insurance company)

R 11,436,154.00

Erf 3007 Nylstroom as per Deed R 887,938.63

R 109,524,197.15 R 612,593.27 R 108,911,603.88

TOTAL GROUP R 1,129,212,296.00 R 318,513,811.12 R 793,108,787.11


Annexure 1

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Projected Cash (after income tax)

Cashflow With the sales projection and income derived from the rental projection thecashflowfortheCompanyoveraperiod of 10 years is projected in the graph above.

TheGroupisconfidentthatithasthe operational ability to utilise the capital within a short period, adding sufficientstocklevelstogetherwithmarket demand forecast to deliver thecashflowthroughdirectsaleofproperty and rental stock.

Theprojectedcombinedcashflowfor the Group over the 10-year period (including initial building programme) is shown in the graph above.

Asummarisedprojectedcashflowforthe Group over the 10-year period is available on request.

Returns The following returns are projected over a 10-year period.

• The projected average dividend returned to the shareholders over a 10-year period is R9.06 per share.

The following table is indicative of the return per year over the 10-year investment period:

Year Projected Dividend

1 - Feb 2013 -

2 - Feb 2014 -

3 - Feb 2015 -

4 - Feb 2016 R 8.16

5 - Feb 2017 R 10.2

6 - Feb 2018 R 15.35

7 - Feb 2019 R 7.63

8 - Feb 2020 R 15.71

9 - Feb 2021 R 17.12

10 - Feb 2022 R 16.44

• The net asset value of the Company, after the R260 million investment is expected to grow to R1,432 billion at the end of the 10-year period. The projected capital growth per year over a 10-year investment period is 10%.

Projected average dividendper annum is R9.06 per share

Net asset value expected to grow to R1,432 billion

Projected return on investment 18.02% per year


Annexure 1

The Motaganeng Lifestyle Development is situated in the Tubatse Municipality – Burgersfort. The development includes approximately 600 residential stands, 400 residential clusters, 50 lightindustrialstands,10officestands, a hospital stand (now owned by Netcare) and a large regional commercial stand. The development consists of Ext 34 and Ext 35 in Burgersfort.

The infrastructure of the Motaganeng Lifestyle Development in Burgersfort was completed in 2008.

ASA Metals (chrome sector) has purchased 80 stands and built/occupied 80 houses on the estate.

VN Group has completed the construction of approximately 200 cluster units. These units were recently purchased by Modikwa Mine (an Anglo Platinum and African Rainbow Minerals joint venture).

Impala Platinum purchased a residential 2 stand and is constructing the infrastructure for 108 cluster units on the estate.

The hospital Group Netcare has completed and submitted their building plans for a hospital.

Cranbrook was responsible for the planning and delivery of this development consisting of approximately 1 000 residential, commercial and industrial stands.

4. The Developments

Cranbrook Limited currently has three residential developments at various stages of completion...

MOTAGANENG

LIFESTYLE DEVELOPMENTB u r g e r s f o r t


Annexure 1

The scope of work included:

• Working with Eskom to deliver the Burgersfort West substation. This project has a 10MVA subscription in the substation.

• Working with the Tubatse Municipality to supply bulk sewage pipelines and bridges for distribution. This included the attaining of the servitudes, environmental, water license, detail engineering planning etc. for a 3Ml upgrade to the existing Burgersfort sewage works on behalf of Tubatse.

• Working with the Tubatse Municipality to supply a 1.6Ml bulk water storage reservoir and distribution system into the formal town and informal community. This was done through Cranbrook capital contribution and Anglo Coal (Anglo Operation Limited) social corporate contribution.

• Construction of the internal infrastructure, including roads, sewage, water, stormwater and electrical reticulation. This infrastructure has been handed over to the Tubatse Municipality and Eskom respectively.

The Spekboom River Estate is situated in the Tubatse Municipality – Burgersfort. The development includes approximately 1 900 residential stands, a school and business stand and consists of seven extensions in Burgersfort.

The infrastructure of the Spekboom River Estate Ext 52 in Burgersfort is complete. This extension consists of approximately 313 residential stands. Cranbrook Construction Company constructed seven show houses on the estate, which are all sold or rented. The demand for rental housing units in the estate is soaring. Other participants to the Estate include:

Curro Holdings (listed as part of the PSG Group) committed to the construction of a regional private school opening in 2013.

Abacus Property Group is in the process of constructing a shopping centre on the Estate.

Cranbrook acquired and developed theproperty,andthefirstextension(Ext 52 Burgersfort) has since been delivered.


• Working with Eskom to deliver the Burgersfort West substation. This project has a 12MVA subscription in the substation.

• Construction of the internal infrastructure, including roads, sewage, water, stormwater and electricalreticulationforthefirst313 stands. This infrastructure has been handed over to the Tubatse Municipality and Eskom respectively.

• Buildingthefirsthousesforsaleand rental.

• Donation of the school stand to Curro Holdings who committed to constructing a dual medium regional private school in 2012/2013.

• Cranbrook Asset Management has successfully contracted with the Abacus Property Group who (with the backing of key anchor tenants) are in the process of constructing an upmarket shopping centre.

S P E K B O O M

R I V E R E S T A T EB u r g e r s f o r t

The Burgersfort West Substation for subsequent

supply to Cranbrook’s properties

The sewerage bridge constructed by

Cranbrook on behalf of the Tubatse

Municipality in Burgersfort

To date 550 stands and 350 houses have

been delivered to Eskom (Medupi Power

Station) in Lephalale


Annexure 1

The Ledibeng Eco Estate is situated in the Lephalale Municipality (Waterberg) – Lephalale (Ellisras). The development includes approximately 2 400 residential stands, 288 residential cluster units, three school stands and a medium sized commercial stand. The development consists of six extensions in Lephalale.

The infrastructure of the Ledibeng Eco Estate Ext 70 and Ext 97 in Lephalale is complete (863 stands).

Cranbrook sold 550 stands to Eskom and constructed 350 houses for Eskom Housing. Eskom’s management for the Medupi Power station will later be housed on the remainder of their 200 stands.

Anglo Coal has shown interest in Ext 97 and Ext 98 of the estate, however, the building packages have not yet been agreed upon.

Royal Anthem and the developer have entered into a joint development agreement for 288 cluster units on the estate, currently under construction. First occupation of these units took place in September 2009, with primary uptake in the rental market.

Cranbrook was responsible for the development of the residential, school and commercial stands.


• Working with Eskom to deliver the substation.

• Construction of the internal infrastructure, including roads, sewage, water, stormwater and electricalreticulationforthefirst863 residential and 288 cluster units. This infrastructure has been handed over to the Lephalale Municipality.

• Building 350 houses for Eskom and additional units for sale and rental to various other clients.

• Buildingthefirstphasesofthe cluster development with TOOPVAR for sale and rental to various clients.

Investors are encouraged to also visit our website www.cranbrook.co.za for additional information, or arrange for a formal site visit to the current operations.

L E D I B E N G

E C O E S T A T EL e p h a l a l e


Annexure 1

The Mining Act requires mining companies to show models of end-user ownership, as opposed to the old models of corporate ownership, by 2014. In terms of the requirements of this Act, mining companies are considering new housing solutions.

We are therefore increasingly required to assist the sector with long-term rental, rental with an option to purchase solutions etc. These housing solutions run over long durations e.g. 10 years. Thus, Cranbrook is desirous to re-model the Group in order to grow and become a pro-active solution provider in this market segment.

In order to achieve this we require our capital and operational funding to match our 10-year strategy. This process of re-modelling our business offers new shareholders a fantastic investment opportunity in mature projects with immediate returns.

Opportunity StatementThe single factor that sets this offering aside from other property investments in South Africa is the aggressive expansion within the primary sectors driving our developments. These sectors include the power generation, coal, platinum and chrome mining sectors. The organisations operating in these sectors include (amongst others) Anglo Coal; Exxaro; Eskom; SASOL; Anglo Platinum; Impala Platinum; African Rainbow Minerals; ASA Metals (Sinotech from China) and Xstrata. These organisations and the South African Government have expended in excess of R207 billion on infrastructure development in our geographies since 2002.

Coupled with similar committed future expenditure by President Jacob Zuma in the Sate of the Nation Infrastructure Plan, this has enabled our group of property development companies to grow extensively.

“Firstly, we plan to develop and integrate rail, road and water infrastructure, centred around two main areas in Limpopo: the Waterberg in the Western part of the province and Steelpoort in the eastern part.

These efforts are intended to unlock the enormous mineral belt of coal, platinum, palladium, chrome and other minerals, in order to facilitate increased mining as well as stepped-upbeneficiationofminerals.”

State of the Nation Address - February 2012

Projects Status The Cranbrook Group commenced its projects in 2003 and 2005 respectively. The projects, as shown in the previous section, are mature developments that have all reached their repayment cycles. The existing shareholders have re-invested all their historic returns into infrastructure development in order to build the existing asset class.

ManagementCranbrook’s directors and management oversee the corporate governance and management of the Cranbrook Group. In addition Cranbrook’s management and team assist in developing and marketing the product to the mining and supporting sectors.

The management structure of Cranbrook is shown in the diagram on the next page.

5. The Company

Cranbrook is a development company in the fast growing towns of the new energy and platinum capitals of South Africa (namely Lephalale and Burgersfort). Through various changes in National legislation, including the National Credit Act and the Mining Act, our group of companies is desirous of re-modelling itself.

Aggressive expansion within the mining sector

driving our developments

South African Government/Mining Sector have expended in

excess of R207 billion

State of the Nation Infrastructure Plan -

February 2012

Mature developments that have all reached their

repayment cycles


Annexure 1

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Annexure 1

Vision and Mission Vision

It is our vision to be the preferred supplier, to the mining and supporting sectors in fast growing mining areas. Providing property development solutions and all associated town development requirements to meet the demand of clients, for holistic and sustainable community settlement. Through the continuous value addition to the towns and communities where we develop, we can maximise return on investment to all our participating clients, professionals, contractors, staff and shareholders.

Mission

It is our mission to maximise return on investment in our developments through early mover advantage, cost effectiveness and continuous value addition. We strive to minimize the risk and maximise the return on investment of all participants to our projects through proper planning and hands-on management. We work closely or in partnership with the municipalities, communities and large

co-developers in our geographical areas. We believe in the “abundance theory”,ifweupliftourdevelopmentalareas as a whole, participants in our developments will experience optimum growth.

Cranbrook Asset ClassCranbrook is a primary development company with its primary asset class in serviced and proclaimed property and property with development rights. The market value of this asset class is in excess of R764 million, with a total liability of R292 million.

We offer a complete development solution for mining towns comprising residential, in both high and affordable categories, as well as, commercial and industrial properties.


Annexure 1

Contact Details

Cranbrook Limited

[email protected]

www.cranbrook.co.za

PO Box 14562

Clubview

0014

Hoffman Prinsloo

Executive Director

[email protected]

Cell: +27 82 786 3673

Tel: +27 12 665 5308

Fax: +27 12 665 5611

References

The following persons and/or organisations have been involved with Cranbrook and have knowledge of our corporate governance processes:

Name Organisation Contact Number

Susan Read ABSA Corporate & Business +27 12 366 5843

Johan van Graan DBSA (Development Bank) +27 11 313 3217

Jaco Odendaal ABACUS (Chairperson) +27 83 284 3133

Malcolm Law CURRO +27 21 979 1204

Lambert van der Nest Fraser Alexander (previous CEO) +27 83 625 8876

Tjaart van der Walt Realnet SA +27 82 893 7325

Yvonne Mfolo Anglo Coal (Operations Ltd) +27 11 638 2051

Reuben Mamorare ESKOM +27 11 800 8111

Eben Beetge CED (Civil Engineers) +27 12 342 9200

Deodat Prenzler Nel Prenzler & Potgieter (auditors) +27 17 712 1031

Corrie de Jager Snyman de Jager Attorneys +27 12 663 1680

6. Contact Details & References


Annexure 1

www.cranbrook.co.za

annexure 1 - marketing...

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