Retail property fund gets JSE green light

William Brooks, Chief Executive Officer of Synergy Income Fund.

Plans to list South Africa’s first dedicated convenience-retail property fund on the JSE Securities Exchange are on track for mid-December following the bourse’s approval.

The listing of the R1.1 billion Synergy Income Fund will break new ground in the sector as it creates a specialised retail property fund with a portfolio made up entirely of convenience retail assets, typically in the 10 000-25 000m2 range and mostly located in the high-growth lower-LSM end of the market. Synergy is further differentiated from other counters in the sector by virtue of its relationship with the SPAR Group, one of the world’s best-known retail brands and a leading convenience retailer in South Africa.

‘We believe that specialisation will be a key driver of investment performance in the future. By operating in association with the SPAR Group we can offer investors a sustainable competitive advantage and attractive growth prospects,’ says William Brooks, chief executive officer of Synergy Income Fund. ‘It’s about really understanding the investment opportunities, allocating capital correctly and managing the assets effectively to extract maximum value for investors.The bulk of properties will have a SuperSPAR as the anchor tenant, be complemented by a range of national tenants and, where appropriate, independent retailers offering relevance and value to the local shopping community.’

Capital Land, founded by Cape Town-based asset management team of William Brooks and Uys Meyer, established Synergy Income Fund through its association with the SPAR Group. This relationship will enable Synergy to leverage its growth through access to the SPAR Group’s research capabilities and development opportunities. SPAR Group added 25 new stores during the financial year ending September 2011, bringing the total to 859 across the country, and has a significant share of the South African retail food market.

Significant investors in Synergy Income Fund will include Liberty Group Limited (represented by Liberty Properties), one of the largest property investors in South Africa; Regarding Capital Management, a privately owned asset management company with a portfolio exceeding R18 billion; and BlueAlpha Investment Management.

Mel Urdang, Director: Retail and Business Development for Liberty properties, notes that Liberty Group’s holding in Synergy Income Fund will assist the Liberty Balanced Property Portfolio in achieving one of its strategic goals, which is diversification. This will be achieved through an improved geographical spread and tenant profile. Says Urdang: ‘Synergy offers excellent exposure via a pooled investment vehicle to the high-growth, lower-LSM shopper segment. We have every confidence that this investment will contribute to our 25-year track record of delivering inflation-beating returns.’

In addition to Brooks as CEO and Meyer as financial director, Synergy’s Board of Directors brings a wealth of experience to the table. Chairman Martin Kuscus has served in senior government and business positions and is currently the chairman of the Mineworkers Pension Fund. Other Board members include; Craig Coetzee, group property manager for the SPAR Group; Maurice Mdlolo, chief operating officer for Liberty Properties; Lizwi Mtumtum, executive chairman of Ikamva Lethu Investments; Mandy Ramsden, a specialised property investment consultant; and Sean Segar, an executive with NedGroup Investments.

Synergy offers a clearly differentiated investment case with exciting growth prospects backed by strong partnerships, highlights include:

• Sector specialisation, a key driver of investment performance;

• Focus on the high-growth lower LSM retail space;

• Close relationship with the SPAR Group, one of South Africa’s leading food retailers;

• A strong initial portfolio of retail assets valued in excess of R1.1 billion;

• A substantial further acquisition pipeline for 2012;

• National tenants making up 76% of the portfolio by GLA and contributing 71% of the gross rental revenue; and

• Vacancy profile for the portfolio of around 6%, low by industry standards.

‘I believe Synergy has a lot to offer,’ says Brooks. ‘We have a solid core of blue-chip investors, a special relationship with one of the country’s leading retailers, and assets located in areas where there are real consumer growth prospects.’