Arrowhead Properties buys stake in Dipula

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Commenting on the Arrowhead/Dipula deal, CEO Gerald Leissner said he will only acquire an investment in other property companies with the objective of converting the investment into physical property over time. Commenting on the Arrowhead/Dipula deal, CEO Gerald Leissner said he will only acquire an investment in other property companies with the objective of converting the investment into physical property over time.

In a further sign that the JSE listed property sector is undergoing a significant level of consolidation, Arrowhead Properties has taken out 34,5 million Dipula Income Fund B linked units from Investec Asset Management in a deal confirmed on Wednesday.

The deal represent 22% of Dipula’s B linked units acquired and Arrowhead is to become a 11% shareholder in Dipula Income Fund.

Dipula has A-and B-linked units.

Based on Tuesday’s share prices, Arrowhead chief operating officer Mark Kaplan said this valued the deal at about R240 million.

The transaction confirms that the listed property sector is moving from a cycle of new listings into consolidation, which is expected to make new listings difficult. The listed-property sector is experiencing increased activity with property acquisitions and developments.

Not only are small property funds consolidating but bigger funds are gobbling up small ones with prime assets. With prime property hard to come by, listed property funds are under pressure to seek new assets to grow their portfolios, which will make it tough for new listings.

The consolidation trend is typical of the listed property sector with a market capitalisation of almost R250bn given the still weak economy and few prime assets available for purchase. So competition this year has heightened in the sector.

The acquisition is unconditional and the purchase price will be discharged by the allotment and issue of 18,8 million Arrowhead A and 18, 8 million Arrowhead B linked units to Investec Asset Management on or about 27 March 2014.

Arrowhead CEO Gerald Leissner said it is not Arrowhead’s objective to become a hybrid company by owning property directly and holding, for the long term, shares in other property companies.

“Arrowhead will only acquire an investment in other property companies with the objective of converting the investment into physical property over time," says Leissner.

"The Dipula transaction, which is revenue enhancing to Arrowhead, is in line with this strategy as it provides Arrowhead with a strategic stake in Dipula’s R3.75 billion portfolio of commercial and retail properties that are complementary to Arrowhead’s property portfolio,” concluded Leissner.

Arrowhead owns a diversified property portfolio valued in excess of R3.6 billion which is a 100% increase on the size of the portfolio since listing in December 2011.

Led by a chartered accountant, Izak Petersen, Dipula was listed on the JSE in August 2011 and began trading as a REIT (Real Estate Investment Trust) on 1 September 2013. It has one of the highest BEE ratings in the sector. Dipula’s asset base comprises a portfolio of 182 commercial properties.


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