Listed Property Sector a hive of activity as Companies bid for more

SA’s Commercial Property Sector dealmakers recently involved in mergers and acquisitions are Marc Wainer, Norbert Sasse, Paul Theodosiou, Gerald Leissner, Sisa Ngebulana, Ashraf Mohamed, Sandile Nomvete.

Another sign that the JSE listed property sector is undergoing a significant level of consolidation, South Africa’s biggest real-estate giant, Growthpoint Properties, has made an offer for stakes in Acucap Properties and Sycom Property Fund in a R4.66bn deal.

The acquisitions are the first phase of a two-part plan that will see Growthpoint acquire all of Sycom and Acucap.

Last month Acucap and Sycom said they planned to merge this year to save administration costs and eliminate the expense of separate listings.

If accepted, the offer would see Growthpoint swap its shares to acquire a 34.9% stake in Acucap Properties and a 31.5% stake in Sycom Property Fund, boosting Growthpoint’s exposure to retail properties.

Growthpoint’s acquisition of the merged companies would increase its market capitalisation by about a third to R68bn.

Acucap already owns a 33.39% stake in Sycom as well as 100% of the shares in Sycom’s management company. Both companies are managed by MD Paul Theodosiou.

In terms of the deal, Growthpoint agreed to acquire about 64-million Acucap linked units at a ratio of 1.9 Growthpoint ordinary shares for each linked unit, and about 63million Sycom participatory units at a ratio of 1.1 Growthpoint shares for each participatory unit.

Ascension Properties, Delta Property Fund and Rebosis Property Fund said in February they are considering a three-way merger, while Redefine Properties is in talks with Fountainhead Properties to discuss a possible takeover.

Last year saw the conclusion of a drawn-out tussle between sector giants Growthpoint Properties and Redefine for Fountainhead’s R11bn portfolio, which ultimately ended with Redefine acquiring most of Fountainhead’s shares.

After acquiring Fountainhead’s management company in August 2012, Redefine initially intended to acquire Fountainhead’s retail-focused portfolio, although the lengthy bidding war with Growthpoint saw Redefine withdraw its offer in March 2013.

The engagements are still at an early stage but an independent committee of the board of Fountainhead has been established to progress discussions and to represent the interests of all Fountainhead unitholders.

Geoff Noble, a portfolio manager at Grindrod Asset Management said the past few years, we have had a listing boom and it’s natural for consolidation to happen. “The bigger the entity, the more favorable rates they have from financial institutions,” he adds.

JSE-listed property group, Arrowhead Properties, last month announced that it had taken out 34,5 million Dipula Income Fund B linked units from Investec Asset Management in a deal that represent 22% of Dipula’s B linked units acquired and Arrowhead is to become a 11% shareholder in Dipula Income Fund.

In December‚ Arrowhead bought 31.7% of Vividend Income Fund’s linked units from Coronation Fund Managers‚ in a deal valued at about R430m. Arrowhead proposed to acquire all the issued linked units in Vividend for a consideration of not less than 0.374 Arrowhead A and 0.374 Arrowhead B units for every Vividend unit. Stanlib, which controls about 60.2 million Vividend units (representing about 22% of Vividend’s issued units), had irrevocably undertaken to vote in favour of all resolutions necessary to approve the scheme.

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.

Safari Investments RSA and Atlantic Leaf Properties listed on the JSE this month.