SA Corporate Property Fund, Afhco in R953m deal

SA Corporate Property Fund acquired stake in Affordable Housing Company (Afhco) and its Johannesburg assets in a substantial R953-million transaction.

SA Corporate Property Fund (SAC) on Tuesday said it had acquired stake in Affordable Housing Company (Afhco) and its Johannesburg assets in a substantial R953-million transaction.

SA Corporate has knocked on Afhco's door, by concluding a transaction to acquire the entire issued share capital of Afhco and its portfolio of 27 Johannesburg inner city properties.

The valuation of these properties is approximately R953 million, but it also includes debt of R675 million.

The deal value is based on the JSE-listed property group, SA Corporate paying Afhco about R278m and taking over R675m debt. SA Corporate would acquire the Afhco share capital from the company’s shareholders‚ consisting of 50% held by the Ideas Managed Fund‚ a policy product of Old Mutual Life Assurance‚ 35.5% by Wayne Plit and 14.5% by Renney Plit.

SA Corporate says in a SENS statement that it excluded some properties in the Afhco portfolio from the transaction due to their location and vacancy rates.

Last month‚ it said this was on track‚ with it increasing distributions 8.6% in the year to December‚ in line with the sector average of about 8.2%.

It said most of the property portfolio consisted of office buildings converted into residential apartments‚ with a ground floor retail element of about 30% by gross leasable area. Its detailed due diligence study on the properties had enhanced the rationale for its purchase.

“Whilst the core rationale for the proposed transaction is to gain exposure to this fast-growing component of the residential property sector‚ this rationale has been further strengthened through potential opportunities to consolidate and further develop existing owned city blocks into precincts‚ which will significantly enhance the existing income producing property portfolio‚” it said.

There were opportunities to expand on the retail offering in the inner city because of the density of the surrounding residential areas and the passing foot count‚ SA Corporate said.

SA Corporate’s share price jumped by 1% to 406c on Tuesday. According to Profile data, the group’s market capitalisation has moved to over R8 billion and the share trades at a P/E ratio of 12.25 times.