Vividend good in parts

Posted On Friday, 29 October 2010 02:00 Published by eProp Commercial Property News
Rate this item
(0 votes)


On the face of it the proposed listing of a new property loan stock company, Vividend, is what the sector needs. Its small initial property portfolio, worth R425m, won’t attract the big institutions that dominate listed property.


Ari JacobsonThis will give it a higher yield than the sector and make it attractive to retail investors with risk appetite. Its promoters want to lift the yield further by targeting a special niche.

Most of the 18 counters in the property sector have property portfolios worth more than R5bn. So larger investors view investing in properties worth less than R100m as too much trouble. On the other hand, private property buyers stick to the shallows, investing in portfolios with valuations below R30m.

The promoters of Vividend have gone for that gap between R30m and R100m. They include forex company Master Currency’s former MD Ari Jacobson, Cape property manager Mark Sandak-Lewin and Bruce Rubinstein, son of businessman Gerald.

The property market is made up of many niches and the more of these small niche funds that come to market, the healthier and more truly entrepreneurial the listed property market will become. ApexHi revealed this in 2001 when its high-risk B shares were snapped up by the market and it went on to become a blue-chip counter before being swallowed by Redefine

Vividend’s initial properties are likely to include Clearwater Crossing in Johannesburg’s West Rand, in which Rubinstein has a share, three Absa Bank buildings, and four others. The initial portfolio will cost around R425m and give an initial forward yield of 11,2% compared with 8,3% for the sector.

This yield has already attracted R400m from private equity asset managers, including London-based Credo and SA’s Element Investment Managers, which has taken up R150m.

“We’re aiming to have a R1,5bn portfolio by the end of next year, giving a yield of 11%,” says Jacobson, who will become CEO. Robert Amoils is FD, Sandak-Lewin executive director and Rubinstein “executive consultant”.

The FM’s main concern with an otherwise good project is that the executives will own an external company (manco) managing Vividend. This company will receive a 0,5% share each year of the fund’s enterprise value — its market capitalisation plus its debt — plus 20% of the total return to the company above the three- to seven-year all bond index. This goes against the global trend for property companies to have internal management.

Element will have no shares in the manco. Element portfolio manager Matthew Kreeve is comfortable with the manco structure specifically for Vividend. “We have engaged [with them] to ensure a structure that aligns management interests with [those of] investors,” he says. “Compared with like transactions since 2004, the option price [to buy the manco] is notably lower. And they are locked in for eight years.”

However, that structure serves little purpose except to give the promoters an opportunity to make a quick R75m or more. Furthermore, despite the lock-in after sale, it’s a short enough period for the manco to concentrate more on raising the enterprise value than focus on longer-term shareholder aims.

There are other ways in which management could have been provided with incentives. For instance, promoters’ fees up front and then on performance over a long period. This would align their interests more closely with those of the investors. Shareholders should make sure of the executives’ commitment to their long-term interests.

Last modified on Monday, 21 April 2014 14:19

Most Popular

Investec Property Fund launches first REIT sustainability-linked ESG bond in Africa

Apr 22, 2021
Investec Property Fund (‘IPF’ or ‘the Fund’) today became the first South African real…

EPP’s new app takes tenant relations to the next level

Apr 22, 2021
Johannesburg Stock Exchange listed EPP, Poland’s biggest retail landlord, continues to…

4 simple rules to getting a good credit score

Apr 21, 2021
Make buying your dream home an informed purchase by knowing your credit score.

Rethinking office space in post pandemic SA

Apr 20, 2021
Since the beginning of the pandemic, one of the biggest questions in real estate has been…

Still time to bond as economist says modest interest rates hike likely only in 2022

Apr 16, 2021
After the five aggressive repo rate cuts last year that dropped the prime lending rate to…

Please publish modules in offcanvas position.