Vukile acquires R1.5bn property portfolio

Posted On Tuesday, 15 November 2011 02:00 Published by eProp Commercial Property News
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Property loan stock company Vukile Property Fund says it is to acquire a portfolio of 20 properties, worth nearly R1.5bn, from Sanlam Life Insurance.

Laurence Rapp

The Public Investment Corporation (PIC) also announced it had reached an agreement with Sanlam, in terms of which it will acquire 70.2 million Vukile-linked units from Sanlam.

The acquisition was expected to be effective in June next year, once a number of conditions precedent had been fulfilled, and would be funded through a combination of debt and the issue of new linked units.

Following the transaction between Sanlam and the PIC, Sanlam's holding in Vukile would decrease to 13.6%, of which 7.6% would be held by Sanlam policy holder funds and, as such, constitutes an institutional holding. The PIC's stake in Vukile would be around 20%, it said.

Commenting on Vukile's acquired portfolio, Leon Allison of Macquarie First South said, "I don't think it's a bargain price, but it is reasonable".

He added that the vacancies of the properties sit quite high, but with some good management it could be a rewarding undertaking. "It would be a challenge in the short term to reduce vacancies, but with PIC coming on board as a share-holder, they are probably taking a longer term view of the prospects for the fund."

Within the property portfolio being acquired the offices were well located with good quality building specifications, hence the transaction would enhance the quality of Vukile's current office portfolio.

The total acquisition cost of R8,154/square metre is 29.2% higher than the current valuation of Vukile's total portfolio on a rand/square metre basis.

The transaction increases the group's exposure in the Western Cape. It would also assist in achieving Vukile's strategy of broadening its unitholder base and seeking to achieve a JSE free float rating of 100% (currently 50%) in respect of the FTSE/JSE Africa Index series.

Vukile said the introduction of the PIC as an investor is a positive development for Vukile as it will broaden its shareholder base and should lead to an increased JSE free float.

Vukile chief executive Laurence Rapp said: "The PIC is one of the largest property investors in SA and the introduction of such an esteemed property investor is an affirmation of Vukile's new strategy."

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