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SA Retail takeover remains elusive prize for Hyprop

Posted On Monday, 27 June 2005 02:00 Published by eProp Commercial Property News
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There does not seem to be much hope that listed property loan stock Hyprop will succeed with its takeover of SA Retail Properties.

Brian AzizollahoffThe company said on Wednesday that Hyprop unitholders had indicated Hyprop's prospects of controlling SA Retail would influence their vote on the takeover bid.

Old Mutual Asset Management (OMAM), which owns a 7,6% stake in SA Retail, has confirmed it would vote against the takeover bid, and preferred supporting SA Retail parent Marriott because of a possible consolidation of Martprop and SA Retail. Industrial-focused Martprop and SA Retail are both managed by Marriott.

OMAM's stance would bring the total SA Retail unitholding against the Hyprop deal to more than 50%.

Colin Young, property sector head at OMAM, says the group has pushed for a consolidation of Martprop and SA Retail over the last year.

Young says at the end of March, when SA Retail and Martprop proposed co-owning each other's retail properties, OMAM was against it.

He said this proposal was unattractive, because it did not create one highly liquid fund, which was what unitholders wanted.

"Therefore the Hyprop offer was more attractive at that point because no one wanted SA Retail to remain as it is, which is an illiquid fund with a relatively expensive debt structure," Young says.

But he says Marriott had the "good sense" to withdraw the deal, and had suggested that a possible consolidation of SA Retail and Martprop could happen.

Young says OMAM would support this, because SA Retail's buildings are more suited to Martprop's property portfolio than Hyprop's, which is focused on regional malls.

OMAM owns 10% in Martprop, 7% in Hyprop and 14% of Redefine Income Fund.

Redefine is managed by Madison, which also owns an interest in Hyprop's management company .

Consolidating SA Retail and Martprop would create a fund with a market capitalisation of R4bn - making it the third-biggest property fund on the JSE Securities Exchange SA, he says.

"We want Hyprop left as is. It has a small, effective team focused on large regional malls," says Young.

Mariette Warner, fund manager of Stanlib Property Income Fund, which holds an interest in Hyprop, Martprop and SA Retail, says it seems "quite clear"

that Hyprop is not going to gain control of SA Retail and that, "from a Hyprop shareholders' point of view, it is therefore negative and preferable that the deal not go ahead".

Warner says the difference in performance by Hyprop and SA Retail is so marked that a Hyprop unitholding in SA Retail would be a drag on Hyprop's earnings.

Without full control Hyprop would also not be able to apply its "considerable retail skills" in order to generate performance from the SA Retail assets, she says.

But Warner does not favour a consolidation or merger between SA Retail and Martprop.

"I would be negative on a consolidation or merger because I prefer focused portfolios.

"Retail and industrial follow different cycles and a merger would remove the ability to play the cycles," Warner says.

"In terms of performance, the earnings performance of SA Retail and Martprop have both been pedestrian and therefore any merger is unlikely to improve performance because the management of both funds remains the same," she says.

Redefine CEO Brian Azizollahoff says he still believes the Hyprop offer is a "sensible offer" and would be in the interests of unitholders in both SA Retail and Hyprop.

"As a concerned SA Retail unitholder, it appears that the asset managers, Marriott, have been shaken up by this corporate activity.

"My concern is, should the Hyprop-SA retail transaction not go ahead, what will be the alternative for SA Retail?"

Last modified on Wednesday, 07 May 2014 09:15

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