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Growthpoint deal preserves value

Posted On Thursday, 15 September 2005 02:00 Published by eProp Commercial Property News
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Listed property loan stock heavyweight Growthpoint, which is the largest property company on the JSE, has managed to conclude a significant empowerment deal with no dilution to existing unit-holders.

Angelique de RauvilleAn consortium including former justice minister Penuell Maduna and former director of public prosecutions Bulelani Ngcuka paid more than R1bn for a 14,2% stake in Growthpoint.

With the draft property charter already drawn up, many listed property companies are going to be concluding empowerment deals in the near future.

Growthpoint was fortunate in that it had a major unitholder — Mines Pension Fund — which was willing to sell a portion of its Growthpoint stake to the empowerment consortium, which bought 14,2%. Consequently Growthpoint did not have to issue new linked units to facilitate the deal, and so there was no dilution for existing unitholders.

Other funds in a similar situation with a dominant unit-holder include Vukile Property Fund and Emira Property Fund.

Sanlam owns about 58% of Vukile. If Sanlam decided to sell a percentage of its interest in Vukile to an empowerment group, Vukile would not have to issue any new linked units.

Angelique de Rauville, MD of listed property portfolio management company Provest, says Emira is in a similar position to Growthpoint and Vukile.

In Emira’s case, Momentum is the majority unitholder, with a 45% interest.

"With a significant stakeholder, (an empowerment) transaction is easily facilitated (because) if the significant stakeholder wants to dispose of its units without suppressing the share price it can enter into an agreement with an empowerment partner," De Rauville says.

She says the advantage is that the stakeholder has an opportunity to dispose of its units in a single transaction "without suppressing the price of units".

"The advantage for the empowerment investor is that they can acquire a meaningful tranche of shares without having to purchase through the market and put unnecessary buying pressure on a share price."

De Rauville says the main advantage for the listed property company is that such deals are not earnings dilutionary, which they would be in most cases, where units are issued on a shares-for-cash basis.

Old Mutual Asset Management property head Colin Young says Standard Bank owns a significant interest in Hyprop Investments. Such a deal could be an option for this company.

He says it is the best way to do deals without negatively affecting existing unit-holders’ value.

Hybrid listed property funds — which own significant interests in other listed property funds — could also be used to facilitate empowerment deals without diluting value, he says.

Last modified on Monday, 05 May 2014 14:47

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