South African property investment company Growthpoint Properties (GRT) has concluded an agreement to sell a portfolio of properties to a trust, to be named the Growthpoint Securitisation Warehouse Trust, for 442.7 million rand.

The transaction marks the commencement of Growthpoint's five billion rand commercial mortgage backed securitisation programme, it said on Tuesday.

The initial issue, by Growthpoint Note Issuer Company, of approximately 805 million rand of bonds is expected to be listed on the Bond Exchange South Africa before the end of November.

The Trust, which was registered for the sole purpose of holding properties in order to facilitate Growthpoint's securitisation programme, currently owns 23 properties with a value of 842.6 million rand which were acquired by the Trust, as Growthpoint's nominee, from Tresso Trading.

Transfer of the new properties, which is expected to take place before the end of this month, will bring the value of the Trust's property portfolio to approximately 1.3 billion rand.

The Growthpoint Securitisation Warehouse Trust has been structured in such a way that Growthpoint will provide strategic asset management and operational property management services to the Trust. Growthpoint will also hold the Trust's decision making and property ownership powers, said Growthpoint Properties CEO Norbert Sasse.

The transfer of these properties to the trust will not have an effect on Growthpoint's earnings, distribution or net asset value per linked unit, he added.
 
Sasse pointed out that Growthpoint's proposed CMBS programme includes the benefits of increased distributions to Growthpoint linked unit holders, lowered average cost of borrowings, diversification of borrowing sources and the increased competitive advantage of Growthpoint being able to make value-enhancing acquisitions.
 
The Trust also provides Growthpoint with "transparency" for tax purposes, as all amounts accruing to the trust are deemed to accrue to Growthpoint as the sole vested income and capital beneficiary, he said.
 
Simultaneously the properties held by the Trust are ring-fenced and shielded from any Growthpoint insolvency, which is a necessary requirement for successful securitisation.
 
The lead arranger and manager for Growthpoint's CMBS is Investec Treasury and Specialised Finance. Steinway is the independent trustee of the Growthpoint Securitisation Warehouse Trust, with powers limited by the provisions of the trust deed.
 
For accounting purposes, the assets of the Trust will be consolidated in Growthpoint's balance sheet and from a financial perspective, the trust's property portfolio will be treated as if they are held directly by Growthpoint, the company said.