Presenter: Stephen Gunnion  Guest(s): Jaco Verster 

Property group Acc-Ross lists on the JSE Alternative Exchange (AltX) in February 2006. Now they’re back in the news with an empowerment partner. With Jaco Verster, chief executive of Acc-Ross

STEPHEN GUNNION: Acc-Ross has formed a strategic partnership with the Abalengani Group of companies that owns upmarket property development assets - Acc-Ross is buying these for R210-million, and in turn has sold some assets back to Abalengani that will end up with a 10% stake in Acc-Ross. Jaco, can you explain how this deal works - it seems pretty complicated?

JACO VERSTER: It’s actually very simple - there’s a cash component to the transaction, as well as a share component. The total purchase consideration - as you’ve mentioned - is R210-million that the Abalengani Group has paid for their 10% stake in Acc-Ross.

STEPHEN GUNNION: So they’re paying R210-million to Acc-Ross, you’re taking on some of Abalengani’s assets and giving them some back.

JACO VERSTER: Yes, it’s a value-add transaction. The Abalengani Group is a property and financial services company - over the last six or seven months we’ve grown closer to them, and from day one we saw the synergy between the two companies. What we’ve done in terms of the transaction is we’ve taken three of the Abalengani developments into our portfolio - being The Bay at Hartbeespoort Dam which is an upmarket golf estate development with all the rights in place, as well as two luxury apartment developments in the Sandton area, being Sandhurst and Hyde Park.

STEPHEN GUNNION: How do they actually tie in with your existing portfolio?

JACO VERSTER: It’s actually a perfect fit - if you look at our portfolio currently we specialise in golf estates, and golf leisure developments. Obviously the development we’re now going to do on the banks of Hartbeespoort fits very nicely into that portfolio. We’re also currently busy with an upmarket l luxury apartment development in Pretoria. The two new developments in that portfolio fit in very nicely, an added benefit is that one of the projects - Icon at Hyde Park - is currently under construction, so that immediately brings a development into our portfolio that’s going up as we speak.

STEPHEN GUNNION: The 10% stake they’re taking in Acc-Ross - is that an initial 10% stake, and might it be raised later?

JACO VERSTER: Obviously considering the empowerment criteria in the South African environment, and the working relationship as it grows over the next 12 to 24 months there is a possibility for the group to increase its stake. It’s obviously a value-add transaction, but we will see how the relationship develops over the next 12 months.

STEPHEN GUNNION: Any possibility of a full merger between the groups at any point?

JACO VERSTER: It’s obviously that we don’t want to disclose at this point in time, but Abalengani being a financial services company with financial services arms in the property sector means we are exploring other opportunities as well.

STEPHEN GUNNION: You had a relationship with them for some time - how do you see that developing as they become partners with you?

JACO VERSTER: It will obviously involved potential further equity, and there might be joint venture arrangements as well. We’re currently conducting due diligence on a number of other projects, including commercial retail developments. We believe that it’s necessary for us to strengthen ourselves in that sector of the property market, and the Abalengani Group has very strong developments in that area as well.

STEPHEN GUNNION: So basically your portfolio at the moment is mostly golf estates, and the apartment buildings you’re taking over from Abalengani?

JACO VERSTER: That’s correct. We do have in our current developments some component of retail and commercial - for example with The Bay development at Hartbeespoort Dam there’s a very big component of commercial and retail. That not being our core expertise at this point in time, we will be looking at other partners to either joint venture with, or to bring them into the group .

STEPHEN GUNNION: Did you purposely wait to announce this deal after your listing so you could put a valuation on your company?

JACO VERSTER: Discussions started during the listing process but there was nothing final, and nothing was presented to the board - it wasn’t a specific move on our part to delay the process. Like any business transaction it takes time to develop, and it takes time to find the synergies and to get an agreement. No, it wasn’t something that was specifically delayed for any reason.

STEPHEN GUNNION: I suppose it does make it easier, and more attractive for the empowerment partner to come on board with a listed vehicle?

JACO VERSTER: I believe so yes, definitely. I think going forward being a listed company our deal flow over the last two or three weeks - the proposals we’ve received for new developments not only in South Africa, but throughout Africa - there are some exceptional opportunities that we are now exploring. The profile of being a listed company has opened a number of doors for us.