Cape Town - Rumours circulating around the Cape Town property sector suggest that Friday's AGM for listed Paramount Property Fund will be anything but ordinary.

Finweek has heard that certain shareholders in Paramount - most notably 22% shareholder Redefine Income Fund - are intent on blocking proposals to introduce a Mvelaphanda Group led consortium as an empowerment partner.

The proposed BEE transaction - announced in April - envisaged Paramount creating and issuing 80m new redeemable cumulative option-holding preference shares at 10c/each by way of a specific issue of shares for cash. The preference shares have a "strike" price of 650c/linked unit.

The voting rights attaching to the redeemable preference shares and the options on the linked units would represent 28.69% of the enlarged issued share capital of Paramount.

Holding at least 75%

Mvela will hold at least 75% of the consortium with the remaining 25% earmarked for black women's groups and other empowerment groups. Paramount expects these BEE groupings to play meaningful roles in facilitating skills transfer and transformation in the property sector.

Paramount executive director Bruce Kerswill indicated there would be no official response from the company when Finweek made enquiries this week. "We'll have to wait and see on Friday", Kerswill said via a spokesperson.

Redefine CEO Brian Azizollahoff was also reluctant to comment on the matter.

Whether Redefine is acting alone in blocking the Mvela-led empowerment deal is not clear. Unsubstantiated rumours at the time of this article suggested Redefine had acquired a parcel of additional Paramount shares from another institutional shareholder.

Hostile intent?

Some property sources are speculating whether Redefine are perhaps not eyeing Paramount with hostile intent. If Redefine advanced on Paramount it would represent another major consolidation in the JSE's Real Estate sector.

Redefine is the second biggest shareholder in Paramount after banking giant Absa, which took a strategic 28% stake in the property group about three years ago.

It is understood that the Mvela deal will be opposed on the basis that the proposed empowerment deal does not add value to Paramount and dilutes the interests of existing shareholders.

In April Paramount disclosed that if the preference shares were redeemed and the linked units subscribed for by the Mvela consortium, the group's earnings would have fallen 38% to 98c/linked unit had the deal been effective at year end October 30 2005.

Double share capital

To implement the proposed BEE transaction (and affect future acquisitions), Paramount has proposed that it double its authorised share capital from 250m linked units to 500m linked units.

Paramount has emerged as one of the best performing companies on the JSE's Real Estate sector. The group, initially bogged down by a cumbersome and dilutory corporate structure, has looked a strong medium sized competitor after making some inspired acquisitions in the last few years.

The group's recent acquisitions include the old Pick 'n Pay HQ and the Golden Acre in Cape Town - which added a retail element to a portfolio of quality commercial and industrial properties.

Only last month the group announced the acquisition of The Bridge shopping centre in Gauteng.

Paramount, which pays quarterly distributions to linked unit holders, declared a 14c/linked unit payout at the end of the January quarter.