V&A Waterfront selloff ‘gets local and foreign bids’ 
Nick Wilson

 
Property industry sources say that 20 to 40 initial bids may have been made for the Victoria & Alfred (V&A) Waterfront in Cape Town. Several of these bids were thought to have been made by foreign companies, which may or may not team up with South African partners.

A reliable source, who does not want to be named, says it is understood that about 40 bids were initially made.

It is also believed that several South African property players have been short-listed to go into the second round of the bidding process. Among these are Hyprop Investments, Zenprop, Old Mutual and the Cavaleros Group.

It is understood these players are members of consortiums that have made bids for the landmark Cape Town property.

“We don’t know how many went through. Apparently there were also some international bidders,” says the source.

Norbert Sasse, CEO of Growthpoint, SA’s largest listed property company, says his sense of the bidding process is that 16 to 20 bids would be made for the property.

“You are going to have four or five listed property companies, four or five institutions, four or five private consortiums and four or five international consortiums,” says Sasse.

But he would not comment on whether Growthpoint had made a bid for the V&A.

Investec Bank and Deutsche Bank, the advisers appointed for the V&A disposal process, are tight-lipped about the process.

David Tew, a corporate finance consultant from Investec, says he cannot say how many bids have been received.

“Our clients were pleased with the quality of the bids they did receive. On the basis of that we are still proceeding with the process. The prices were at the right level,” says Tew.

He says they will soon advise bidders who will go through to phase two of the bidding process.

There is speculation that foreign bidders may have an advantage over South African ones because of the lower cost of funding overseas.

Property commentators say that a foreign investor in the V&A could also act as a catalyst for future foreign direct investment in SA.

Les Weil, chairman of real estate group JHI Real Estate, says he has heard a Canadian pension fund, an international bank and Middle East investors have put in bids for the V&A. He says this is “very good” for SA.

“Where there are trophy assets and if they (foreigners) are successful (in running the asset) and it’s a good experience, it brings in other investors and not necessarily just into commercial property. It highlights SA as a good place to invest,” says Weil.

David Green, MD of commercial and industrial property brokers Pace Property Group, says foreign investor interest in the waterfront is a “fantastic indication that foreign investors see SA as a good location to invest”.

“Obviously the V&A Waterfront is one of our premier retail precincts with further opportunities for expansion. But I think the most important thing is if you are a foreign buyer you can’t buy in your country at yields as attractive as those offered in SA.”

He says if investments in SA by foreigners are funded offshore at lower interest rates than those applied to SA, it “makes it particularly attractive for foreign investors to invest in SA at higher yields than would globally apply”.

“Also, foreign investors are only really interested at the moment in large-scale investments and generally they want investments of more than a $1bn.

“Foreign investors are looking for a large real estate investment of which there are very few available and of course they are competing with domestic investors, which include the listed property funds, but the advantage the foreigners have is access to cheaper capital.”

Property economist Francois Viruly, of Viruly Consulting, says that the V&A is probably of “a size or value that would be of interest to foreign investors”.

“From a valuation perspective it will be interesting to determine at what yields the V&A Waterfront is sold because it would set a benchmark for prime shopping centres and mixed-use developments,” says Viruly.

He says a foreign investment in the V&A may “start opening the doors for other foreign investors and pension funds to start looking more carefully at the South African property market”.

In May, Transnet and two of its pension funds launched a process to sell a majority stake in the V&A by next month.

Transnet CE Maria Ramos said at the time that the parastatal would sell 77,4% of the V&A, or 100% if a third pension fund, the Transnet Pension Fund, decided to dispose of its 22,6% stake.

Ramos said that only offers for at least a 25% interest in the V&A would be considered and preference would be for a transaction involving a single buyer.

Market speculation on the V&A’s price tag varies from R3bn to R7bn.