With this transaction, Growthpoint will acquire 51 properties from Sentinel Mining Industry Retirement Fund and the Mine Employees' Pension Fund (MEPF). This will boost its total portfolio value to R1,65-billion. Market capitalisation is projected to hit R1,2-billion.
More institutions are expected to list their property holdings on the JSE in the next few years, enhancing the sector's attractiveness to investors.
Institutionally held property is estimated to be worth more than R60-billion. As this property comes on stream, the sector will assume a significant status in investment portfolios due to enhanced size, liquidity and quality.
The Growthpoint acquisition is seen as the beginning of this process. The transactions will boost market capitalisation of the property loan stock sector 20%, with 10% growth for the combined property loan stock and the property unit trust sectors.
Investec Properties manages the portfolio and underlying properties of Growthpoint, while parent company Investec Group will be lead banker and underwriter to Growthpoint with Absa, Standard Bank and First Rand.
Investec Properties MD Sam Leon said the involvement of these financial institutions, also as unit holders, 'indicates a degree of comfort investors can take from the underlying quality of Growthpoint portfolio'. This was backed by relatively low gearing levels of around 32%.
The banks would provide debt facilities of R800-million and underwrite R400-million of units.
About 60% of Growthpoint units would be held by Sentinel and MEPF, placing more than 40% of the shares with the public.
'This is good news for the sector as it creates a free float of about R450-million,' said Leon.
Growthpoint offered exposure to a broad-based loan stock portfolio suited to low-risk investors, and compared favourably to call accounts and investing in gilts. About 68% of the properties in the portfolio were in Gauteng, 22% in KwaZulu-Natal and 3% in the Western Cape.
While 54% of the portfolio was in offices, 30% was in retail, 10% in industrial and 6% in hotels.
Leon said this acquisition and subsequent listing was in line with international trends, and he cited Australia in particular.
'Converting physical property to listed property shares introduces a new set of investors to the market and broadens property ownership to the private investor, since many major institutions have been overweight in direct property holdings and liquidity has been limited.'
Initial placement of Growthpoint linked units offered investors a forecast forward yield of 13,86%. The new Growthpoint units will be issued at 90c a unit