Once Growthpoint Properties’ bid for Acucap Properties (Acucap) is approved by the Competition Tribunal – signalling the deal being put to bed – then the property counter might start seeing full benefits of the transaction.
Growthpoint CEO Norbert Sasse (pictured) says that once the company becomes a 100% shareholder of Acucap, it can then start consolidating and extract operational efficiencies from the deal.
Growthpoint’s bid for Acucap began in April last year, when it acquired a 34.9% stake in the company – triggering a mandatory offer to increase its stake for shares it did not own. At the same time it also acquired a 31.5% stake in Sycom Property Fund (Sycom).
“At the moment, it [stake in Acucap and Sycom] is just an investment and we don’t really have an impact on the operations of it,” Sasse tells Moneyweb.
Growthpoint, the largest JSE-listed property company by market capitilisation (R68 billion), has seen a nominal benefit to its stake in Acucap and Sycom.
Of Growthpoint’s R1.9 billion distributable income to shareholders for the six months to December 31, 2014, about R170 million derives from its listed investments (including Growthpoint’s stakes in Acucap and Sycom).
The stakes in Acucap and Sycom contributed 8.6% of distributable income. The property counter also declared a 7.5% growth in distributions to 84.4 cents per share.
Peter Clark, sector head for property at Investec Asset Management, says the Acucap/Sycom transaction will boost growth marginally, “however the operating environment remains difficult in South Africa”.
The deal was referred to the Competition Tribunal last month by the Competition Commission, the last hurdle to climb before full approval. If the Competition Tribunal approves the deal, Sasse says it could be effective from April 1 and implemented by May 1.
This would subsequently lead to the delisting of Acucap from the JSE to become a wholly-owned subsidiary of Growthpoint.
“Even in the next set of results to June, given that the [Acucap and Sycom] transaction will only be implemented in May, will have a negligible impact. But we look forward to the June 2016 results to start seeing an impact [of the deal],” says Sasse.
The Acucap transaction would grow Growthpoint’s asset base by R18 billion to nearly R100 billion from the current R78.2 billion.
The deal, described by Growthpoint as the largest in the company’s history, will give the property heavyweight more exposure to retail assets beyond its flagship assets including Brooklyn Mall in Pretoria and retail sections of the V&A Waterfront in Cape Town.
The retail sector is considered as defensive in light of macroeconomic headwinds compared with the office and industrial sectors.
The deal will afford the property counter access to Acucap’s Bayside Mall in Cape Town, East Rand Value Mall in Boksburg and Festival Mall in Kempton Park among others. Sasse says Growthpoint’s ideal sectoral mix across the portfolio would be slightly heavy towards the retail sector than the industrial and office sectors.
“After the transaction we will have 46% of our portfolio in the office, 39% in retail and the industrial portfolio will be 15%. In an ideal world you want to reverse that, you would want 46% retail, 39% office and 15% to be in industrial.
“That means we can continue to look for retail opportunities on the one end but on the other hand we might continue to dispose some of our office assets,” Sasse explains.