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New Frontier raises R927m in private placement

To acquire a shopping centre.

UK-focused New Frontier Properties has raised £44 million (R927 million) in a private placement, as it looks to acquire a shopping centre in the region.

The newly raised capital comes as the property counter, with a market capitalisation of R2.4 billion, plans to grow its exposure to the retail sector in London, which offers attractive rentals and redevelopment opportunities.

New Frontier, which has a primary listed on the Stock Exchange of Mauritius and a secondary listing on the JSE’s AltX, says further details on the shopping centre it’s acquiring will be revealed shortly.    

It placed 48.3 million New Frontier shares with investors, of which 7.1 million shares were placed at an issue price of £0.9113 (R19.21) per share, raising about £6.5 million (R137 million) through its Mauritian share register. It further placed 41.2 million shares at an issue price of R19.50 per share raising about R804 million through its South African share register.

In April, New Frontier announced that it acquired two shopping centres in the towns of Burton and Middlesbrough.

The shopping centres, which have a collective vacancy of 4%, have tenants which include Marks & Spencer, Hennes & Mauritz (H&M), Top Shop and more.

The shopping centres were acquired after successfully raising £84 million (R1.7 billion) through placing shares on the market.

The rand hedge player at the time noted that it was looking at another pipeline of acquisitions in the UK.

New Frontier is backed by local fund, Rebosis Property Fund, which owns more than 60% of the company. Rebosis CEO Sisa Ngebulana co-founded New Frontier.

New Frontier will give Rebosis, which plans to grow its retail sector investments, exposure into the UK market and returns in hard currency. The investment would make about 9% of Rebosis’ total assets. 

Ngebulana was betting on the UK market due to its rebound from the 2007/8 global financial crisis, its rapid growth in retail sales (especially in a low-inflation market), the ease of doing business and availability of infrastructure.

New Frontier also offers it diversification from South Africa, which battles a tepid economic growth rate (expected to be less than 2% for 2015) and an interest rate rising cycle putting pressure on property returns.

Grindrod Asset Management chief investment officer Ian Anderson says local investors have the desire to increase their offshore exposure. More funds in the JSE’s more than R500 billion real estate sector have prioritised their offshore exposure including heavyweights Growthpoint Properties and Redefine Properties.

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