JOHANNESBURG – Rand Merchant Bank Holdings (RMH) hopes its newly launched property business will eventually play a “meaningful role” next to FirstRand, which accounts for R82 billion in the investment company’s portfolio, says RMH CEO, Herman Bosman.
RMH announced on Tuesday that it plans to buy a 25.01% stake in local property group, Atterbury as the first step in a strategy to build out a sizeable property arm by investing in entrepreneur-led property businesses.
Established in 1987 by GT Ferreira, Paul Harris and Laurie Dippenaar, RMH holds a 34% stake in FirstRand, the banking group that owns FNB, RMB, WesBank and Ashburton Investments.
Following an analysis of its business back in 2014, RMH realised it was under-exposed to property and has partnered with Atterbury in developing a core property portfolio targeting office, retail and industrial property.
Beyond the traditional areas of South African property, the RMH property business will include a specialist portfolio focusing on niche areas of the property sector, such as property entrepreneurs investing in storage and city rejuvenation.
“We are in discussions with a couple of entrepreneurs, but the focus now is to bed down and complete the Atterbury investment,” says Bosman.
An unlisted property group, Atterbury was co-founded by CEO Louis van der Watt in 1994 and is the developer behind the Waterfall property development in Gauteng, which is home to the 130 000 square-meter Mall of Africa.
Atterbury established Attfund, which was reversed into Hyprop in 2011, and formed – and later listed – Attacq.
‘We are SA optimists’
Although he believes there is a lot of opportunity locally, Bosman says RMH is not limiting itself to South Africa and may back entrepreneurs with international expansion plans.
“The strategy will involve investing in physical property portfolios as well as vertically integrated property companies, specifically with internal management teams that offer asset management, development management and property management skills,” Bosman explains.
Ultimately, the group hopes its property portfolio will play a “meaningful role” next to FirstRand, says Bosman. The financial services giant accounts for as much as R82 billion in its portfolio currently, meaning it will take “a lot of investment and a long time” to reach that point, he acknowledges.
“This is not moving out of banking but building next to banking. We’re not decreasing our exposure to banking,” he adds.
RMH believes the investment is the right one strategically for the group and will provide shareholders with geared returns that are uncorrelated to FirstRand’s earnings, Bosman says.
Asked whether the property investment reflects a vote of confidence in the long-term future and growth potential of South Africa, Bosman remarks, “We are South Africa optimists. Between the two companies [RMH and RMI] we have around R150 billion invested in financial services in South Africa.”
RMH’s sister company, Rand Merchant Investment Holdings (RMI), which was unbundled from RMH and separately listed in 2011, has investments in Discovery, MMI and OUTsurance, among others.
Bosman notes that “any or all” of these investments are a vote of confidence in South Africa.