The Government Employees Pension Fund (GEPF) which is represented by the country’s largest investor, the Public Investment Corporation (PIC) is pumping R2.8bn cash into Waterfall City through a groundbreaking transaction with JSE-listed Attacq.
In 2008, the Attacq Waterfall Investment Company (AWIC), owned by Attacq, secured rights to develop commercial properties near Midrand, Gauteng, in an area called Waterfall. Over the years this area would develop into a node which would house Waterfall City and Waterfall Estate. This multi-billion rand node is now one of the most popular for young families and professionals in Gauteng. Within Waterfall City, Mall of Africa which is the largest shopping centre built in one phase can be found as well as industrial and officed parks including the PwC Tower.
The GEPF will acquire 30% of AWIC. AWIC is a wholly owned subsidiary of Attacq and holds the company’s completed real estate portfolio and development and leasehold rights in Waterfall City.
The investment will be made made through issuing new AWIC equity, acquiring AWIC shareholder equity and shareholder loans from Attacq, as well as the extension of an additional pro-rate shareholder loan by the GEPF.
Attacq’s CEO Jackie van Niekerk said this is a monumental transaction for Attacq, which has been more than two years in the making.
“We have wanted to put Waterfall into second gear for a while. We believe that this deal is good for SA as the government allocates capital to a fast-growing node. It will be transformative for us and help us to fast-track our development pipeline,” she said in an interview with Property Flash.
The transaction aligns with Attacq’s strategy of improving its capital structure by decreasing its relative debt to asset or loan-to-value (LTV) ratio and boosting its balance sheet. Attacq wants to fund its Waterfall City development pipeline with no additional capital required from shareholders in the medium term.
Van Niekerk said Attacq would benefit from cost savings and efficiencies, while retaining its real estate investment trust (Reit) status. Attacq will retain full control of AWIC through its majority stake and will continue to provide asset management and administration services to AWIC at market-related fees.
Attacq’s chief investment officer, Peter de Villiers said attracting a significant investment like this was a major affirmation of the quality of Waterfall City, a work and lifestyle precinct which has won international awards.
Van Niekerk said the deal was highly exciting and was reminiscent of when the PIC invested in Cape Town’s V&A Waterfront more than a decade ago.
Attacq’s CFO Raj Nana said the deal was ideal for the listed group.
“We can sell individual buildings but deals like this are highly attractive for us as they really boost our balance sheet. It provides the GEPF with a unique opportunity in the co-ownership of a world class city. Once implemented, Attacq will see its gearing reduce from 37.2% to circa 24% on a pro-forma basis, providing the balance sheet to develop out Waterfall City,” he said.
“Attacq’s capital structure will also be optimised resulting in a reduced cost of capital thereby enhancing returns for Attacq’s shareholders. It’s a win-win for all stakeholders,” said Nana.
The transaction is subject to the fulfilment of certain conditions. Since the transaction is classified as a Category one transaction in terms of the JSE Listings Requirements, majority shareholder approval is required.
alistair@propertyflash.co.za