March 20 2003
JSE-listed SA Corporate Real Estate, which owns a diverse range of property types, is shifting its strategy to focus more on residential assets. SA Corporate has been selling its office assets and now wants to expand its rental residential portfolio by buying out and then delisting Indluplace Properties. The deal would be worth about R1.1bn and would be a cash offer for all the share of Indluplace.
Indluplace was formed when the formerly-listed Arrowhead Properties spun out and separately listed its residential portfolio. It is led by CEO Carel de Wit. SA Corporate already owns numerous residential units through its investment in the African Housing Company (Afhco). In fact, Afhco makes up about a third of its asset base by value.
SA Corporate last week Friday March 17, released financial results wherein it showed that it had grown its dividend by 5.5% to 24.15 c per share at a 90% distributable income payout ratio for the year to end-December, over 2022’s 22.89 cents per share at the same ratio. This was one of the stronger performances in the current financial reporting period so far. The group earned net property income of R1.2bn.
SA Corporate’s directly-held portfolio includes 157 retail, industrial and residential properties and is valued at about R15.2bn. It is also part of a 50-50 joint venture in three Zambian entities with properties worth R1.4bn and listed investments of R169m. Its market capitalisation is roughly R4.8bn. It is led by CEO Rory Mackey who has spent the past five years or so rationalising the company’s portfolio. This included selling all sorts of non-core assets, such as its holding in Storage Genie as well as offices with high vacancies which placed strain on the performance of the fund. At the end of December 2022, its loan-to-value (LTV) sat at 38.1%. This is a sign of good health for the group. SA’s property and pension fund managers tend to prefer for property funds’ LTVs to lie below 40% otherwise they argue that a company may be in financial distress.
Indluplace listed on the JSE in 2015. It was largely owned by Arrowhead Properties. Last year, Fairvest took over Arrowhead and became the largest shareholder in Indluplace.
Fairvest last week endorsed the proposed merger and said it would receive about R651m from the sale of its 56% stake in the company. Fairvest said it would use the proceeds from the sale to reduce debt.
“Fairvest’s investment in Indluplace is not strategic, and implementation of the proposed disposal would be a step towards refocusing the Fairvest portfolio towards lower LSM and convenience retail. Fairvest does not expect the proposed disposal to have any impact on Fairvest’s distribution per share,” the company said.