Property Flash


RMB Holdings (RMBH), the company which has been trying to sell all of its property assets as it is unwound is still leaving its shareholders in the dark about what happens next regarding its multi-million rand dispute with developer, Atterbury. At this stage, all the shareholders can do is wait.

In fact, Atterbury’s group CEO and co-founder, Louis van der Watt told Property Flash that investors will have to wait until July before the dispute can be solved. This is when RMBH’s R489m loan to Atterbury will mature. Atterbury will then have to cough up the money to repay the loan or use debts to repay it. The loan could also be converted into equity which would not suit RMBH.

RMBH wants to pay its shareholders a large dividend after it is unwound and the loan is causing it a headache.

Atterbury, which is a real estate developer, was founded by van der Watt in the 1990s. He said that Atterbury wants to invest its funds in more projects.

Atterbury has conversion rights on the loan and will be able potentially to convert the loan into Atterbury shares at a premium.

RMBH’s CEO, Brian Roberts said in December 2022 that there was a difference in opinion on the settlement terms of the loan. He said that RMBH was consulting its lawyers. Since, then there has been no update to the market.

RMBH unbundled its First Rand stake in mid-2020. It has been exiting its property assets since and distributed R2bn to its shareholders in the six months to end-September.

But shareholders are still unhappy that RMBH is trading at a huge discount to net asset value (NAV). A trading statement released in March showed that RMBH’s revised NAV for the year to end-March 2023 would range between 77.5c and 116.3c a share while the share is trading at 50c.

RMBH’s management needs to sort out its dispute with Atterbury, of which it owns a 27.5% stake, as soon as possible. Atterbury is by far RMBH’s biggest asset following the recent sale of its stake in Atterbury Europe. There are also concerns that this stake was effectively sold at a half a billion rand loss and that RMBH’s management was incentivised to do this, handsomely.

Atterbury is pushing to convert the loan into equity. This would preclude the payment of another special dividend and it would also make it difficult for RMBH to sell its remaining property interests.

Roberts said that a facility agreement between Atterbury and RMBH gave the property company a right to issue a conversion notice around the loan. This was on the condition that Atterbury, in their reasonable opinion, did not have available cash resources to repay the loan.

Atterbury has a huge incentive to convert the loan into shares as the conversion price would be at Atterbury’s embedded value which equates to a 10% to 12% premium to market value as it also includes a value of the management and development businesses. Effectively the potential conversion could be seen as a recapitalisation of Atterbury by RMH at a 10% to 12% premium to net asset value which would position Atterbury well to grow its business very cheaply.

If RMBH does have to convert the loan to equity, it would then hold about 44% of Atterbury, a company with property interests including 20% of Mall of Africa, the largest shopping centre built in a single phase in South Africa.

There are concerns that RMBH should have kept its stake in Atterbury Europe which owns retail centres in eastern Europe. Centres in this region are performing well. Eastern European property stocks are having a good 2023 while western European real estate stocks generally are not.

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