Growthpoint Properties is racing towards the R70 billion tangible asset mark. The largest listed property fund on the JSE, Growthpoint, announced yesterday that it has reached an agreement with Tiber Group to acquire from Tiber a property portfolio and attendant services for about R6.6bn.
Growthpoint said the R6.6 billion transaction, its largest single acquisition to date, will see it gaining one of the most exclusive office property portfolios in South Africa.
Yesterday’s announcement comes a month after Growthpoint notified the market that it was going for a R1.3bn Abseq Properties’ portfolio.
In reporting financial results for the year ended June 2013, Growthpoint said for the first time its tangible assets exceeded R60 billion during the year. At year end, consolidated tangible assets were valued at R62.8 billion. Growthpoint gained prominence when it acquired 50% of the V&A Waterfront in 2011.
If it goes through, the transaction announced yesterday plus the Abseq Properties will boost Growthpoint’s portfolio to cross the R70 billion mark. This would make Growthpoint almost twice the size of the second largest propert fund on the JSE, Redefine Properties.
Growthpoint said the Tiber portfolio developed under the vision of the late Francesco Rivera spans 320 000sqm of mainly P- and A-grade office space concentrated in Sandton and its surrounds. The portfolio includes multiple multinational head offices such as Nestlé, PPC, AngloGold Ashanti, Norton Rose, Merrill Lynch, Barclays and Absa Capital. It comprises 28 prime properties and a 50% stake in a further 9 properties. It also incorporates 48 000sqm of undeveloped bulk.
Growthpont added that for want of securing continuity of management and expertise in the transaction, it will internalise the asset management and property management business from Tiber Projects, gaining the skills of 55 full-time employees. Growthpoint has also secured an initial three-year strategic agreement with the Tiber Projects executive team of Stephen Scott, Germano Cardoso and Artur Carrazedo.
Growthpoint added that the transaction is a significant boost to its office portfolio and enhances its underlying income streams. “The acquisition lengthens Growthpoint’s average office lease length and, with a 95% occupancy rate, improves its overall office vacancy levels. It will also make Growthpoint the country’s biggest office property owner, with a portfolio of 1,5 million square metres of office space across South Africa, valued at nearly R25 billion.”
Norbert Sasse, CEO of Growthpoint Properties said “A portfolio of this quality and size, centred in arguably the best investment property location in South Africa, is a once-in-a-lifetime opportunity and beneficial for Growthpoint’s shareholders.”
Moreover, Growthpoint will gain the core competencies, skills and long-standing relationships with tenants of the Tiber portfolio, and have access to the executive team who conceptualised, built and managed the properties.”
On the Tiber side the transaction was characterised as meeting two important goals. These are creating liquidity for Tiber shareholders and unlocking the next phase of its business which will continue to deliver exceptional property development, investment and management to the South African property sector.
Tiber’s Stephen Scott said “While achieving these goals, we wanted to find an excellent home for our people and our property portfolio, and believe we have done this with Growthpoint. Tiber considered several alternatives and ultimately Growthpoint enabled us to realise an enhanced value for our shareholders and it has the ability to readily access and implement large transactions of this kind.”
Sasse said “The acquisition will become effective when the portfolio transfers, which should be in Q1:2014. But the real benefits will come through in FY2015 when shareholders will enjoy the full 12-month impact of the transaction.”
Growthpoint said it will settle the acquisition with a combination of cash and shares. It will issue 93.3 million new Growthpoint shares at R27.00 per share to raise approximately R2.5 billion. The remaining consideration will be paid by accessing the cash resources from Growthpoint’s successful capital raise in May 2013 and its existing debt facilities.
The transaction is conditional on Competition Authorities approval and the adoption of certain resolutions by the respective Sellers.