Attacq, a bundle of premium properties, listed on the JSE yesterday amidst a colourful pledge.
The company promises a “unique investment proposition”. Before you attack this as one of those meaningless corporate statements, pause for Attacq. Take a ride!
Take a ride down or up the N1 Highway in the northern side of Johannesburg and towards the historical 2200ha piece of land. This land was exclusively held by the Waterval Islamic Institute for more than 70 years until 2008.
You will know that you are in the money, once you reach the three lanes Allandale off ramp from one of the busiest stretch of road in Africa, the N1 Midrand portion, which carries about 300000 vehicles per day.
You are now a stone throw away from what could be referred to as ‘Attacq Land’, the R25bn property development that borders Midrand, Baccleuch, Kyalami and Sunninghill. These localities are touted as hosting a remarkable concentration of spending power.
An estimated 6.7 million people live within an hour’s drive from ‘Attacq Land’ and 4.9 million people within half-an-hour’s drive. They come from households dominated by the LSM 7 to 10 categories. They are monied!
As you branch off westwards with the Allandale off ramp, you will come through a stretch of road under expansion to accommodate the exploding traffic which is set for a slip road into ‘Attacq Land’.
This land, the Mia’s land will be ‘Envy Land’ to many who have passed through Maxwell Drive. The street snakes through the largely residential component of the majestic Waterfall City. In 2008, Attacq which was previously known as Atterbury Investment Holdings secured leasehold and development rights over this land. The mixed use development plan is known as Waterfall Business Estate and encompasses Waterfall City.
The few residential properties developing there live many feeling envious. Even the residential portion of this development is out of reach for a significant majority of South Africans. Listings by Century Property Developments spots a 522m², 4 bedroomed and 5 bathroom house, at R9.5m for the Waterfall Country Estate.
There is a R3bn shopping centre, Mall of Africa, under development. South Africa’s third largest mobile phone network operator Cell C will be taking up a 44,200sqm campus. Construction giant Group Five has secured 23,000sqm new head office inside Waterfall City.
You will realise that this land is clearly no place for minnows in the investment game. Only the wealthy live here. Only large financial institutions can look at this with direct investment ambition. To be sure, Old Mutual, the insurance giant with Group funds under management of about £289.3 billion (about R4.4 trillion) may be envious after it was beaten to this majestic urban design. Old Mutual has for years been talking about more or less this kind of development for a site that is five kilometres away from Waterfall City.
But wait, portions of Waterfall City and much more are up for sale for about R17 a piece. This is for real! Not for long though.
Attacq’s listed on the JSE yesterday making available an opportunity for you, the man in the street, to own a piece of its R13.35bn listing portfolio.
In addition to the Waterfall Business Estate the portfolio features Garden Route Mall in George, Eikestad Mall in Stellenbosch and Lynnwood Bridge in Pretoria.
Attacq also features a 25% stake in Atterbury Property Holdings a private development company and a 32.5% shareholding in the Mauritius based Atterbury Africa. The latter is a property investment company focused on developing shopping centres across the African continent. Atterbury Africa lists a 45% interest in the 27 700 m2 West Hills Mall in Accra. This property is under construction and scheduled for launch in October 2014. There is also a 47% interest in Accra Mall in Accra, a 75% interest in a 3.59 hectares piece of land in Accra which is set to house a 14 000 m2 shopping centre by 2015 and a 25% interest in 8.09 hectares land set to host Waterfall Mall in Lusaka.
By now you are probably wondering; where is the unique value proposition. After all, the JSE hosts a vibrant real estate sector featuring about 30 property funds with total market value flirting with the R200bn mark. Most of these property vehicles are positioned for the Real Estate Investment Trust (REIT) craze. What is special about the Attacq crowed?
Attacq appears special because its executives say so. Morne Wilken, Attacq CEO, and his team make a compelling argument, an attack to the dominant listed property paradigm if you like.
In its prelisting prospectus Attacq highlighted the fact that it will be listing on the JSE’s Real Estate Holdings and Development sector. It will not be seeking a REIT status. To South Africa, REIT is a new legal regime governing listed property funds and was introduced to align the country with a global standard. REITs are largely an income play as defined an emphasis on the rental income stream flowing from their investment property portfolios. REITs do enjoy capital gains, largely from appreciation of properties held but this can never match that of a Greenfield property developer.
Wilken says “Attacq focus on long-term sustainable capital growth differentiates it from other JSE-listed property entities that focus on the generation and regular distribution to shareholders of income derived from rental”.
Attacq comes to the JSE with noteworthy historical performance. Established eight years ago, Attacq has delivered a compound annual growth rate of more than 20%. The company came to the JE to raise cash to fund its development. It debuted yesterday after raising R800m from a private placement of its shares. Institutions piled into the stock at R14.50 a piece. The stock ended the first day at R16.61.
The company has promised huge growth prospects. I can hear you saying what is the catch, there is always a catch. Risk! Attacq comes with a more pronounced risk when compared to the many other real estate plays on the JSE. This is due to its emphasis on development. You will probably know that property development is a tricky game and the South African landscape is littered with painful stories of people who lost money to development gone wrong. Remember Stocks & Stocks?
But then, you can take some comfort from the experience brought by the Attacq crowed. There is also the fact that Attacq’s portfolio also features investment property which may dilute the development risk. The company says going forward its portfolio strategy is to hold 65% investments and 35% developments.
The idea is to keep the investment in completed buildings so that they can provide income and balance sheet strength to fund high-growth development opportunities. “In turn, the group’s developments create a pipeline of high-quality investment properties that grows the investment base, as developments are retained rather than realised”.
Take a closer look at Attacq story if you are looking for growth.