Residential property assets are increasingly lining up to enter the JSE in a move that comes with huge potentials for investors and the general South African public.
This is signalled in the transaction to be concluded by JSE listed property fund Arrowhead Properties. The fund announced today that it has concluded an agreement with Jika Properties to acquire a residential property portfolio for R406m.
The transaction represents steady progress in the entry of residential property on the equities market. The trend comes to benefit diversity of listed property investment while raising the profile of affordable residential property as an investment destination which could then unlock the so called gap market.
Outside the remarkable Wapnicks led march through Premium Properties there is nothing to speak of about affordable residential property on the JSE.
The portfolio pursued by Arrowhead Properties is made of 1089 affordable housing units in 36 properties with a gross lettable area of just over 79 000m2. The portfolio is spread across Johannesburg.
Mark Kaplan, COO of Arrowhead commented, “This transaction is in line with Arrowhead’s low risk and high yield investment benchmark. Furthermore, it expands our investment strategy, as it provides growth opportunities and great diversification for the Fund.”
Gerald Leissner, CEO of Arrowhead said, “To date no one party has acquired a residential portfolio suitable for listing. Residential property comprises less than 1% of the listed property sector in South Africa unlike 15% in the USA. Purchasing these assets paves the way for Arrowhead to start developing its residential offering and enhancing its asset base.”
“Since announcing this transaction in July, we have been approached with about R5 billion worth of pipeline opportunities. This is not to say that we will conclude any of these deals, but doors are opening and our competitive edge is growing,” added Imraan Suleman, Arrowhead CFO.
The portfolio will be managed by Jika Properties for two years and receive a guaranteed return of not less than 10% in year one and 10,8% in year two. The transaction is subject to due diligence and approval by the Competition Commission.
“Arrowhead remains focused on growing income for unitholders and diversifying our asset base. We are excited about this transaction and what it will bring to the Fund,” concluded Kaplan.