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May 29, 2007:
Property fund SA Corporate Real Estate Fund (SAC) has bought 51 properties for R1bn, boosting its asset value to more than R7,8bn, it said on Monday. It also announced that as a result it has reshaped its board.
The properties were bought from Collins Property Group and Buffet Investments, collectively known as Buffcol. The proposed acquisition, announced earlier in May, would be another important step in SA Corporate's expansion strategy, said the fund's CEO Craig Ewin.
"We are aiming for a R10 billion portfolio in the short to medium term and to remain within the top 3 in the sector in market capitalizations value," added Ewin.
Peter Sparks, executive director of SA Corporate negotiating the transaction, said a due diligence investigation of the Buffcol portfolio had been completed. "It is an excellent portfolio of well located properties, predominantly industrial, let to well known South African corporates on long leases."
The transaction would reduce SA Corporate's retail weighting to just under 60% and increase the industrial weighting component of the portfolio to 33% from 28%.
Management were more than comfortable with this overweight industrial weighting given the excellent rental growth prospects being evidenced in this sector, said Sparks.
He added that the fund would be looking to add to the office component where the fund is underweight and where management generally expects good rental growth to be found.
Sparks said the acquisition would not materially affect the geographic profile. Gauteng properties in a consolidated portfolio would account for 40% of income, KwaZulu Natal properties for 47%, Cape properties for 13%, with a small balance from Mpumalanga investments.
He said the ten largest properties in the Buffcol portfolio by value accounted for about 45% of the portfolio value at 462 million rand. The portfolio's top 10 tenants are Chep SA, Bosch, Afrox Healthcare, Shell SA, MSA, Unitrans Motors, Tiger Wheel and Tyre, Supply Chain Services, the SA Police Service and BDO Spencer Stewart. The lease expiry profile is favourable with most leases expiring between 2012 and 2015 and 77% of the leases expiring after 2011, the company said. SA Corporate reshapes board
Reshaping of board
Following this acquisition and the conclusion of a BEE transaction SA Corporate has reshaped its board. SA Corporate's chairman, Ben Kodisang, said that as result of the BEE deal Women Investment Portfolio Holdings Ltd and Kensani Properties have an 11% interest in the fund, and Louisa Mojela and Musa Ncgobo had been appointed directors.
Mojela is CEO of Wiphold and Ncgobo, who is a national councillor for SAPOA and has played a leading role in property charter initiatives, is CEO of Kensani Properties. John Swain, chairman of the audit committee of SA Retail Properties which was recently acquired by SA Corporate, and Wayne van der Vent, head of property at the Public Investment Corporation, a major unitholder of the fund, have also joined the board. Malcolm Wyndham and Colin Young have resigned.
"Colin Young is responsible for the launch of the innovative institutional Triangle Property Funds at Old Mutual Investment Group Property Investments and his resignation is in the interest of good corporate governance to avoid any potential conflict of interest," said Kodisang. Peter Sparks, formerly managing director of SA Retail, has joined the board as an executive director to focus on sourcing investment opportunities. - I-Net Bridge
