Drawing a line of value

REGULARLY CBN reports on the great successes Hyprop is enjoying with their 87% investment in Canal Walk, and in the half year to June the story is much the same.

Hyprop now accords a rather modest R2.8 billion value to Canal Walk - meaning a serious bit of value appreciation from the original R1.2 billion paid to take the property off Nedbank’s hands.

Canal Walk – which has a enviable vacancy rate of 1.7% - generated net revenue in the interim period of R141 million and net property income of R96 million.

Why these figures are quite interesting to peruse at this point is that Hyprop was initially (or so we are led to believe) a bidder for the V&A Waterfront. Hyprop, if media reports are to be believed, dropped out of the reace for the V&A – presumably because the stakes became a tad too rich.

Last month the V&A Waterfront linked unitholders – namely Transnet Ltd and its pension funds Transnet Second Defined Benefit Fund, the Transnet Pension Fund and the Transnet Retirement Fund (TRF) – confirmed that the L&R Consortium was selected as the successful bidder to acquire 100% of the V&A Waterfront for a cash price of R7 billion.

The consortium, selected from nine short-listed bidders, apparently comfortably outbid its nearest rivals.

The question at this juncture is whether the LL&R Consortium – led by the UK-based London & Regional Group Holdings Limited and Dubai-based Istitsmhar well as prominent BEE personalities (including Grand Parade Investments’ Hassen Adams) – may have over-paid for the Cape’s premier lifestyle property.

Transent CEO Maria Ramos was probably not understating matters when she observed that: “This is a balanced deal: The V&A linked unitholders are satisfied that the L&R Consortium has successfully fulfilled the stated evaluation criteria with maximum value being realised…”

Even more significantly around the question of the price paid was the action by the TRF, which had the option of retaining its 22.6% interest or increasing it to 26% in the V&A Waterfront.

Initially it seemed TRF was not a willing seller of its stake in the V&A Waterfront, but once the terms of the deal were announced the retirement fund opted to sell its stake.

The terms of the deal suggest in essence that the V&A Waterfront is about three times more valuable than the Canal Walk shopping centre.

Does that sound about ball park? Well, one has to consider that the V&A Waterfront comes with additional elements aside from its core leisure and retail mix – most notably residential and office development possibilities.

The V&A Waterfront is also a prime location - more so than Century City (which houses Canal Walk), which has needed to create its own node 13 kms outside central Cape Town.

Still, R7 billion does seems a premium price and probably a tag that most local bidders were not prepared to match.

Much of the justification for the R7 billion price tag will come from what value the consortium can unlock at the V&A Waterfront.

L&R Group is one of the largest private property companies in Europe with investments, developments and business interests exceed i7 billion (R65 billion) spread over the UK, Sweden, Finland, Germany, Poland, Denmark and Russia.

So does that mean more hotels, more luxury apartments…perhaps another specialised retail node at the V&A Waterfront.

Time will tell…

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