Battle of the landlords

2014-04-16 17:55

Fresh from a battle of the landlords, which cost the target company millions to defend, Redefine Properties has resumed merger talks with the Fountainhead Property Trust – potentially placing it in line to benefit from the target’s growth, which appears to be gaining traction.

This week, Fountainhead – which has a substantial retail, office and industrial property portfolio and owns malls such as Centurion Mall in Pretoria – released its results for the six months to February, which showed profits had more than doubled on the previous corresponding period, reaching close to R786 million.

This was more than the R767 million it made in the 12 months to last August. It has major projects worth more than R1 billion in development. It also acquired three properties for a combined R762.4 million, which are expected to deliver 8% to 10% of their purchase prices in annual rentals.

But it sold Westgate, Southgate and Southgate Value Mart for R945 million, which directors said would “fund acquisition and development activity”.

It will distribute 29c a unit to holders (Fountainhead has unitholders instead of shareholders because it is a collective investment scheme) – which means Redefine, with its units numbering more than 766 million, will pocket about R222.2 million for the period. Small wonder it wants more.

Last week, Fountainhead advised unitholders that it was in talks about a potential merger with Redefine Properties.

Early last year, Growthpoint, the largest property company by market capitalisation on the JSE, threw in the towel after a long battle against Redefine for total control of Fountainhead.

This cost the target company big money.

“Fountainhead incurred legal and advisory costs of some R12 million that were incurred in the six-month period to March 2013, the previous financial year’s interim period,” said Len van Niekerk, its CEO.

Redefine, for its part, appeared to withdraw its takeover offer and opted to increase its stake in Fountainhead to 65.9% from the 49.6% it previously held.

Cara White, its spokesperson, said the company had always intended to buy Fountainhead’s assets.

“Redefine acquired a stake in Fountainhead to align its interests with Fountainhead unitholders,” she said yesterday.

Meanwhile, Growthpoint appeared to be consoling itself with more than a third of units linked to Acucap Properties, and 31.5% of the Sycom Property Fund. This would give Growthpoint exposure to about R18.4 billion in these landlords’ collective retail and office portfolios.

It has concluded agreements to this effect, and will pay for the stakes in a share swap deal: 1.9 Growthpoint shares for each Acucap unit and 1.1 Growthpoint shares for each Sycom unit.

The two targets are set to merge after Acucap released a circular on the proposed transaction last month. Acucap shareholders will vote on the deal on May 5.

Growthpoint executive director Estienne de Klerk said his company was happy to see the merger proceed.

“We will possibly consider making an offer for the merged entity as Growthpoint,” he said. “The deal is unrelated to Fountainhead. We continue to pursue various transactions that will enhance Growthpoint and continue to build the business.”

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