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Atterbury to list its property fund in Q4
Could sell five regional shopping centres to Vukile.

JOHANNESBURG – The Atterbury Group plans to list its property fund on the JSE  in the fourth quarter of this year. According to MornĂ© Wilken, chief executive officer of the fund – currently called Atterbury Investment Holdings – the reasons for the proposed listing is twofold. “It potentially will create more liquidity for our shareholders, because in an unlisted company – although it is public – it is more difficult to trade,” he says. It will also make it easier for the company to raise money for its huge development pipeline, such as the R3bn Mall of Africa in Waterfall, in future.

Louis van der Watt (pictured), chief executive officer of the Atterbury Group, says the fund’s gross assets is valued at around R12bn. Depending on the gearing, the market cap of the fund could be around R6bn during its initial listing.

Atterbury is still contemplating whether or not it will list on the new REIT board of the JSE.

Atterbury’s comments follow a recent announcement by the Vukile Property Fund (JSE:VKE) that it has entered into negotiations for the acquisition of the Wingspan property portfolio comprising of five regional shopping centres. According to Laurence Rapp, chief executive of Vukile, the acquisitions could push the Vukile Property Fund’s asset base “comfortably above the R10bn level.” The Wingspan property portfolio, comprises of Irene Mall, Hartebeespoort Mall, Weskus Mall, Westwood Mall as well as a shopping centre in Jeffreys Bay.

Atterbury, currently owns just over 30% of the Wingspan portfolio, according to Van der Watt. The rest of the portfolio belongs to a consortium of investors including Retail Africa, Corovest, Absa and Leafcapital, he says. Van der Watt says Atterbury decided to sell its stake in Wingspan, since the group is currently investing in large retail centres and the Wingspan portfolio does not fit its investment criteria anymore. The Wingspan portfolio’s biggest property is only around 30 000 square metres while the Mall of Africa is 120 000 square metres, he notes. The value of the proposed transaction between Atterbury, the consortium and Vukile is under wraps for now, although a detailed cautionary could be published before the company’s results are released on May 27, 2013. Van der Watt indicated that the current market value of the Wingspan portfolio is around R2.5bn although the value of the transaction would not necessarily be the same.

Rapp says Vukile’s bid for the Wingspan portfolio is part of its stated strategy to grow the size of the fund by buying good quality regional shopping centres and to bulk up on its retail exposure. “We are also keen on having an overweight exposure to retail in our portfolio, so we would like to have approximately 60% of our asset base in retail centres,” he says. Although recent data indicate that certain regional shopping centres might be under pressure, Rapp says Vukile does not currently experience such a trend. “As with all property, retail is going to go through different cycles, but if you look historically, retail has always been the most defensive asset class,” he notes. “We think that retail is (still) the most desired asset class and the most defensive asset class, and that is why we have made a call in our fund to go overweight in the retail sector. But having said that, we also like to have a balance in our fund, so it should be 60% retail and then the balance split between office and industrial,” he says.

The implications for investors

Rapp says the key question that everybody is asking at the moment, is what the proposed transaction’s iMpact (JSE:MPT) will be on earnings. “That I can’t answer at the moment because we haven’t yet published those figures, but we have a very good idea what that answer will be,” he says.

Rapp says the East Rand Mall acquisition moved Vukile’s asset base to approximately R8.7bn. “We’ve recently also announced the Encha transaction, our empowerment deal, where we’re going to be buying a portfolio of five buildings, largely government-tenanted, for about R1.4bn. That would put our asset base around R10bn,” he says.

“Assuming we buy the whole of Wingspan, it will push the portfolio very comfortably above the R10bn level, which means that Vukile is then starting to play in sort of the bigger section of the listed property sector which does start attracting more index tracking money,” he says. Rapp says the company has been working hard to improve the quality of the portfolio – also selling assets from the fund – which is a positive development for shareholders in the short and longer term.

Van der Watt says Atterbury will invest the proceeds from the sale of the Wingspan portfolio in its larger developments, which should be positive for investors.

An analyst comments

Anton de Goede, property analyst at Coronation Fund Managers (JSE:CML), says through this proposed acquisition Vukile will increase its retail exposure, which it has been aiming to do in the recent past.

“However what is important is the yield at which this asset will be acquired since it has had its letting challenges in the past.”


Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!