Fairvest pulls off R420m property acquisition.

Posted On Thursday, 14 November 2002 10:01 Published by eProp Commercial Property News
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PROPERTY loan stock company Fairvest has pulled off its R420m property portfolio acquisition by using a complicated financial technique that essentially defers a substantial portion of payment to vendors.

Property-Housing-ResidentialThis is becoming a popular technique for listed property funds because of the four increases in interest rates this year. High interest rates make it difficult to put together a viable property portfolio acquisition.

The vendors, known as Daisy Street, were paid partly through R129,7m in compulsory convertible debentures with a life span of between three and five years.

The R248m cash component of the settlement was funded through R195m mortgage bonds and R53m in deferred payment.

The deferred payment will begin two years after the acquisition is implemented.

The remaining R42,3m was settled through 28,2-million new Fairvest linked units at an issue price of 150c.

These were issued at a substantial premium to the Fairvest linked units, the ruling price of which was quoted at 65c on the JSE Securities Exchange SA yesterday, a gain of 5c or 8,3% .

Fairvest CEO Nicky Vontas said that in structuring the funding they were looking to harness a number of hostile factors including high interest rates and a huge discount of Fairvest market price to net asset value.

Vontas said their strategic objective was to issue as few units as possible because the issue price was at a premium, and to keep exposure to prime-linked borrowings as low as possible because of high interest rates.

This arrangement enabled Fairvest to boost its total property portfolio to about R735m.

Last modified on Monday, 28 April 2014 11:20

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