Redefine still hopes to earn fees on a new deal with Hyprop

Posted On Thursday, 03 June 2010 02:00 Published by eProp Commercial Property News
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Redefine Properties says it will probably still be earning fees from Hyprop Investments after the termination of its consultancy agreement with the company.

Marc WainerSA’s second-largest listed property company, Redefine Properties, with a market capitalisation of R21,1bn, said yesterday it would probably still be earning fees from Hyprop Investments, but on a different basis, after the termination of its consultancy agreement with the company.

The original agreement, based on a fixed consultancy fee of R1,5m a month, was entered into on the premise that both Redefine’s Wolf Cesman and Marc Wainer would provide a continued contribution to Hyprop.

But on Tuesday, retail-focused property company Hyprop announced it had given three months’ notice of termination of its consultancy agreement with Redefine following the recent resignation of Mr Cesman as joint CEO of Redefine.

Mr Cesman also resigned from the Hyprop board with immediate effect. Redefine is a significant investor in Hyprop.

“With Mr Cesman’s departure, we have agreed to renegotiate the role that Redefine plays and the fees that would be earned from Hyprop,” Mr Wainer said.

“We are excited about the prospects of the new agreement, because it could provide the opportunity to earn more than the fixed consultancy fee in the 2011 financial year.”

By next year, Redefine would have earned R15m from the remainder of the contract.

Mr Wainer said that subject to the competition authorities’ approval, Redefine could own more than 50% of Hyprop by the start of the 2011 financial year.

“Any savings by Hyprop as a result of the termination of this contract will translate into increased distributions for all Hyprop unitholders, and therefore Redefine, as a majority shareholder, will benefit”.

He said in light of this, the net effect on Redefine should be only about R7,5m. “However, subject to the successful conclusion of our current negotiations, Redefine would most likely still be earning fees from Hyprop, but on a different basis.”

Redefine has concluded an agreement with Coronation Asset Management to acquire 19,68- million Hyprop linked units for an aggregate consideration of R984m.

The acquisition is subject to approval from the South African competition authorities and Redefine unitholders.

If approval is received, Redefine’s stake in Hyprop would increase from 33,3% to 45,2% and this would trigger a mandatory offer to the remaining Hyprop linked unitholders.

But analysts have questioned whether Redefine could afford to buy Hyprop.

Catalyst Fund Managers investment manager Paul Duncan said he believed Redefine should not be utilising capital to acquire assets that could already be accessed by unit holders by virtue of their investment in Redefine.

Last modified on Tuesday, 28 January 2014 10:39

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