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Vukile terminates bid to acquire five shopping centres

Posted On Wednesday, 12 June 2013 08:10 Published by eProp Commercial Property News
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While an analyst believes this may not necessarily be the result of recent listed property price declines‚ general price weakness in the sector has made many potential property deals less attractive than before.
Vukile Property FundVukile announced in April that it had entered into negotiations for the acquisition‚ either alone or together with a third party‚ of the Wingspan property portfolio.
Blue-chip retail acquisitions have become a rarity in the sector‚ with property players looking to hold on to their assets that are in demand.
The Wingspan portfolio‚ which is Retail Africa’s regional shopping centre fund‚ houses the Irene Village Mall‚ Village Mall Hartbeespoort‚ Weskus Mall‚ Westwood Mall‚ and Fountains Mall.
The deal would have pushed Vukile’s retail exposure to about 60% of its total portfolio — which is the diversified fund’s target for retail. Vukile was unable to comment further on Tuesday.
Grindrod Asset Management chief investment officer Ian Anderson said given the significant share price weakness in the listed property sector over the past few weeks‚ the sector would find it “increasingly difficult to proceed with yield-enhancing acquisitions”.
This was especially relevant in instances where substantial equity funding would be used on deals. Anderson said that generally‚ “doing deals now is significantly more difficult because the value of their paper is so much lower”.
Across the industry‚ some deals would now look poor compared to prior to the sector’s price declines which began on May 21. An issue was now what price paper would be issued at‚ “and therefore what dilution are investors going to take” if companies bought properties on yields “substantially below the yield on their paper”.
Anderson said Growthpoint Properties’ R2.5bn equity raise occurred on the day that the listed property sector began declining. “If you go back in history and look at when the global property market collapsed in 2007-2008 — it was preceded by an absolutely enormous amount of equity issued.”
When companies raise large amounts of capital because it is cheap to do so as it was very cheap to do so‚ “that sends a very strong signal to the market that things are now overvalued”. Anderson said that on the back of the significant price declines it would be “very difficult” for the sector to complete deals which did not dilute earnings.
Last modified on Friday, 18 April 2014 09:21

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