The best-performing property stock of last year Fortress Income Fund, yesterday announced its firm intention to acquire all the listed shares of Capital Property Fund in the biggest transaction of the year in the sector. If the deal is concluded, Fortress will become the JSE’s third-biggest South African-based property fund by market capitalisation, worth about R44.5bn.

The new fund will be a more liquid offering to South African investors. Fortress focuses on retail centre assets situated near transport nodes such as taxi ranks, and bus and railway terminals. This market has become saturated in recent months and Fortress has been looking to diversify its business.

By buying Capital, it acquires the largest proportion of listed industrial property in SA. CEO Mark Stevens said the Fortress fund after the takeover would have a platform to invest directly in property abroad, which would provide investors with protection against a weak rand.

“Many large South African property funds are investing abroad because they can acquire good assets there relatively cheaper than they can here. Offshore assets also provide protection against a weak rand, so we can develop a more varied offering to investors.”  Mr Stevens said the bigger fund would also gain larger economies of scale and better credit ratings, making it easier to get funding for projects.

Fortress has an A and B structure. Fortress has offered to acquire all the issued shares of Capital that it does not already own in exchange for Fortress A shares and Fortress B shares, by scheme of arrangement, at a swap ratio of 0.31750 Fortress A and 0.31750 Fortress B shares for each Capital share, based inter alia on 1,772,624,329 Capital shares in issue.

Mr Stevens said he was confident that shareholders would accept the scheme of arrangement. 

Source: BD