Outwitting the Kebbels

Posted On Thursday, 29 August 2002 02:00 Published by
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Redefine ups the stakes on Roger and Brett, but how will RL Props' minorities fare?
By Ian Fife

Has Corpcapital got the better of the Kebbles - father Roger, son Brett and associates - and, if so, how did it do so?

It looks as if the Kebbles' listed property loan stock company, Rand Leases Properties (RL Props), is about to sell its prize properties to Corpcapital's property loan stock group, Redefine.

Could the reason be the whopping R8m directors and RL Props management drew in bonuses and share options last year, up from R1,6m in 2001?

According to the annual report to June 2001, management and executive directors exercised options on 4,836m shares granted at 35c in 1998. they were sold for R1,17/share, netting R3,177m, mainly to the Kebbles. Bonus payments jumped from R356 000 to R1,736m and nonexecutive directors got R400 000.

Including their share of the R11m annual unit-holder payout, the Kebbles and management raked in nearly R14m, leaving R5m for the rest of the other RL Props minorities shareholders.

This is all justified by the increase in the value of the portfolio from R37m to R376m in the past year, says CEO Grant Fischer, and the 67% outperformance of the property loan stock index since February 2000.

But some shareholders believe that this was just the opportunity for which Corpcapital's property deal maker, Marc Wainer, had been waiting, And now Redefine will likely end up with the properties in a portfolio that RL Props bought less than a year ago.

Redefine was outbid by RL Props in a battle to buy a R205m Johannesburg (mainly Bryanston) portfolio of shopping centres and offices. RL Props took more than R142m in debt and issued R25m in linked units to the sellers.

The balance of R38m was to be paid in linked units in March and September this year. The Kebbles took up 52% of the new linked units issued.

Then Redefine appeared to turn its attention to acquiring RL Props. Its chance came when Angelique de Rauville of Provest, a Durban investor which holds 25% of RL Props, learnt of the RL Props bonuses and share options.

Redefine was able to buy Provest's share. 'This is because I was dissatisfied with the company's direction, including the share participation plan,' says De Rauville. 'It was unacceptable.'

Since then Redefine has been buying up shares as they were released for sale. Now, the Kebbles face the spotlight on their RL Props payouts.

Some shareholders speculate that the Kebbles have accepted defeat and agreed that Redefine can buy the investment properties. A sale would take RL Props back to being a land developer.

'My concern is what price Redefine pays for the properties,' says one shareholder. 'I want to see that they look after the minority shareholders.'

Brett Kebble denies he has been forced into the deal. He confirms that Wainer initiated the proposed deal, 'but what he proposed made absolute sense when we geared high to buy the properties and interest rates had turned. Redefine has a low cost of capital and we can concentrate on our developments, which are high-yielding.'

Wainer says any deal will be at 'fair value', but declines to comment further because of the cautionary in place. The financial turmoil of the past year makes it likely that Redefine will get the properties for less than RL Props paid.

Simon Pearse, MD of Marriott Asset Management, whose funds own about 10% of RL Props, says: 'For us it will be neutral because we hold Redefine as well. We just hope the sector can build respectability after this.' Corpcapital is taking opportunities as they come, he notes. 'But it is disappointing that these sorts of bonuses are being taken .'

'It was a smart move by Redefine,' says De Rauville. 'It could also be good for RL Props shareholders if they do buy the properties. It would give them a wider spread of properties through the Redefine holdings.'

Financial Mail

Publisher: Financial Mail
Source: Financial Mail

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