Marriott warns Hyprop unitholders

Posted On Wednesday, 08 June 2005 02:00 Published by eProp Commercial Property News
Rate this item
(0 votes)

Property group Marriott, which manages SA Retail Properties, has launched a new defensive action in its battle to stop a takeover of SA Retail by rival Hyprop Investments.

Simon PearseMarriott CEO Simon Pearse said yesterday that among other issues the variable debt funding Hyprop would use for the SA Retail acquisition would expose Hyprop unitholders to income risk.

Hyprop is offering R8 in cash for every SA Retail unit, or one Hyprop unit for every 2,7 SA Retail units.

Pearse said Hyprop had assumed a cost of funding of 9%, but this was a variable and not fixed rate and raised the question of the risk to income if interest rates were to rise.

He said market commentators were expecting interest rates to rise over the next two to three years.

Pearse said Hyprop unitholders should also be concerned about the “pricing risk” of the transaction.

He said that from February 1 to May 31, Hyprop’s unit price was up 25%, against a sector average of about 10%, and Hyprop now had the lowest yield of all property funds, at 6,9%.

Pearse said this low yield could be justified in the short term because of Hyprop’s recently reported earnings growth of 16,4%, but such growth was unlikely to continue.

Colin Young, property sector head at Old Mutual Asset Management, said that the group’s official forecast was that there would be a reduction in interest rates of a full percentage point in 2007, barring unforeseen shocks.

He also said that if there was a merger of Hyprop and SA Retail, and the resultant company carried a slightly lower rating than Hyprop did currently, it was unlikely any “derating would be material”.

Hyprop MD Pieter Prinsloo hit back at Marriott, saying it had “no insight” into Hyprop and so was “not competent to express a view” on it. “Their opinions contradict the SA Retail board and their advisers, who have said in the circular that the transaction is fair and reasonable for SA Retail unitholders.”

Prinsloo said most SA Retail unitholders canvassed had indicated they would accept the offer of Hyprop units, and “very little additional debt” would be required for the transaction.

Last modified on Wednesday, 07 May 2014 11:17

Most Popular

Should you rent or buy your business premises?

Jun 23, 2022
Malusi Mthuli_FNB
This is a question that most business owners will face at some point in their journey.…

April 2022 Hotel Accommodation Income Statistics continue to show a very weak picture compared to pre-lockdown times.

Jun 23, 2022
Hotels Monthly Income 2022
The StatsSA release of April 2022 preliminary monthly tourism statistics show the Hotel…

South Africa’s inflation exceptionalism: can it last?

Jun 23, 2022
Carmen Nel
South Africa is often seen as a high-beta play, be it regarding financial market risk…

Hyprop continues to reduce debt and reposition its portfolios in SA and EE

Jun 30, 2022
Skopje City Mall Playground
Hyprop, which manages dominant retail centres in mixed-use precincts in key economic…

Vaal Mall rolls up its sleeves for pothole repairs

Jun 30, 2022
Vaal Mall crew busy repairing the various potholes making easier access to the Centre.
Vaal Mall is showing their commitment towards their community by stepping up to repair…

Please publish modules in offcanvas position.