The acquisition will be funded by the issue of 37-m ApexHi A units and 37-m B units - issued at a price of R20 per combined unit - and R236-m in cash, which will be used to settle all mortgage bond liabilities in Prima.
Prima shareholders will receive 5,9 ApexHi A units and 5,9 ApexHi B units for every 100 units they hold. At yesterday’s closing prices of ApexHi units, that valued the Prima shares at R128,02 per 100 shares of 128 cents per share, a premium of five percent on yesterday’s closing price.
Gerald Leissner, ApexHi CEO, says the Prima portfolio is similar to ApexHi’s portfolio, and meets the company’s acquisition strategy criteria of buying to enhance revenue.
The portfolio comprises retail, commercial and industrial properties, located throughout South Africa, with very few located in the inner cities of the major metropolitan areas.
The property portfolio is well let with predominantly national and regional A-grade tenants, says Leissner.
“The merger of the two portfolios will result in cost savings, as the Prima properties are located in areas where ApexHi already has offices and teams that manage the existing portfolio.”
In addition, he says, property managers Broll Property group currently manages both portfolios, which should ensure a smooth transition.
Leissner says the deal will have positive spin offs for both ApexHi and Prima unit holders.
“The acquisition of 164 properties boosts ApexHi’s portfolio value to over R5-bn, with a gross lettable area of 2,3-m2. The vacancy in the combined portfolio will drop to approximately 10%.”
Leissner adds that the acquisition will also swing the portfolio in favour of retail, increasing ApexHi’s retail holding from 39% to 43%, which is in line with ApexHi’s stated objectives to increase its retail weighting in the portfolio to benefit from the current environment.
Offices will reduce from 43% to 39%, and industrial increases marginally to 17%.
“Prima unit holders stand to benefit from becoming part of a much larger property company where higher than average trading volumes, provide greater liquidity to shareholders,” says Leissner.
Wolf Cesman, director of Prima Property Trust Managers, says this exchange will expose Prima unitholders, through ApexHi units, to a diverse property portfolio valued at R5-bn and the benefits of economies of scale and cost savings due to synergies between the Prima and ApexHi property portfolios.
Angelique de Rauville, MD of Provest, says this is a good diversifying transaction that stands to benefit the unitholders of both companies.
“The acquisition is also good for the sector because it will lead to further consolidation in the sector,” says De Rauville. The listed property sector has been battling to attract institutional and international investors because the funds are small.
Leon Allison, an analyst at First South Securities, says it makes sense for some consolidation to take place in the sector.
“Physical properties have become expensive and it is now difficult to acquire direct property and the alternative is to buy small listed funds,” says Allison.
Allison says ApexHi is a buy because it is relatively cheap and has attractive yields compared to its peers. De Rauville agrees that ApexHi is cheap and therefore a buy.
But despite this positive news, ApexHi’s share price dipped from R11,10 yesterday to R10,89 on the day of the announcement.