By Joan Muller

Senior writer

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THE R1bn deal recently concluded between major listed player Growthpoint Properties and a high-profile empowerment consortium is expected to serve as a catalyst for other listed funds to get their black empowerment ducks in a row.

Until now property loan stocks (PLSs) and property unit trusts (PUTs) have been slow on the transformation front, with only three out of 26 listed funds – Capital, Spearhead and Calulo – acquiring a meaningful empowerment component.

The Growthpoint deal – whereby an empowerment consortium will acquire around 14% of Growthpoint’s total linked units in issue at a price of just over R10/unit – is the biggest empowerment deal to date in SA’s listed property sector.

Shortly after Growthpoint’s deal was announced, Pangbourne said that it’s in the advanced stages of discussions with empowerment private equity fund Yard Capital, which could see the group acquire 5% of Pangbourne’s units.

Others are apparently also negotiating with potential empowerment partners but have yet to conclude any deals. The listed sector, a dominant player in SA’s commercial property market with a combined market cap of close to R50bn, needs to comply with the recently drafted property transformation charter, which sets a 25% black ownership target within five years. The charter is expected to come into effect in January 2006.

Some argue that the 25% empowerment target may be easier said than done, as access to funding is a major stumbling block. There are also legal issues that could hamper listed funds’ efforts to comply with the charter’s ownership targets.

For example, legislation governing PUTs won’t allow the funds to buy back a pro rata portion of existing shareholders’ shares and issue those to new shareholders. So empowerment deals would have to be funded by issuing large chunks of new shares, forcing funds to bulk up portfolios.

Growthpoint CEO Norbert Sasse says that access to finance is an issue and could become even more difficult if yields in the listed sector continue to fall. Some funds are already trading at yields as low as 7% – while financing costs are generally between 9% and 10% (also see report on p 38).

Andi Tondi, chairman of the property charter’s steering committee, says that the Growthpoint deal proves that there are ways and means of funding large empowerment transactions. However, he concedes that easier access to funding would make it easier for the listed sector to reach transformation targets.

To that end the steering committee will meet financial services players next month in a bid to establish partnerships that could facilitate empowerment funding.