Old Mutual Property Group worth R32bn

Posted On Friday, 28 October 2005 02:00 Published by
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The acquisition of Marriott property businesses by Old Mutual Properties has amassed assets totalling 32 billion rand
The acquisition by Old Mutual Properties, a division of listed financial services giant Old Mutual plc (OML), of the property businesses of Marriott will create SA's largest property asset management company, provisionally known as the Old Mutual Property Group, with assets totalling 32 billion rand, according to the two property groups.

Revealing the details of the merger on Thursday, Old Mutual Properties managing director Ben Kodisang said it would be effective from July 1, 2005, and is still subject to Competition Commission approval. It involves the property fund management, listed property company management, property services and asset management business of Durban-based Marriott, while excluding Marriott Corporate Merchant Bank, which is the subject of separate negotiations.

The value of the deal is not being disclosed under the terms of a confidentiality agreement, but is less than the 500 million rand being speculated by the market, sources close to the deal said, given that this figure included the Merchant Bank. The purchase price was based on Marriott's earnings of 23 million rand for the year to end-June 2005.

Marriott can boast 20 billion rand in property related assets under management, of which 10 billion rand are in listed assets (including equity and real estate shares), 3.9 billion rand in third-party mandates and 5.3 billion rand in properties housed in listed property companies. At the same time, Old Mutual Properties has 12 billion rand in assets under management, comprising 8 billion rand in institutional property and 4 billion rand in listed assets.

According to Kodisang, the new group was set to become the "leading property force" in the country, as well as beyond its borders.

Marriott Asset Management and The Income Specialists will remain as a stand-alone business within the Old Mutual Group. Its activities will include management of Marriott unit trusts and the Old Mutual SA Quoted Property Unit Trust.

Kodisang said this set-up is consistent with Old Mutual's philosophy in the US, where Old Mutual Asset Management (US) has several investment house style brands. These include Dwight Asset Management, which specialises in fixed income funds and Heitman, which specialises in property asset management.

Another business unit within the Old Mutual Property Group will manage the listed companies - Martprop (MTP), SA Retail (SAR), Ambit (ABT) - and Oryx, as well as the Old Mutual institutional portfolios.

A further unit of the new company under Ian Watt as executive director, international operations, will continue the drive to build international business and to grow exposure beyond the substantial involvement in Saudi Arabia and India.

Third party service businesses will be housed in a new division to remove issues of conflict and also facilitate compliance with the requirements of the Property Charter. These will include property management, valuations and facilities management and the Office Suites Company, a provider of executive office services.

Also included will be operations focused on the retail property industry.

These are Point of Presence Communications, specialists in mall advertising, and Lifestyle Communications, which provides marketing and promotional services for retail centres.

Roddy Sparks, managing director of Old Mutual SA, said the acquisition was a key step in Old Mutual Properties' increased focus on asset gathering and asset management in addition to property management.

"Marriott has a unique focus on income management, a strong brand, and a good presence in its chosen niche markets. This transaction will result in significant synergies to grow assets and properties under management," Sparks observed.

Added Kodisang: "We are acquiring a large pool of assets in property management, with long-term strategic benefits. We are also gaining good skills and an efficient and tested revenue business model, with attributable earnings to 30 June 2005 of 23 million rand. All these factors will enable us to enhance our offering to clients and tenants."

Simon Pearse, CEO of Marriott, said Marriott would gain from the strengths of Old Mutual, one of which was its empowerment status that was bolstered by its broad-based black empowerment deal announced earlier this year.

"Apart from empowerment, Marriott will gain from the strength of Old Mutual's retail distribution network," said Pearse. "Greater exposure to the retirement funding market will be afforded by Old Mutual's corporate distribution capability. A further benefit is the growth potential flowing from association with Old Mutual's institutional portfolios."

"It's an exciting opportunity for both parties," concluded Kodisang. "We are looking to help redefine the property sector by co-operating with other major investment groups to firmly establish an investor friendly industry, a consistently attractive asset class offering a reliable, growing property income stream. We want to create truly large, liquid, listed property funds."

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