Presenter: Lindsay Williams  Guest(s): Estienne de Klerk 

After earlier denying corporate action, it now turns out that Metboard is getting hitched to Growthpoint in a deal that will be beneficial for their unit holders. With Metboard Properties executive director Estienne de Klerk

LINDSAY WILLIAMS: In November 2006 Classic Business Day spoke to Estienne de Klerk from Metboard Properties. We asked him about potential corporate activity, and then this is what he said then: “The rumour has done marvelously for our unit price, but at this stage there is nothing to announce - maybe watch this space.” We did watch that space - it’s now been filled. Estienne, what’s your reaction to what looks like the conclusion of this deal?

ESTIENNE DE KLERK: It’s obviously the fruit of a lot of work that has been put in behind the scenes - you put me on the spot in November 2006. Obviously at that stage we had just initiated some discussions with the Growthpoint team - we’ve knocked out a deal that I believe is marvelous for Metboard unit holders, they will be receiving several benefits from the transaction we believe, and we are quite excited about that.

LINDSAY WILLIAMS: Can you tell us about those benefits?

ESTIENNE DE KLERK: Yes, I think the obviously benefit was the capital premium that Growthpoint was prepared to pay in terms of the switch ratio - obviously that being a bit of a moving target. The deal was really done on the basis that Growthpoint was prepared to accept that Metboard unit holders - in terms of this transaction - couldn’t dilute their earnings. So the second benefit is then that obviously Metboard unit holders won’t dilute their 2007 earnings or distributions, which is very attractive. Usually with a transaction of this nature the larger company gets the enhancement, and the smaller company has to take a dilution - in this specific case we have managed to really structure a win-win transaction where the Metboard unit holders get a capital premium, they get no dilution, and Growthpoint still manages to have enhancements to their earnings

LINDSAY WILLIAMS: A big consolidation in any industry usually gets people thinking - some people say well it means you are at the top of the cycle, other people say the cycle actually still presents value. In terms of listed property on the JSE which do you think it is?

ESTIENNE DE KLERK: We honestly believe there’s still quite a bit of legs in this sector - obviously the interest rate environment prospects are reasonably stable, and if you look at the fundamentals in literally every one of the sectors from retail through to industrial, we are seeing growth in rentals coming through. So the fundamentals in property are marvelous at this stage, and those fundamentals are driving growing returns to unit holders. We’ve structured the deal on the basis that for Metboard it was quite difficult to grow the portfolio - to double its size wasn’t really an option for several reasons. The market doesn’t really have massive industrial portfolios out there - Metboard literally is the largest in the market. There is also a risk premium allocated to it - so when it competed with the likes Growthpoint and some of the other mixed funds out there, it always came second best when bidding on property. The deals that we have done was where we had good relationships and good referrals, and could really move quickly and secure the transaction before the big players came in with the big prices - so that’s the benefit for the fund. We ultimately felt that if the right deal came along it would be worthwhile for Metboard unit holders to consolidate into a larger company, and get exposure to retail and offices so if the cycle does turn for industrials they would get the benefit of the other sectors. They also get the benefit obviously of liquidity in their units, and an increased NAV in total.