Property loan stock company Paramount Property Fund (Paraprop) will sell 26% of its shares to a newly formed empowerment company led by Tokyo Sexwale's Mvelaphanda.

The agreement will involve the issue of a new category of Paraprop shares to the company, owned 75% by Mvelaphanda and 25% by a broad-based empowerment partner.

The empowerment company will have the right to convert the new shares into Paramount linked units later and nominate directors to Paraprop's board.

Paraprop MD Rodney Squire-Howe said the transaction would bring Mvelaphanda's proven skills and abilities into Paraprop's business.

Paraprop's portfolio is valued at around R2,2bn, with properties situated in the Cape and other major metropolitan areas in SA.

The fund was launched in March 2001.

The group's board has indicated that it is aiming at an 8% increase in distributions for the year ending October 2006.

Mvelaphanda Group Deputy CEO Yolanda Cuba said the investment in Paramount would increase the group's exposure to the property sector.

Squire-Howe said the deal was in line with the terms of the newly signed property charter, which sets out the agreed targets for empowerment compliance and aims to place 25% of the property sector in black hands in five years.

Shares in Paraprop rose slightly to R7,35 on news of the transaction and closed at R7,30, unchanged from Friday's close.

Before the charter was signed in March, about six listed property companies and funds had concluded black empowerment deals.

It was anticipated that the charter would prompt a rush of black empowerment deals once the requirements were formalised.

There are 30 property funds listed on the JSE, with a total market capitalisation of more than R50bn.

In October 2004, Cyril Ramaphosa's Shanduka Properties acquired a 50,4% stake in Property Fund Managers.

In August last year, the largest property fund listed on the JSE, Growthpoint, concluded a deal with a consortium formed by former justice minister Penuell Maduna and former director of public prosecutions Bulelani Ngcuka that saw the two buy a 14,2% stake in Growthpoint worth R1bn.

Pangbourne said in October that it had also concluded a R125m black economic empowerment deal.

Another likely candidate tipped to enter into a deal is Vukile Property Fund.

Hyprop Investments formed a new black empowerment property fund with Vunani Properties at the end of last month.

The newly-formed Vunani Property Investment Fund is 50,2% owned by Vunani Properties, with Hyprop holding the remaining 49,8%.

Hyprop said it was investigating an equity empowerment deal for itself in future.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge