CBS Property Portfolio acquires R600 million prime properties and gains a strategic partner

Posted On Wednesday, 12 April 2006 02:00 Published by
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CBS Property Portfolio has acquired 12 prime properties for R616 million driving CBS’s property assets above R1.7 billion, with 47 properties covering a gross lettable area (GLA) of 270,842m2.

CBS Property Portfolio has acquired 12 prime properties for R616 million driving CBS’s property assets above R1.7 billion, with 47 properties covering a gross lettable area (GLA) of 270,842m2.

The properties consist of quality office buildings, mostly with long triple net leases, the bulk of which expire between 2011 and 2014, with an effective forward yield of 8.44% and an average rental escalation of 10.2% per annum.

“These acquisitions will enhance the quality of CBS’ property portfolio in addition to the long-term sustainable growth of the company and allows CBS to provide investors with growth in income and capital over the medium to long term,” notes CBS  director Derek Greenberg.

He elaborates that the acquisitions increase the critical mass of the portfolio and the high annual rental escalations add to the above average sustainable growth in distributions to CBS linked unitholders. The deal has been structured to be immediately yield enhancing for CBS and represents good earnings growth.

A year ago CBS owned  property assets exclusively in the Western Cape. As a result of its recent acquisitions and its current deals, 53% of its property portfolio by (GLA) is now located in Gauteng with 31% in Cape Town and the remaining 16% in KwaZulu-Natal.

CBS has further swung its portfolio in favour of commercial property, which now represents 50% of the portfolio’s GLA, at a strategic point in the property cycle as office occupancies and rental levels are on the increase. The remainder of the portfolio comprises 38% retail property, 8% industrial property and 4% residential property.

The acquisition includes Jowell Glyn & Marais House in Sandown, the UUNET building in Gallo Manor, and a portfolio of five properties from Deventon located in Midrand comprising Birchwood Court, Royal Palms, Waterfall View & Cresent, Waterfall Close and Waterfall Edge.

A portfolio of five properties from Zenprop was also acquired including Sun International in Sandown, Sita in Sunninghill, Bristol-Myers Squibb in Bedfordview, the South African Revenue Services building in Alberton and Palm Grove in Randburg.

In addition to the Zenprop acquisition, CBS will embark upon an innovative strategic development alliance with Zenprop Property Holdings

The deal secures CBS the first right of refusal, for a period of five years, on certain properties which Zenprop elects to offer for sale to the market. Accordingly, during the same period, Zenprop acquires the first refusal to the exclusive re-development of properties in the CBS portfolio.

“Zenprop is South Africa’s pre-eminent national developer and this formal relationship positions both parties optimally for future growth in a market of strong demand for space and a keen appetite for property investment,” said CBS director Martin Ettin. “It also secures development expertise with a partner with interests aligned to CBS and this is a mutually beneficial cross pollination of intellectual capital.”

Gavin Klerck, who drives CBS’ development division, which is already fully involved in a number of redevelopments of existing properties, believes that this strategic alliance will place CBS at a strong advantage when pursuing various opportunities to grow its property portfolio and income streams.

“CBS’s properties provide unique opportunities for redevelopment and are wonderfully positioned. We believe that Zenprop can certainly add value to the portfolio, unlocking potential and bringing the portfolio to full value,” said Zenprop director Rodney Weinstein. Derek Greenberg and Martin Ettin are long-time business associates of Zenprop’s Rodney Weinstein and Avin Lieberman.

In part consideration for CBS’ acquisitions, there will be  a vendor placing of CBS linked units amounting to 82.5% (R508 million) of the purchase consideration, of which approximately R413 million will be placed privately by CBS and the remaining R94 million is to be retained by the vendors. The issue price of 787 cents per linked unit represents an average forward yield of 9.36% for the period 1 August 2006 to 31 July 2007. CBS has strong support for the acquisitions with in excess of 65% of all current unitholders having confirmed their approval.

Since its listing on the main board of the JSE Limited in November 2005, CBS has outperformed the PLS index and All Share Index with capital appreciation of approximately 30% from the initial issue price of 675 cents per linked unit. On an annualised basis, CBS has traded approximately 35% of its linked units in issue.

“CBS intends to unlock even further value for its investors through proactive interest rate management of debt funding and is currently investigating various financial structures in this regard,” explains CBS financial director Sean Mackay.

~ Ends ~

Issued on behalf of CBS Property Group:

Gary Fisher

T: 021 426 1880       C: 083 450 2222

Martin Ettin

T. 011 215 6440         C. 083 325 1463

Derek Greenberg

T. 011 215 6440       C.082 552 7244

Sean Mackay

T. 021 426 1880       C.083 440 3444

 

By Marketing Concepts:

Sandy Davey / Bronwen Noble

T: 011 880 2213      

C: 083 453 6668 / 082 855 434

 


Publisher: CBS Property Group
Source: CBS Property Group

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