Listed property unit trust Capital Property Fund said on Friday it had concluded an agreement to acquire R410m worth of properties from the Fedbond Participation Mortgage Bonds.

Capital MD Barry Stuhler said the transaction, which is still subject to regulatory approvals and a due-diligence exercise, would boost the fund's asset base from about R1,5bn to about R1,9bn.

"It's a nice mix mainly of industrial property in Gauteng, offices in Sunninghill, offices in Durban, and a small amount of retail in the Cape," said Stuhler.

"All the (listed) property funds are looking to bulk up their portfolios and most of the them have been chasing this portfolio."

Stuhler said Capital was busy conducting a due-diligence exercise to "verify the income and expenditure figures supplied by Fedbond".

He said Capital would use its unutilised borrowing facilities for the acquisition. The fund's current borrowings equate to 6% of its total assets.

In terms of the legislation governing property unit trusts, Capital can borrow the equivalent 30% of total assets.

The Fedbond property transaction will increase Capital's borrowings to about 25% of total assets. Stuhler said most of the properties in the portfolio were "fairly new and well located".

"There aren't any portfolios of this size offered in the market at the moment," he said.

The Fedbond portfolio had vacancies of about 5%, said Stuhler.

He said Capital had historically been quite evenly spread between the offices, industrial and retail property sectors.

"The Fedbond portfolio consisted of mainly industrial properties. It is a class we would like to concentrate on. We believe it will be a consistent performer in the medium to long term."

Stuhler said the portfolio would "complement the existing sound Capital portfolio" and should give the property unit trust "sustainable income and capital growth into the future".

Capital, which put in a solid performance over the past year, announced in February that its distributions surged 13,5% for the year to December.

Management at the time attributed the increase to an aggressive asset management policy. The policy included reducing operation costs, renewing leases at improved rentals and enhancing utility recoveries from tenants.

Capital also sold 46 buildings, which did not have the ability to sustain long-term growth, through the year to December.

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