Growthpoint Properties Limited, the largest JSE-listed South African property company, is to purchase a portfolio of eight prime properties from Business Connexion (Proprietary) Limited, a subsidiary of Business Connexion Group Limited, for an aggregate purchase consideration of R380 million, at a forward yield of approximately 8.5%.

The properties comprise a gross lettable area of 48,065m2 in prime business locations throughout South Africa. All are fully let, with Business Connexion as the only or major tenant in all the properties except one. Two of these properties are situated in Midrand, Gauteng, three in Durban, and one in each of Pretoria, Port Elizabeth and Cape Town.

Business Connexion will lease back the properties from Growthpoint at market related rates on tenant-specific custom structured triple net leases for periods varying from three to ten years with a weighted average lease period of seven years.

Through this transaction Business Connexion has joined the increasing number of companies, for which property holding is not a core business, that are disposing of their premises to professional property owners such as Growthpoint.

Kerry Millar, director of Real FMG which provides real estate advice to corporate users of real estate, explains that on examination of the BCX portfolio an opportunity was identified which allowed the Business Connexion real estate strategy to be more closely aligned with its corporate strategy whilst simultaneously releasing meaningful amounts of capital.

“Three possible purchasers were short listed for the transaction and Growthpoint was able to provide the necessary flexibility, notably in terms of lease length and Business Connexion’s occupation in the multi-tenant buildings, the right price and rental structures. Growthpoint provided the most competitive overall packaging,” explains Millar.

According to Alan Farthing, Financial Director of Business Connexion Group Limited, the company’s decision to sell its properties supports the group’s business strategy. 

“We will remain focused on our core business which is to deliver a market leading outsourced IT solution to the business community and have opted to exit from property holding,” he says.

Farthing confirms that the sale of the properties will enable Business Connexion to restructure its rental terms on a more commercially efficient basis that will result in an improved cash flow on a monthly basis.   

“The sale permits the group to settle its outstanding debt on the Business Connexion properties and retain about R130 million in cash,” he says. 

The proposed disposal is subject to approval by the relevant regulatory authorities including the Competition Commission.

The acquisition of the Business Connexion properties reaffirms Growthpoint’s objective of investing in quality, diversified physical property assets that are underpinned by long term, sustainable, escalating income streams. 

“Through this transaction Growthpoint has acquired a prime property investment, a blue chip tenant and a valuable business partner,” notes Rudolph Pienaar, Growthpoint Properties Limited Commercial Fund Manager.

The acquisition of this property portfolio will increase the size of Growthpoint’s commercial portfolio from approximately R5 billion to R5,4 billion.

“With office vacancies continuing to fall, the commercial sector is poised for growth in the short to medium term and Growthpoint will continue to look for investment opportunities in this sector and grow its position as the preferred property partner to leading South African businesses, without compromising on quality,” says Pienaar.

The acquisition of the Business Connexion properties will increase Growthpoint’s total asset base from R11,5 billion to approximately R11,9 billion.

~ Ends ~

Issued on behalf of:                          
Growthpoint Properties Limited
Norbert Sasse: CEO
Tel.                  011 286 7306
Cell  083 632 1599

Business Connexion  (Proprietary) Limited
Alan Farthing
Group executive: finance and administration
Tel.                  011 266 6066
Cell                 082 551 0079
                                                           
Kerry Millar
Real FMG
Cell                   082 450 3926

By:                                                      
Marketing Concepts
Bronwen Noble/ Sandy Davey
Tel                  011 783 0700
Cell                 083 453 6668  (Sandy)
Cell                 082 855 4349 (Bronwen)