Century City buyout debate

Posted On Thursday, 21 June 2001 03:01 Published by
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The group has yet to decide on an offer to minorities in developing firm Monex

The group has yet to decide on an offer to minorities in developing firm Monex

CENTURY City Centre, a multibillion-rand commercial development in Cape Town, is again under the spotlight as financial services group BoE considers buying out minorities in the centre's developer, Monex.

The question is how much BoE is likely to offer Monex minorities, given differing views on how to value the property developing company. Monex holds a 34% stake in Century City, which is made up mainly of Canal Walk, the largest shopping centre in Africa, valued at R1,5bn.

Launched in December last year, Canal Walk's prospects have been of major concern to the investment community.

The dominant view has been that it was launched in an already overtraded market and is too big for the Cape Town market. This will have to be taken into account as BoE ponders the pricing of its consideration to buy out minorities in Monex.

Indications are that if BoE makes an offer, it will be about 150c a share, reflecting a discount to the value of Monex's underlying assets.

Such an offer would be at a premium to market value but still disappointing to minority shareholders who have subscribed for two rights issues at a price higher than 200c in the past few years.

Monex CEO Martin Wragge does not appear worried by the concern about the future of Canal Walk, saying that the performance of the centre has been ahead of budget.

Wragge says the centre is on track to exceed R1bn in turnover for the year, having recorded 10million visitors in the six months to the end of April, and looks set to exceed the first year target of 16-million visitors. At the end of April more than 85% of the total 124000m² of retail space in the centre had been let.

There is, however, no simple answer to the question of the pricing of a possible buyout of minorities by BoE. Monex's future is a function of land sales, which are in turn susceptible to the vagaries of the market, he says.

The group is sitting on 140ha in Century City and 11ha in Tyger Falls. As the group sells 30000m² to 40000m² of land a year, this represents 15 to 20 years of stock. 'This assumes that we will continue to capture a disproportionate share of the total new development in the Western Cape region,' says Wragge.

He says this, along with the debt issue, will have to be carefully considered by shareholders if and when the BoE offer is made. The group's debt is R281m, which is said to be R100m more than acceptable levels.

Wragge says Monex could eradicate its debt by selling its entire stake in Century City. 'This would, however, be dependent on finding a buyer at a time when the centre is arguably not quite ready for sale.'

Observers have said it is too soon and unfair to start judging the performance of Canal Walk, which was only launched in December, and that it would be unfair for a minority shareholder to be forced to sell now, before Century City matures.

Publisher: Cape Business News
Source: Cape Business News

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