PIC's property play

Posted On Thursday, 19 July 2007 02:00 Published by eProp Commercial Property News
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The Public Investment Corporation (PIC) has its sights set on becoming a major player in the R100bn listed property sector - which will no doubt prompt plenty of corporate action from the Government-owned pension fund manager over the coming months.

Wayne van der VentThat follows PIC's takeover bid for Cape-based property fund CBS Property Portfolio earlier this year, which now seems little more than a formality. PIC surprised the market by offering a generous 1200c/share in cash per linked unit to CBS shareholders in March, outbidding other suitors, including Madison-managed Redefine, that were also vying for control of CBS. Redefine's offer was clearly no match for the cash-flush PIC.

The Competition Commission approved the PIC/CBS deal earlier this month and the Competition Tribunal is expected to rubber stamp the application by 17 July. That will allow PIC to exercise its mandatory offer to CBS minorities.
 
PIC property boss and ex director of Futuregrowth Asset Management Wayne van der Vent says just over 90% of CBS shareholders have already indicated that they'll accept PIC's offer, paving the way for a delisting.
 
PIC already owns what's believed to be the largest portfolio of township and rural shopping centres in SA. It also has stakes in a number of super-regional malls in upmarket, urban areas including Sandton City and Cresta (Randburg).

A successful acquisition of the R2,3bn portfolio of CBS will push the value of PIC's property holdings to a hefty R11bn, placing it in the company of SA's largest commercial property owners (non-listed) - the likes of Old Mutual Property Group, Liberty Properties and RMB Properties.

PIC will not only acquire the underlying property assets of CBS but also the group's asset and management team, a staff of 61. CBS director and co-founder Gary Fisher will head the fund in its new (unlisted) guise under PIC's banner.
 
Van der Vent says the CBS deal is part of a much broader expansion plan. PIC is determined to grow its property portfolio at least six-fold over the next five years. Van der Vent is aiming for a R70bn portfolio by 2012, which should see property as a percentage of the more than R600bn in total assets under PIC management surge from around 2% to between 8% and 10%.

While CBS will be used as a platform to expand PIC's directly held property portfolio - with the focus on premium grade offices - much of the growth will come via the listed sector.

Van der Vent says that's currently the easiest route through which to grow a portfolio. PIC has already built up sizeable stakes in a number of listed property stocks. Earlier this year, it bought Hyprop's 46% stake in SA Retail for R1,135bn. The deal will see PIC effectively owning 30% of Old Mutual-managed SA Corporate Real Estate Fund once the latter's proposed merger with sister fund SA Retail is finalised. Van der Vent will join the board of the merged entity.
 
When the market dipped end-May/early June, Van der Vent also upped PIC's stake in other property counters in an R800m buying spree. PIC now owns 5% of sector heavyweight Growthpoint, 10% of Acucap and 4% of Emira. It's also taken small positions in Diversified and Resilient.

Van der Vent says PIC wants to own 8% to 10% of SA's entire listed property sector within 12 to 18 months. And he'll go the takeover route if necessary, as was the case with CBS. He believes there are still a few smaller funds, such as Ambit, Acucap and Atlas, that are "ripe for the picking".

Van der Vent is clearly not averse to ruffling the feathers of the sector's big guns, a handful of players that control more than 60% of the sector by market cap. These include Marc Wainer and Wolf Cesman's Madison Property Fund Managers (via ApexHi, Hyprop, Redefine), Investec Property Group (Growthpoint), Des de Beer's Resilient group (Resilient, Diversified and Capital) and the Pangbourne stable (Pangbourne, iFour, Siyathenga and Calulo).

Says Van der Vent: "SA's property sector needs a bit of a shake-up, and we have the skills, competence and financial muscle to outmanoeuvre many of the traditional players." However, he stresses that PIC's expansion drive needs to be conducted in a measured way. "PIC favours a friendly approach and would like to avoid hostile action. We're mindful of the fact that institutions are loath for us to take more property funds out of the market, as they already have a limited pool of investment opportunities."

Last modified on Thursday, 24 April 2014 09:57

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