The feeding frenzy begins

Posted On Thursday, 18 April 2002 10:31 Published by eProp Commercial Property News
Rate this item
(0 votes)


South Africas big three property unit trusts (PUTs), Grayprop, Martprop and Sycom, are preparing to launch a joint take over bid for listed property loan stock (PLS) fund Primegro. It could be the first of a number of such deals in the property sector this year.


Property-Housing-ResidentialWere aware of the rumours but have not had any approach and do not expect one, so its business as usual, says Primegro joint MD Martin Ettin.

Fund managers wont comment. Their funds are in a bind because the yields of PUTs and PLSs rise they now average 15% with the general interest rate and make it impossible to pay for properties by issuing paper. Prime offices yield less than 13% at present. Paying cash for them will reduce dividend yields.

So they must now try to buy up other PUTs and PLSs to keep growing. And they get a double bonus cheap property because most fund market caps are at a discount to net asset value (NAV), and boosted yields because the smaller funds have higher cap rates.

The market caps of funds in the sector are low and their shares poorly traded, making them vulnerable to take over. Primegro, which traded only 7% of its issued shares last year, is particularly illiquid. Two-thirds of its shares are held by the public investment commissioner (17,5%), Sanlam (17%), Richway (15,5%), Investec and Old Mutual (11% each).

Primegro was structured at a time when property was out of favour, says Ettin, and the sectors share prices volatile: Stability was more important than liquidity then.

But the temptation to swap Primegro for shares in the three biggest PUTs could be irresistible. All three are well traded with market caps of more than R1bn. They may well strip Primegros assets, which will give them a R2,4bn retail portfolio at a 33% discount to its R8/share NAV. (Assets include Kolonnade and Brooklyn Mall, two Pretoria retail centres recently in the news when parts of them collapsed.)

Some shareholders may not see the discount as fair exchange, and Primegro management could seek a white knight to counter the bid.

Last modified on Monday, 28 April 2014 18:29

Most Popular

Bentel Associates International scoops two awards at The African & Arabian Property Awards 2020

Oct 06, 2020
Marriott Hotel
The African Property Awards is a novelty awards scheme instituted to recognize and…

Inospace acquires its 26th business park

Oct 06, 2020
Rael Levitt
The record-low interest rate and favourable lending environment has spurred Inospace, a…

Iconic Sandton building given a facelift

Sep 23, 2020
3 Alice Lane Building
Since 2016 the City of Johannesburg has embarked on an ambitious programme to renovate…

Unprecedented buying activity in East London and Port Elizabeth housing markets

Oct 06, 2020
PE Sardinia Bay  smallholding
Since June this year, residential property sales have escalated in the Eastern Cape hubs…

Attacq’s client-centric approach stands it in good stead

Sep 22, 2020
Deloitte Waterfall City Aerial picture
Attacq Limited (“Attacq”), The South African-based REIT today announced its financial…

Please publish modules in offcanvas position.