Listed property company SA Reit has decided to pull out of a transaction that would have seen the company acquiring properties from Super Group for R918,2m.
CEO Arnold Maresky said yesterday the company was in a healthy financial position and that the board of directors had decided against the transaction because they did not want to “expose the company to any undue pressure”.
Maresky also said one of the banks that would have provided funding for the transaction “at the last minute decided to pull funding on the deal”.
“This is a property industry norm at the moment. A lot of banks are pulling in the reins on funding in line with their international counterparts,” he said.
Last week SA Corporate Real Estate Fund said its R636m black empowerment deal with Wipken Trust collapsed because of price weakness.
Maresky said SA Reit “felt it was prudent in a rising interest rate environment not to expose the company to any undue economic pressures”.
The deal would have been funded with the issue of units, as well as cash.
SA Reit had borrowings of 23% of total assets. The Super Group transaction would have increased its borrowings to 60% of total assets.
“We felt uncomfortable with exposing the company to those debt levels in this environment.”
Maresky said that placing equity or issuing units in the current environment was also “proving difficult” because of unit price volatility.
Keillen Ndlovu, co-head of Stanlib Property Franchise, said banks were “tightening their funding requirements or increasing funding margins” after the global credit squeeze.
“SA Reit unfortunately, seems to be have become a victim of this,” said Ndlovu.
“The gap between physical property yields and funding rates is widening, due to higher interest rates and increased margins, making it tough for property companies to fund acquisitions using debt. At the same time it is difficult to use the equity funding route given the current volatile unit prices.”
Macquarie First South property analyst Leon Allison said “one could see some property deals not happening as a result of tighter funding”.
