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New iFour units should stop value dilution

Posted On Thursday, 16 May 2002 10:01 Published by
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Aim is to return value to shareholders

A DEFERRED issue of 6-million iFour linked units to property company iProp's shareholders should prevent the dilution of shareholder value caused by increased listed property yields.

IProp proposed the unbundling of its property assets into a new company called iFour in December last year, and the transaction initially offered 81 iFour units for every 100 iProp shares held.

But the increase in listed property yields in the past few months as a result of the two percentage point hike in interest rates this year forced changes on the initial proposed deal announced in December last year.

Last week's revised deal offers 46 iFour units for every 100 iProp shares held.

The difference between figures in the revised and the initial transactions is mainly accounted for by the exclusion of a portfolio owned by Onaghan Investments, which featured in the initial transaction.

To make up for the value lost as a result of an increase in the listed property yields, the issue of a tranche of iFour linked units being transferred to iProp shareholders has been deferred. Up to 25,1-million linked iFour units will be issued to iProp's shareholders before the iFour listing scheduled for June 10 and 6-million linked iFour units will be issued on March 15 2004.

IProp MD Anthony Diepenbroek said there was not much difference between the initial and the revised deal. 'The transaction will return value to shareholders and should reduce the discount to net asset value at which iProp is presently trading,' says Diepenbroek.

We have been running two distinct businesses with two very different risk profiles,' says Diepenbroek. He said this has raised concern among shareholders about cross subsidisation between the two operations.

'Those concerns will now be laid to rest with the investment portfolio in iFour continuing to provide risk averse investors a steady source of annuity income while iProp, as a company focused exclusively on land development, and the sale of its mineral rights, has the potential to provide good returns that are more cyclical in nature,' said Diepenbroek.

The new group, iFour, will debut on the JSE Securities Exchange SA with a property portfolio worth R730m encompassing the portfolio transferred from iProp and others acquired on the market.

Diepenbroek said the iFour portfolio would offer a quality long-term investment. He said iFour boasted a well-balanced portfolio consisting of 48 investment grade commercial, retail and industrial properties located in the primary growth nodes of SA's major metropolitan areas.

Diepenbroek is due to quit iProp and will become iFour MD.

The 58-million iFour linked units to be listed on the JSE were expected to produce an initial yield of 15,09% at an issue price of 500c, and the company would be 55% geared.

Publisher: Business Day
Source: Sibonelo Radebe
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