Transcend deal to double portfolio
AltX-listed Transcend Residential Property Fund has signed a deal to more than double the size of its portfolio and allow it to move to the JSE’s main board. Graduating to the country’s main exchange could help Transcend’s equity pricing “to right itself”, said CEO Rob Wesselo.
AltX-listed Transcend Residential Property Fund has signed a deal to more than double the size of its portfolio and allow it to move to the JSE’s main board.
Graduating to the country’s main exchange could help Transcend’s equity pricing “to right itself”, said CEO Rob Wesselo. The company’s illiquid shares — none of which changed hands on Monday despite the landlord announcing its biggest deal yet — have drifted slightly lower since its 2016 listing.
“We see this as a big first step,” Wesselo said.
Transcend said on Monday it would buy 2,159 residential units for R1.3bn from related parties. Spread across eight properties in Gauteng and the Western Cape, the units would be acquired at a weighted average yield of 9.9%.
The deal, 60% debt-funded, would boost Transcend’s portfolio to 4,691 units valued at R2.5bn.
JSE-listed Emira Property Fund, which owns about 9% of Transcend, has agreed to buy more of the company’s shares to fund the deal,
Transcend said. Emira’s shareholding would increase to between 25.1% and 34.9%, depending on the outcome of an investor road show, Wesselo said.
The acquisitions would improve the quality of Transcend’s portfolio, according to Wesselo.
“These are high-quality properties that are all managed by IHS [a related party] so we know them very well.”
Though the level of debt funding is high for a real-estate investment trust, gearing is likely to reduce after the transactions, he said.
“Our expectation is that the valuations of the portfolio we’ve acquired will come out at about 20% higher than what we’ve paid for it … and there are three properties that are very saleable on a sectional-title basis.
“The board will decide, from time to time, to exit those properties at good profits and pay down debt and reinvest in more typical affordable properties.”