Merger cre­ates prop­erty group with al­most R20bn cap­i­tal

Weekend Argus (Saturday Edition) - - PROPERTY -

OUT­LIN­ING for new in­vestors the im­pli­ca­tions of the now ap­proved a nd c o mplet e d merg e r b e t ween Rede­fine Prop­er­ties, Apex-Hi and Madi­son Prop­erty Fund Man­agers, Mike Flax, for­merly of Madi­son and now a Rede­fine di­rec­tor, was bullish about the long-term prospects for the group.

How­ever, he cau­tioned that for at least a year Rede­fine would have to cope with de­fault­ing and strug­gling ten­ants, “like ev­ery other ma­jor prop­erty group in South Africa”.

“The re­ac­tion of the mar­ket to the merger had been com­pli­men­tary,” said Flax. “Rede­fine’s shares have risen 27 per­cent this year to date to stand at more than R7. This re­flects the com­pany’s fore­cast that it will pro­duce earn­ings be­tween 70 cents and 74 cents a unit for the 2011 year, which will equate to a year-on-year growth in Rede­fine’s dis­tri­bu­tions of be­tween 15 per­cent and 20 per­cent.”

He said the merged group would be larger than many prop­erty stock watch­ers re­alised: it would have a mar­ket cap­i­tal­i­sa­tion of al­most R20 bil­lion and should soon be­come an ALSI 40 com­pany (among the 40 largest on the JSE Se­cu­ri­ties Ex­change).

“The 400-plus prop­er­ties in the group have a com­bined floor area of more than 3.5 mil­lion m2, mak­ing it one of the largest prop­erty own­ing groups in Africa.”

Flax said he and Brian Azizollahoff had been given re­spon­si­bil­ity for the growth of the com­pany through ac­qui­si­tions and dis­pos­als. Flax will also play a big role, along with Marc Wainer, in the in­ter­na­tional growth of Rede­fine through cor­po­rate ac­qui­si­tions, which, he said, were ex­pected to com­prise more than 20 per­cent of the com­pany’s as­sets be­fore the end of 2010.

Flax said the global re­ces­sion had opened up a va­ri­ety of prop­erty ac­qui­si­tion op­por­tu­ni­ties for any strong South African com­pany in this field, and Rede­fine was de­ter­mined to di­ver­sify ge­o­graph­i­cally in and be­yond South Africa and away from ex­po­sure to only a sin­gle cur­rency, the rand.

“We will be form­ing a sep­a­rate ac­qui­si­tions and dis­posal unit to cre­ate a key con­tact point for South African and in­ter­na­tional prop­erty bro­kers. Our aim is on­go­ing ac­cret ive a c q u i s i t i o n s, ” s a i d F l a x . An­other prime fo­cus of the new com­pany will be ten­ant re­ten­tion.

“The com­pany’s very large port­fo­lio is typ­i­cal of South Africa’s cur­rent prop­erty sce­nario and, like oth­ers, is now run­ning with a 9 per­cent over­all va­cancy fac­tor. Un­til the re­cov­ery pe­riod be­gins, we will ini­ti­ate a num­ber of mea­sures to help en­sure ten­ant sur­vival and re­ten­tion in our vast port­fo­lio.”

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