AReit Prop plans a R300m listing on the JSE

AREIT Prop plans to raise about R300 million through a JSE listing of some 30 million shares by way of private placement, the company said yesterday in its prospectus.

The proposed listing as a Real Estate Investment Trust (Reit) on the main board would be at an indicative price of between R8 to R10 per share.

The company said interested investors could contact it or AcaciaCap Advisers if they wished to participate in the private placement. The listing is expected on February 14.

aReit Prop holds a portfolio of two hospitality properties (Cresta Grande Hotel and Fountains Hotel) and one medical property (Lady Hamilton).

Rental income is also derived from the lease of a billboard on top of the Cresta Grande Hotel.

The properties were valued at R913.92m, exceeding the minimum of R300m required in terms of the Tax Act. aReit Prop, through subsidiary aReit Prop Leasehold, holds four longterm leases, two of which the lease terms are for 10 years, renewable for 10 years, with large tenants, namely Cresta and Afrirent.

In these two instances, parent guarantees were held for one year’s rental from the tenant for the duration of the lease, thus giving security to aReit Prop for the majority of the annual rental income.

The minimum contracted annual rental for aReit Prop group was about R39.96m, excluding any upside in the event that turnover rental exceeded the minimum rental.

aReit Prop said its operating costs were relatively low and related primarily to being a listed company.

The properties were acquired on a leasehold basis for 40 years, and the leasehold obligations were settled via the issue of shares to the vendors, who own 100 percent of aReit Prop prior to the sale of a portion of their shares in terms of yesterday’s prospectus.

The asset and property management functions were carried out internally by aReit Prop’s management team. In the future, the company planned to acquire freehold properties and gear the properties at appropriate levels.

“The board of aReit Prop is confident that it will deliver good growth to investors off a solid and secure base,” its directors said yesterday.

“With a secure rental income, strong balance sheet and no gearing, aReit Prop has a solid base that will provide the ability to invest in various real estate sectors both locally and internationally through further leasehold and freehold property acquisitions, utilising both debt and equity associated with such acquisitions,” the prospectus said.