Oct 30, 2007:
Leading listed retail property fund Hyprop Investments has expanded its investment portfolio with the acquisition of approximately 31,3% of listed property unit trust Sycom Property Fund (“Sycom”) for R1,24 billion
The acquisition will see Hyprop issue 21,7 million new units and increase its market capitalisation from R6,9 billion to R7,9 billion at the current trading price.
In terms of the transaction Hyprop will acquire 64,2 million Sycom units from Redefine, Old Mutual, Stanlib, Investec and on the open market, which equates to 31,3% in aggregate of Sycom. Hyprop will settle the purchase consideration by a cash payment of R51,3 million, the issue of 21,7 million Hyprop units and swapping the 5,6 million units it currently owns in Resilient Property Income Fund for Sycom units. The acquisition of Sycom units other than those from the open market, was effective 1 October 2007.
Hyprop CEO Pieter Prinsloo says he is pleased with the value at which the Sycom units have been acquired, which should realise an estimated forward yield of more than 7%. He emphasises the investment makes strategic sense for Hyprop due to the quality of Sycom’s shopping centre portfolio. “The acquisition enables Hyprop to share in a well-managed property portfolio with quality assets in strong locations at good value.” The transaction will also enhance distributions for Hyprop unitholders in 2008.
Sycom’s portfolio consists of good quality properties equally weighted to the retail and office sectors with a total value of R3,5 billion at March 2007. Regional shopping centres including Fourways Crossing, Vaal Mall, N1 City, Somerset Mall, Paarl Mall and a 22,5% interest in a German shopping centre Nova Eventis, complement the well-located A-grade office parks with mainly corporate tenants. The fund has a market capitalisation of R4,2 billion.
Prinsloo says he is satisfied with Sycom’s growth prospects on the strength of its asset base, as well as the asset management style of Parkdev which took over management of Sycom in July last year. He points out that Parkdev also manages unlisted R6,5 billion property fund Attfund, whose assets are similar to both Hyprop’s and Sycom’s.
He concludes that the acquisition is aligned with Hyprop’s strategy of investing in listed property securities with a retail focus on a yield-enhancing basis for unitholders.
The acquisition of the Sycom units remains conditional on a “fairness” opinion from an independent expert regarding the transactions with Redefine and Stanlib. Hyprop remains trading under cautionary until an announcement in this regard is made.