The portfolio, developed under the vision of the late Francesco Rivera, spans 320,000 sqm of mainly P- and A-grade office space concentrated in Sandton and its surrounds, including multiple multinational head offices such as Nestlé, PPC, AngloGold Ashanti, Norton Rose, Merrill Lynch, Barclays and Absa Capital. It comprises 28 prime properties and a 50% stake in a further nine properties. It also incorporates 48,000 sqm of undeveloped bulk.
Securing continuity of management and expertise in the transaction, Growthpoint will internalise the asset management and property management business from Tiber Projects, gaining the skills of 55 full-time employees. It has also secured an initial three-year strategic agreement with the Tiber Projects executive team of Stephen Scott, Germano Cardoso and Artur Carrazedo.
For Growthpoint, the transaction is a significant boost to its office portfolio and enhances its underlying income streams. The acquisition lengthens its average office lease length and, with a 95% occupancy rate, improves its overall office vacancy levels. It will also make it one of the country's biggest office property owners, with a portfolio of 1.5 million sqm of office space across South Africa, valued at nearly R25 billion.
Norbert Sasse, CEO of Growthpoint Properties says, "A portfolio of this quality and size, centred in arguably the best investment property location in South Africa, is a once-in-a-lifetime opportunity and beneficial for shareholders. Moreover, the company will gain the core competencies, skills and long-standing relationships with tenants of the new portfolio and have access to the executive team that conceptualised, built and managed the properties."
For Tiber, the transaction meets two important goals: creating liquidity for its shareholders and unlocking the next phase of its business, which will continue to deliver exceptional property development, investment and management to the South African property sector.
Tiber's Stephen Scott says, "While achieving these goals, we wanted to find an excellent home for our people and our property portfolio, and believe we have done this. The company considered several alternatives and ultimately this enabled us to realise an enhanced value for our shareholders and it has the ability to readily access and implement large transactions of this kind."
Not only Tiber's shareholders benefit from the transaction. At a 7.41% property yield on income-producing properties, the deal will also enhance Growthpoint's distribution per share, based on the mix of funding it is planning to use to pay for the acquisition. This includes the bulk of the cash it raised in May this year, when it issued 90 million shares at R28 per share thereby raising R2.5 billion in new equity
Sasse explains, "The acquisition will become effective when the portfolio transfers, which should be in Q1: 2014. But the real benefits will come through in FY 2015, when shareholders will enjoy the full 12-month impact of the transaction."
The portfolio holds even more upside potential in undeveloped bulk attached to the acquired properties. As part of the agreement, Growthpoint will enjoy continued access to Tiber Bonvec Construction's development and construction expertise for this bulk and when exploring other development and redevelopment opportunities for its growth pipeline.
Growthpoint will settle the acquisition with a combination of cash and shares. It will issue 93.3 million new shares at R27.00 per share to raise approximately R2.5 billion. The remaining consideration will be paid by accessing the cash resources from its successful capital raise in May 2013 and its existing debt facilities.
