34 replies to this topic

[yusufm]

where's GRT heading? R20.00??

I don't see it dropping below R23 but I might be biased there

[Heinzsight]

Not much has been mentioned about Vukile. I like the company and they have performed well.

The property sector has been under major pressure and decline of late. R/$ and Bond yields.

At the current levels on Vukile would you invest +-R15.50.

[delta66]

where's GRT heading? R20.00??

[Moonraker]

Moon,

I think there is still some downside. Bond yields have risen considerably the last few weeks. German yields even more so the last two days. I think there is more downside to local property stocks in the short term. The landscape has definately changed.

The biggest risk to property share/unit prices remains bonds. I think there is still downside due to the gap in the move in bonds and yield on property. The liquid stocks took the brunt of the correction, but we all knew the property sector was overcooked.

I am however buying selectively at these levels and keeping to my old favourites. I am avoiding the recent listings like the plaque - in my view massive pain coming for them.

But I am buying yield, not capital gain. If you focus on that you will do well.

 

Thanks for the input, Immobilier.

 

Yes, it is all a yield/exchange rate story. With the Chinese economy slowing more than expected, we here, may (will) suffer in terms of exports of the raw kind. This in turn will affect the current account balance, which is already deep in deficit territory, negatively. That probably means no improvement in the Rand exchange rate from current weak levels, which may further encourage foreign withdrawals from our bond market putting upward pressure on our bond yields. 

I think that listed property has discounted most of this scenario, but probably not all of it. So, as you say, I am prepared for another 10% ± drop in prices for this sector.

I am in for the yield as well.

The strict correlation between bond yields and listed property yields seems rather 'unfair' as the latter manage to increase their distributions from year to year, whereas the former only provide a fixed yield based entirely on the price the bonds were purchased at.

Let's hope a bottoming out will be reached soon.

 

BTW. You are OK with NEPI (ROE - Rand Hedge) 

[Perreby]

In fact, we could very well see a further 10 to 15% downside from these already low levels... Not inconceivable. But if yield makes sense to me, I'll buy. REIT may also have a slight uptick effect.

I suspect it will have a more than slight uptick effect

[Immobilier]

In fact, we could very well see a further 10 to 15% downside from these already low levels... Not inconceivable. But if yield makes sense to me, I'll buy. REIT may also have a slight uptick effect.

[Immobilier]

Moon,

I think there is still some downside. Bond yields have risen considerably the last few weeks. German yields even more so the last two days. I think there is more downside to local property stocks in the short term. The landscape has definately changed.

The biggest risk to property share/unit prices remains bonds. I think there is still downside due to the gap in the move in bonds and yield on property. The liquid stocks took the brunt of the correction, but we all knew the property sector was overcooked.

I am however buying selectively at these levels and keeping to my old favourites. I am avoiding the recent listings like the plaque - in my view massive pain coming for them.

But I am buying yield, not capital gain. If you focus on that you will do well.

[delta66]

haven't got many prop stocks and dont know much about the sector but stumbled upon CCO(Capital and Counties Prop PLC) had a cursory glance at their 5yr graph and returns look good(PE very high @240.56)  

 

copy/pasted from my brokers site:

The group has a concentration of assets in three landmark estates in the central London real estate market, with the potential for substantial active asset management to drive superior total returns for shareholders.

 

sounds like a good punt with rand hedge value going into the future.  run hard this year so somewhat reserved to buy in at current levels but have added to watchlist 

Edited by delta66, 22 May 2013 - 09:37 AM.

[Goliath]

The property sector had a great run past week or 2.. Now dreading my choice of swopping my Redefine for some more Afrocentric!

[HDB]

and I don't want to know about it, thank you!

[Goliath]

Looks like the Fountainhead saga isn't over yet!

 

Growthpoint SENS:

 

Growthpoint Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 1987/004988/06)
Linked unit code: GRT ISIN ZAE000037669
(“Growthpoint”)


OFFER FOR THE PROPERTY ASSETS OF FOUNTAINHEAD PROPERTY TRUST AND RENEWAL OF CAUTIONARY ANNOUNCEMENT



Growthpoint linked unitholders are referred to the previous announcements released on SENS in relation to the
offer by Growthpoint (the “Growthpoint Offer”) to acquire the property assets of Fountainhead Property Trust
(“Fountainhead”), the announcements released on SENS by Redefine Properties Limited (“Redefine”) in relation
to, inter alia, its offer to acquire the property assets of Fountainhead (the “Redefine Offer”) (together the
“Competing Proposals”). Growthpoint linked unitholders are also referred to the more recent announcements
released on SENS by Redefine detailing its withdrawal of the Redefine Offer, the acquisition of an initial 18%
stake in Fountainhead and the subsequent tender offer of Hyprop Investments Limited (“Hyprop”) linked units in
exchange for Fountainhead units to select Fountainhead unitholders, and the announcement released on SENS
by Fountainhead on 28 March, 2013, wherein the Independent Committee of Fountainhead Property Trust
Management Limited (the “Independent Committee”) resolved to terminate its engagement with Growthpoint in
relation to the Growthpoint Offer.

The purpose of this announcement is to communicate to Growthpoint linked unitholders and the market in
general:

1. the background to the Competing Proposals and Growthpoint’s views and position in relation to the evolution
and resultant outcome of the Competing Proposals; and
2. processes being pursued by Growthpoint with the relevant regulators and stakeholders to ensure that:
a. Fountainhead unitholders are afforded the opportunity to consider and vote on the Growthpoint
Offer, which they have to date been precluded from doing so, due to the continued actions and
threats of litigation by Redefine aimed at protecting its proprietary interests, which are contrary and
misaligned with those of Fountainhead unitholders; and
b. Redefine is precluded from voting its Fountainhead units in terms of the Growthpoint Offer.

The Growthpoint Offer remains at a 11.2% premium to the Fountainhead unit price based on closing prices as at
16 April, 2013, which equates to a premium of R1 166 million.


1. BACKGROUND

Initial offers and process

On 30 March 2012 Redefine announced the acquisition of Fountainhead Property Trust Management
Limited and Evening Star Trading 768 Proprietary Limited (collectively the “Manco”) from Standard Bank
Properties Proprietary Limited and Liberty Holdings Limited for which it paid an aggregate consideration of
R660 million. At this time, Redefine also indicated that it was the intention to make an offer to acquire all of
the assets of Fountainhead in exchange for Redefine linked units and Hyprop linked units. It was further
indicated that the proposed pricing in terms of the acquisition of the assets of Fountainhead would be at the
“clean price” at which Fountainhead units traded with zero premium. Redefine announced that the
acquisition of the Manco became unconditional on 26 July, 2012.

On 1 October, 2012, Redefine announced its offer for the acquisition of the property assets of Fountainhead
(“Redefine Initial Offer”) for a proposed purchase consideration of 3 Hyprop linked units and 62.5 Redefine
linked units for every 100 Fountainhead units owned by a Fountainhead unitholder, which at that time was at
a discount of 0.4% to the closing price per Fountainhead unit.

In accordance with Growthpoint’s stated intention of increasing its exposure to quality retail properties in
premiere locations, on 23 October, 2012, Growthpoint announced its offer to acquire the property assets of
Fountainhead for a purchase consideration of 35 Growthpoint linked units for every 100 Fountainhead units
(“Growthpoint Initial Offer”). The Growthpoint Initial Offer was subject to the fulfillment of certain conditions
which are normal for a transaction of this nature, including the performance of a due diligence investigation
and a potential price adjustment mechanism related thereto.

The Growthpoint Initial Offer was at a premium of 15% to the last closing price of a Fountainhead unit prior
to the date of the announcement and an 11% premium to the Redefine Initial Offer.

Prior to the making of the Growthpoint Initial Offer, Growthpoint consulted its advisors and obtained the
opinion of Senior Counsel to ensure that the Growthpoint Initial Offer, which did not offer any compensation
for the Manco, was legally permissible.

Based on the advice received, Growthpoint is firmly of the view that Manco has no perpetual right to income
generated from the assets of Fountainhead, but only an entitlement to remuneration as quid pro quo for
services actually rendered. In addition, Fountainhead obtained its own independent advice from Senior
Counsel that it was legally competent for it to conclude a transaction with Growthpoint on the terms in the
Growthpoint Initial Offer, and that to the extent Redefine pursued its threats of its litigation, Fountainhead
would ultimately be successful in any such litigation. The Financial Services Board (“FSB”), being the
regulator responsible for the regulation of the relationship between the Manco and Fountainhead, also
appears to support Growthpoint’s and Fountainhead’s views in this regard as it was publicly stated by a
senior representative of the FSB in an interview published on 29 March, 2013, in the Financial Mail that “…
in the event of a disposal of assets of the scheme, the manager takes the risk of a loss of management
fees.”

At the time of the Growthpoint Initial Offer, Redefine announced numerous public threats of litigation against
the Manco, the Independent Committee and Fountainhead to the extent they pursued the Growthpoint Initial
Offer based on it being unlawful as it contained no compensation payable to the manager.

These constant threats of litigation, on various fronts, were fundamental to the strategy of Redefine in order
to create uncertainty as to Growthpoint’s ability to implement the Growthpoint Offer. The details of these
threats and arguments were never publicly disclosed, despite numerous requests from Growthpoint.

Redefines’ abrupt change in strategy and withdrawal of the Redefine Offer, as explained below, indicates
Redefine’s threats were without merit and substance.

The numerous threats of litigation and statements indicated Redefine’s failure to distinguish between the
Manco, as the manager of Fountainhead, and Redefine, as the shareholder of the Manco, and highlighted
the inherent unmanageable conflict of interest between Redefine, the Manco and Fountainhead unitholders.

These conflicts remain and exist today as is further explained below and form one of the fundamental
reasons as to why Redefine should be precluded from voting on the Growthpoint Offer.

Award of exclusivity

On 13 December, 2012, Redefine submitted an amended proposal to acquire the assets of Fountainhead
(“Redefine Second Offer”).

Despite the improved pricing of the Redefine Second Offer, it remained at a discount to the Growthpoint
Initial Offer by 4%, which equated to approximately R372 million.

Notwithstanding the superior Growthpoint Initial Offer, the Independent Committee elected to enter into
exclusive arrangements with Redefine. The Independent Committee cited the following reasons for pursuing
the Redefine Second Offer:

- Growthpoint’s requirement for a due diligence investigation of the properties of Fountainhead and the
price adjustment mechanism related thereto; and
- the risks associated with threatened litigation as well as the resultant delays and costs of consummating
a transaction with any other person.

Growthpoint maintains that the decision to leave this quantum of value on the table for these reasons
indicates the extent to which Redefine’s threats of litigation impacted on the Independent Committee’s
assessment of the Growthpoint Initial Offer and the manner in which it exercised its powers.
In addition, the conflicts of interest resulting from Redefine’s persistent threats of litigation against any form
of progression in relation to the Growthpoint Initial Offer, clearly prejudices Fountainhead unitholders. These
conflicts of interest caused Manco to make decisions and act contrary to the interests of unitholders.
Specifically, Redefine’s actions resulted in the following breaches of the provisions of CISCA:

- Section 2(1) of CISCA whereby a manager must administer a collective investment scheme honestly
and fairly, with skill, care and diligence and in the interest of investors; and
- Section 4(1) of CISCA whereby a manager must avoid conflict between the interests of the manager
and the interests of investors.

Growthpoint revised offer

After extensive consultation with stakeholders, including the FSB on the aforementioned transgressions and
process, the Trustee and Fountainhead unitholders, Growthpoint announced on SENS on 21 February 2013
that, in spite of its offer being at a premium to that of the Redefine Second Offer, it would increase it to 37
Growthpoint linked units per 100 Fountainhead units, equating to a further R605 million to that of the
Growthpoint Initial Offer (“Growthpoint Second Offer”). The Growthpoint Second Offer was at a significant
premium of 12.8% to the closing price of Fountainhead and a premium of 8.6% or R857 million to the
Redefine Second Offer.

To address the concerns expressed by the Independent Committee in relation to the Growthpoint Initial
Offer, Growthpoint undertook to provide Fountainhead unitholders with a pricing floor, in that irrespective of
the outcome of the due diligence investigation to be conducted by Growthpoint, Fountainhead unitholders
would receive a minimum of 35 Growthpoint linked units per 100 Fountainhead units (the “Minimum Ratio”).
The Growthpoint Second Offer, even at the Minimum Ratio, equated to a premium of 6.7% to the
Fountainhead closing price.

Based on the Growthpoint Second Offer, the Independent Committee allowed the exclusivity with Redefine
to expire and re-engaged with Growthpoint with a view to progressing towards a due diligence investigation,
finalising transaction agreements and a unitholder vote.

Included in the Growthpoint announcement on 21 February, 2013, was Growthpoint’s understanding, after
seeking guidance from the FSB, that it was intended for Fountainhead unitholders to be provided with
comparable information relating to both offers to enable them to compare the offers and determine which
offer to pursue. Growthpoint was supportive of such a process as suggested by the FSB as it would see
Fountainhead unitholders consider the offers from both Redefine and Growthpoint and determine which offer
to pursue. Such a process would require that both offers be presented to Fountainhead unitholders on equal
terms which in essence would see Growthpoint completing a due diligence investigation and finalising the
terms of an agreement with Fountainhead.

Despite the aforementioned understanding by Growthpoint, the Independent Committee continued to decline
Growthpoint any opportunity to present the Growthpoint Second Offer alongside the Redefine Offer on a
comparable basis. To mitigate against any risk of litigation directed towards the Independent Committee by
Redefine, the Independent Committee proposed that Fountainhead unitholders would vote on the Redefine
Offer first and then, only to the extent that the Redefine vote was unsuccessful, would unitholders vote on
the Growthpoint Second Offer.

In Growthpoint’s view, the Independent Committee failed to consider the significant upside that was on offer
by Growthpoint and instead focused on doing all things necessary to avoid the litigation, despite obtaining
legal advice that if Redefine were to litigate, the Independent Committee would be successful in dispelling
Redefine’s arguments. Notwithstanding the background as summarised in this announcement, Growthpoint
compromised on the condition that the Growthpoint Second Offer be put to Fountainhead unitholders
immediately after the Redefine vote. Considering that the premium attached to the Growthpoint Second
Offer had risen to in excess of R1 billion greater than that of the Redefine Second Offer during the course of
the negotiations, Growthpoint was confident that Fountainhead unitholders would vote in its favour.

Withdrawal of Redefine Second Offer and acquisition of a direct stake in Fountainhead

Prior to the market opening on Monday, 11 March, 2013, the implied premium of the Growthpoint Second
Offer was R1.3 billion higher than that of the Redefine Second Offer. On this day, Redefine released an
announcement on SENS wherein it stated that it had resolved to withdraw its proposal to acquire the
property portfolio of Fountainhead on the basis of protracted delays and uncertainty, and the detrimental
impact it was having on Fountainhead’s assets and day-to-day business.

The reasoning provided for the withdrawal is difficult to understand considering that:

- the protracted delays in terms of the process were directly as a result of the litigation threatened by
Redefine; and
- Redefine, as the owner of the Manco and beneficiary of the payment of the approxiamtely R60 million
asset management fees per annum, was in control of the day-to-day management of Fountainhead,
and as such has a responsibility to ensure the day-to-day activities are appropriately managed.

Redefine further stated that it had acquired 18% of the Fountainhead units (“Redefine Initial Acquisition”),
making it the largest single Fountainhead unitholder and, on an accelerated basis, offered to acquire from
Fountainhead unitholders a further 175 million Fountainhead units in return for 12.15 Hyprop units for every
100 Fountainhead units sold (in tranches of not less than 1 million units) (“Redefine Tender Offer”).

The withdrawal of the Redefine Second Offer, and the abrupt change in strategy provided a clear indication
that Redefine was doubtful as to the likely success of its offer and the merit of the arguments forming the
basis of its threats of litigation.

In addition, Redefine’s actions in pursuit of the Redefine Initial Acquisition and the Redefine Tender Offer
are clearly contrary to Redefine’s statement that it endeavors to align its interests with those of
Fountainhead unitholders and to “protect and safeguard the interests of Fountainhead and Fountainhead
unitholders”. Its actions prejudiced investors, particularly small investors, in that they were precluded from
partaking in the Redefine Tender Offer, due to the fact that the accelerated bookbuild was only being made
available to those Fountainhead unitholders holding tranches of more than 1 million units. In addition the
accelerated bookbuild was only open for one day.

These actions by Redefine prejudice what is actually the majority of Fountainhead unitholders by denying
them the opportunity to consider and vote on the Growthpoint Second Offer, which equated to a premium of
11.2% or R1 166 million to the Fountainhead closing unit price as at 16 April, 2013. As a result, the majority
of Fountainhead unitholders stand to lose a significant premium that Growthpoint is willing to pay. As long as
there is a third party offer to acquire the assets of Fountainhead, Redefine will continue to have an interest
that is at odds to the interests of Fountainhead unitholders due to its shareholding in the Manco and the
actions it will undertake to protect the value it paid for the Manco.

In a SENS announcement released by Fountainhead on 25 March, 2013, it was indicated that Redefine had,
as a result of the Redefine Initial Acquisition and the Redefine Tender Offer, acquired a direct interest of
approximately 46% in Fountainhead, which it will utilise to block any Growthpoint offer.


2. STATUS OF GROWTHPOINTS OFFER AND PROCESS

In the Fountainhead SENS announcement dated 28 March, 2013, the Independent Committee indicated that
it would not re-engage with Growthpoint in respect of the Growthpoint Second Offer unless it could be
proven that Redefine would be precluded from voting its units in respect of the resolutions to approve the
Growthpoint Offer.

To this end, Growthpoint has requested a formal ruling from the JSE that Redefine be precluded from voting
on all resolutions, including the vote required to amend the Trust Deed, and is awaiting the JSE’s response.
Growthpoint is of the view that the Manco is a related party as defined in terms of the JSE Listings
Requirements, which is supported by the extraordinary circumstances arising from the continuing conflict of
interest, Redefine will be precluded from voting on the Growthpoint Offer.

Growthpoint has to date received letters of support from Fountainhead unitholders confirming their support
for a vote of Fountainhead unitholders which would specifically exclude those units held by Redefine and its
associates, and to lodge their vote in favour of the resolutions necessary to implement the Growthpoint
Second Offer.

To the extent Fountainhead unitholders wish to support the process to table the Growthpoint Offer a copy of
the Letter of Support can be obtained from either Nick Riley on +27(0)11 286 7773 or Paul Birkett on
+27(0)11 286 7497 from Investec Bank Limited.
Furthermore Growthpoint believes that the manner in which the Redefine Initial Acquisition was conducted
and the interactions and information exchange with Fountainhead unitholders during this period may have
contravened the Security Services Act. Growthpoint has requested that the FSB investigate the Redefine
Initial Acquisition with a view to determining whether contraventions of the Security Services Act were
committed by Redefine.

In addition to the aforementioned, Growthpoint is considering a number of legal alternatives that it has at its
disposal and reserves its rights related thereto.

Lastly, Growthpoint reiterates its commitment to progressing the Growthpoint Offer and is prepared to take
whatever actions are necessary to get to a point where Fountainhead unitholders are able to consider the
Growthpoint Offer free of litigation or influence from Redefine.

Renewal of cautionary announcement

Further to the cautionary announcement released on SENS on 12 March, 2013, Growthpoint linked unitholders
are advised that discussions with various stakeholders of Fountainhead remain in progress.

Accordingly, Growthpoint linked unitholders are advised to continue exercising caution when dealing in their
linked units until a full announcement is made.

[Goliath]

Any opinions on Capital Property Fund?

[Goliath]

Thanks, will have a look!

 

I have Arrow A also in my stable(in at R6.66 - unlucky number!), quite happy with it and defnitely holding on to it!

[delta66]

heya Goliath, Dipula Income Fund Ltd. (DIB) is one to look at.  29.7% up after holding for only couple months(bought in around Dec last year) they have a respectable div of 5.9%

 

add to your watchlist and keep a eye on it..this one is northward bound

[Goliath]

Another thread lost, hence the new one..

 

Redefine had a great move today, finally picking up as I think people realizing the value here especially after Fountainhead deal..

 

Any other ones you guys would recommend at the moment?