Explaining the motivation for the tie-up, Calgro M3 MD Wikus Lategan said his group was able to develop affordable housing more cheaply than other companies in SA, and that SA Corporate was a top manager of residential property assets.
In a joint announcement on Monday, 29 August, SA Corporate and Calgro M3 said they had agreed to form a joint initiative through Afhco Holdings, a wholly owned subsidiary of SA Corporate, and Hizoscape, a wholly owned subsidiary of Calgro M3 that will be renamed Calgro Real Estate.
Afhco will subscribe for 51% and Calgro Real Estate will subscribe for 49% of the issued share capital in the Afhco Calgro M3 consortium, a newly incorporated private company trading under the Afhco brand.
"The company will acquire, once developed and tenanted, a defined portfolio of residential properties from Calgro M3," Lategan said.
"The long-term strategy is to acquire further developed and tenanted residential portfolios of properties from Calgro M3, other developers and the broader market. We would like it to be worth R10bn-R15bn in the next four to five years."
As much as R1.639bn in capital will be raised for the Afhco Calgro M3 consortium in an initial transaction consideration.
The company will be capitalised as a set of completed properties are tenanted and transferred over the next 18-24 months.
These development properties include a project in western Johannesburg, one in Soweto, one in southern Johannesburg, one in northern Cape Town, and one on the Cape Flats.
The projects have a total rentable area of 162,068m². The annual net property income attributable to the assets is forecast to be R176m.
SA Corporate CEO Rory Mackey said the consortium's portfolio would be positioned within SA Corporate.
"At this stage we believe it is appropriate to incubate this portfolio in SA Corporate, as it requires a balance sheet to fund particularly the development pipeline," he said.
"Once it achieves appropriate scale and the market and the various funders of property in SA have fully acquainted themselves with the merits of this [residential] property class being defensive and having growth potential, then we will consider whether a separate listing will be advantageous."
SA Corporate released interim financial results on Monday and reported growth in distributions per share of 9.1% for the six months to June.
"Their results were good," said Evan Robins, the manager of listed property at Old Mutual Investment Group's MacroSolutions boutique.
"Particularly pleasing was that their core income grew strongly."
Source: Business Day
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