Roy Cokayne
Redefine, the listed property company, has stepped up its criticism of the offer by listed Growthpoint for the assets of Fountainhead Property Trust without paying compensation for its R660 million acquisition of Fountainhead’s management company.
Marc Wainer, Redefine’s chief executive, said yesterday that in terms of the Collective Investment Schemes Control Act and Fountainhead’s trust deed, the net income from Fountainhead’s underlying assets was allocated to two partners, the investors and the management company.
Wainer said if the entire portfolio was sold and the proceeds distributed, the purchaser then acquired all of the income and not just the portion attributable to the investors.
“If the investors were to obtain the benefit of the income attributable to the asset manager, their cash flows based on [Fountainhead] consensus would increase from 59c a unit to 64.3c a unit, resulting in a 9 percent increase in value in their asset achieved simply by investors expropriating the managers’ asset without compensation.
“This is contrary to a fundamental principle of law that no party can be deprived of ownership of an asset without compensation,” he said.
Wainer believed Growthpoint would have to overcome a number of obstacles to get their offer accepted.
He said Growthpoint’s offer was for the distribution of all the assets, which meant it required the approval of 75 percent of the unitholders.
“That is going to be a big ask because a lot of Fountainhead shareholders are big shareholders in Redefine. I don’t think they would be too happy to have 2c or R660m expropriated without compensation.”
Wainer also believed Growthpoint could encounter opposition to the transaction from the Competition Commission because the Public Investment Corporation was such a big shareholder in Growthpoint and the extent of their property holdings.
Redefine Properties yesterday reported distribution growth of 7.2 percent on a like-for-like recurring income basis in the year to August.
The total distribution declined by 5.9 percent to 64c a share from 68c.
But Andrew Konig, Redefine’s financial director, said recurring core income stripped out once-off events, such as transaction fees of 4.6c that Redefine earned last year from a Hyprop transaction and a further 4c last year for the Arrowhead property portfolio that was unbundled.
Konig said excluding those elements from last year resulted in an adjusted base of about 59c, which compared with about 63c this year that excluded 1c of non-recurring income.
The total return to unitholders was 30 percent for the year.
Wainer attributed this solid performance to Redefine’s successful strategy, which improved the quality of its local property portfolio, produced good core income growth, reduced funding costs and delivered management efficiencies through firm cost control
Redefine’s local investment assets comprise 253 properties valued at R21.1 billion and a R5.6bn portfolio of strategic, listed property securities.
Redefine’s share price closed 1.67 percent lower at R8.85 yesterday. Its market capitalisation was at R24.48bn.