The Government Employee Pension Fund (GEPF) has taken a 30% stake in South Africa’s fastest-growing work and lifestyle precinct, Waterfall City, north of Johannesburg for R2.8 billion.
The deal saw JSE-listed REIT Attacq’s share price surge 16.25% to R8.30 on the JSE by early yesterday afternoon. Waterfall City is Attacq’s flagship development, its other retail centres include Mall of Africa, Brooklyn Mall and Eikestad Mall.
Attacq said it had entered into an agreement with the GEPF, which was represented by the Public Investment Corporation to acquire a 30% stake in Waterfall City owner, and Attacq’s fully owned subsidiary, Waterfall Investment Company (AWIC).
The GEPF would buy the stake at about 10% below book value, with the investment made through AWIC issuing new equity, and the acquisition of AWIC shareholder equity and shareholder loans from Attacq, as well as the extension of an additional pro-rata shareholder loan by the GEPF.
Attacq CEO Jackie van Niekerk said in an online interview that with Attacq’s share price at an about 50% discount to value, it was difficult to raise capital on the market… The group did not wish to sell its interests in Waterfall City “piece by piece” to fund further development, and a decision was taken three years ago to find a partner that could provide capital as well as participate over the long term in the development of Waterfall City.
GEPF directors would be part of an AWIC board, and participate in all decisions in a full governance structure at AWIC, said CEO Peter de Villers.
He said based on current rand value, the existing development pipeline at Waterfall City would cost about R23bn.
“We wanted somebody who would be excited to build South Africa for the future,” he said. He said the GEPF had experience of these kinds of long-term property investments through, for example, its 50% shareholding in V&A Waterfront in Cape Town.
Van Niekerk said the transaction was in line with Attacq’s strategy to optimise its capital structure by creating a significant de-leveraged balance sheet, with capacity to fund the Waterfall City development pipeline and no additional capital required from shareholders in the medium term.
Attacq would also benefit from cost savings, while retaining its REIT status. Attacq would retain full control of AWIC through its majority stake and would continue to provide asset management and administration services to AWIC at market-related fees.
“We can now expedite the rollout of developments in Waterfall City as part of our precinct strategy which focuses on creating safe, smart and sustainable retail-experience, collaboration and logistics hubs,” said De Villiers.
“Once implemented, Attacq’s gearing will reduce to 24% from 37.2%. Attacq’s capital structure would also be optimised, resulting in a reduced cost of capital, thereby enhancing returns for Attacq’s shareholders. It’s a win-win for all stakeholders,” said Attacq chief financial officer Raj Nana.
Attacq said in a trading update recently that turnovers and foot count for all its retail-experience hubs had recorded “pleasing growth” in November, 2022 and December, 2022 when compared to the comparative periods in 2021.
BUSINESS REPORT