Sasfin, Primegro form new listed property group

A well-known South African property brand, Primegro, is to be reborn and listed as a property loan stock company on the JSE in the second quarter of this year in a deal announced on Thursday with niched financial services company Sasfin Holdings Limited.

In terms of the deal, Sasfin will dispose of its head office at 29 Scott Street, Waverley, to a re-emergent Primegro for a total consideration of R167.9m, subject to, inter alia, a listing of Primegro on the Johannesburg Stock Exchange as a property loan stock company.

The purchase price for Sasfin's property will be settled by way of a R134.32m cash payment by Primegro and the balance of R33.58m in Primegro linked units (6,716,000 linked units at R5 per unit) to be issued to Sasfin simultaneously with Primegro's listing.

Sasfin has also undertaken to lease back its head office building from Primegro for a 10-year period by way of a triple net lease at a market related rental.

The transaction also makes provision for Sasfin to acquire a 25% interest in Primegro's asset management company, Primegro Asset Managers Proprietary Limited, for no additional cost to Sasfin.

Says Derek Greenberg, CEO of the Primegro Property Fund: "We are aiming to assemble a portfolio of carefully selected properties over the next few years and we are busy with a number of deals at the moment. Primegro has a reputation for delivering above average returns in the property sector and we want to be able to continue that in the future."

Roland Sassoon, the CEO of Sasfin, notes that at Sasfin's year-end the company announced that it was reviewing its property private equity model and exiting private equity property investments as a proprietary investor.

"However, we still want to participate in the property investment market. Sasfin has extremely good deal flow in the property sector and now we have a home for those deals in our association with Primegro. We think there is a lot of synergy between us and we believe we have backed a winner with this deal. Sasfin's partnership with Primegro will enhance its ability to grow the fund into a significant player in the SA property market."

The promoters of Primegro are Derek Greenberg, Lionel Levinsohn and Martin Ettin, who have an indisputable reputation in SA property circles.

The original Primegro Properties was listed on the JSE in 1999 with a portfolio worth R600m. After growing the Fund to market capitalization of R2.2bn, the Fund was merged with Growthpoint Properties Limited in 2003, which, at the time, was valued at R2.5bn, to form the largest property loan stock company in the country.

Subsequently, Primegro Properties' promoters joined CBS Properties Limited, which they listed on the JSE in 2005 with a portfolio of properties worth R1.1bn. This fund was acquired by the Public Investment Corporation in 2007, by which time its property portfolio had grown to R2.3bn.

Says Greenberg: "According to Bloomberg, investors in the original Primegro Properties received a compound annual return from the date of listing to the date of the merger with Growthpoint of 21.7%. In the case of CBS the compound annual total return for investors from listing to disposal to the PIC was 35.4%."

Greenberg says Primegro is looking to secure an attractive property portfolio comprising a mix of quality commercial and retail properties with some select industrial properties. The Fund is looking at a forward yield of 9% on its units on listing, which is attractive compared to the current sector average of below 8%.

There are a number of conditions precedent to be fulfilled before the deal can be concluded.

The deal is expected to be earnings enhancing for Sasfin and the effective date of the transaction is the date on which the Sasfin property is transferred to Primegro.