JSE-listed real estate investment trust (Reit) Attacq aggressively cuts its debt-to-loan-to-value (LTV) ratio with news of another asset sale on Tuesday as it weathered the financial crisis of Covid-19.
The group, which is the developer of Waterfall City’s multibillion Rand mega-development in Gauteng and majority owner of Mall of Africa, revealed in a statement from Sens that it had sold an additional Rand 328 million stake in MAS Real Estate to three South Africans. fund managers.
This follows the sale of two stakes in European-oriented MAS in December 2020 and March of this year, for a total of R888 million.
The R500 million sale in December was to an investment company linked to the Oppenheimer family, while the March deal was with PKM Development Limited.
With this week’s deal, that effectively means Attacq has sold around two-thirds or just over Rand 1.2 billion of his stake in the Isle of Man-based group since December of this year. last.
Before the disposals, Attacq held a 20.7% stake in MAS, valued at 1.8 billion rand. This made it the largest shareholder in the offshore fund, which incidentally has a secondary listing on the JSE.
Much of the sales money is used to repay the South African Reit’s euro debt, which will also help reduce the group’s gearing or LTV levels.
Attacq’s LTV crossed 46% in December 2020, prompting the group’s leaders to approach its banks to bring the fund’s level of covenant to 60%.
It came in the wake of the financial fallout from Covid-19, which saw the group’s property valuations and stock prices plummet last year. This in turn has seen its LTV ratio skyrocket, as has been the case with several other investment firms such as Redefine Properties and Rebosis Property Fund.
The last sale by Attacq of its investment in the MAS was made at a discount, according to its press release from Sens.
“The sale price of R16 per MAS share represents a 3% discount from the closing spot price of R16.50 on May 28, 2021. [being the date prior to the agreement of terms] and a 3.7% discount from the 30-day volume weighted average price of R16.61 on the same date, ”he noted.
This discount indicates a sort of forced sale given that Attacq and his JSE-listed colleague Reit Hyprop are currently struggling to sell their joint assets in the rest of Africa.
“The proceeds of the sale will be used to settle Attacq’s remaining debt in euros and finance future development opportunities,” he said.
“Attacq does not intend to sell any of its remaining MAS shares in the foreseeable future,” he added.
However, while the group said late last year that it was looking to divest around R2 billion in assets to strengthen its balance sheet and improve LTV levels, it did not mention that it was considering selling its stake in MAS at the time.
“This sale is in line with Attacq’s stated desire to reduce its overall indebtedness and improve its interest coverage rate. Following the [latest] sale, Attacq’s remaining stake in MAS will be 46,157,934 shares, representing 6.5% of the issued share capital of MAS ”, he specified in the Sens press release.
Attacq stated that the buyers and the portion of the sale proceeds attributable to each buyer (in connection with the last sale of MAS shares) are as follows:
- Prudential Investment Managers (on behalf of the underlying clients in terms of discretionary mandates) – 12 million shares for 192 million rand
- Meago Asset Managers (on behalf of its clients) – 5.5 million shares for 88 million rand; and
- Sesfikile Capital (on behalf of its clients) – three million shares for R48 million.
“The disposals are not subject to any condition precedent and will be carried out by way of off-market block transactions on or around June 2, 2021,” Attacq specified.
Speaking to Moneyweb about Attacq’s latest sale to MAS, Garreth Elston, chief investment officer at Reitway Global, said the move made sense because it means South African Reit would structure its business better.
“From the point of view of an Attacq investor, it is also more efficient because if investors want exposure to MAS, they can get it directly, rather than owning shares in a company with some ownership. SA in addition to MAS, ”he explained.