Gauteng Business News

Send  Share  RSS  Twitter  03 Feb 2011

BEE: Property Merger to Create R1,4 Billion Property Fund


Recent Gauteng Business News

Two of South Africa’s prominent commercial property companies are set to merge and establish a sizeable, diverse commercial property fund with exceptional BEE credentials.

The planned merger of Dipula Property Fund and Mergence Africa Property Fund will create a R1,4 billion property portfolio spanning some 320,000sqm gross lettable area and serving in excess of 500 tenants throughout South Africa.

The country’s first full-service black-owned property services company Dijalo Property Services holds the majority stake of Dipula Property Fund. Mergence Africa Holdings, an independent black-owned and black-managed financial services company, owns the controlling interest in Mergence Africa Property Fund. Leading JSE listed property company Redefine Properties owns a stake in both funds.

Dijalo brings its many years of property management and property asset management experience as well as its valuation skills to the partnership, while the Mergence team has strong financial, investment banking and property asset management expertise.

Both teams have a proven record of entrepreneurial flair and were born out of owner-managed companies. Co-founder of Dijalo Property Services Saul Gumede and Izak Petersen of Mergence Africa Properties, who have provided the strategic and operational direction for their respective funds since inception, are central to the merger transaction and will take up executive positions in the merged entity.

“The larger combined fund provides greater critical mass which improves competitiveness, economies of scale, and attractiveness to asset management talent. Importantly it greatly enhances the ability to generate sustainable and growing rental income streams,” says Petersen. “The intention is to grow the fund through a highly acquisitive strategy and to take best advantage of our unique market position”.

Petersen points out that the new company is already working on a number of transactions to acquire further property portfolios. “Growing our assets underpins our immediate objective of listing the merged fund on the JSE,” notes Petersen.Gumede explains that the merger will result in increased portfolio diversification - and thus reduce risk - with the combined geographic spread spanning all nine provinces in South Africa. “The merger also enhances the sectoral spread of the portfolio which will comprise retail (50%), office (25%) and industrial properties (25%) with a substantial blue-chip tenant base,” notes Gumede.

Another advantage of the transaction, notes Gumede, is the combined good established relationships that the partners enjoy in both the property industry and the public sector and the continuity of management that the fund will enjoy.

Petersen points out that few BEE partnerships have been concluded in the real estate sector. “This transaction is testimony to the fact that BEE companies can work together and create considerable opportunities and make a substantial contribution to the South African property sector,” explains Petersen.

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