JSE-listed Emira Property Fund on Wednesday announced its decision to convert into a company, to become a corporate Real Estate Investment Trust (Reit) to be called New Emira.

The introduction of Reit legislation meant that there was no advantage for Emira to remaining a Collective Investment Scheme in Property (CISP) and the fund’s property manager Strategic Real Estate Managers (Strem) had determined that it would be beneficial for Emira to convert into a company.

Therefore, Emira intended to undertake steps to facilitate its restructure into a corporate Reit and to internalise the management function of Strem to better align the interests of Emira’s management with those of its participatory interest (PI) holders.

Emira was granted Reit status by the JSE in 2013 and, in terms of the Collective Investment Schemes Control Act 45 of 2002 (Cisca), it remained a portfolio created under a CISP but was recognised as a Reit for taxation purposes.

In March, the Registrar of Collective Investment Schemes issued a conversion notice setting out the procedure to be followed for the conversion of a CISP to a listed corporate Reit.

The conversion notice was issued following the introduction of the Reit regime. As this resulted in the alignment of the fiscal consequences of investing in a CISP and a property loan stock company, the key rationale for Emira being established as a CISP no longer existed.

There were various operational disadvantages to Emira remaining a CISP and these would be remedied through the conversion into a corporate Reit.

The conversion would allow the asset-management function currently provided by Strem to be internalised in the new corporate Reit Emira and would permit part ownership in unlisted property companies, which was prohibited under the Cisca.

There was a strong preference for property investment entities to be structured as corporate Reits as they were better understood by institutional investors.

Subject to the approval of PI holders, the transaction would be effected in accordance with the provisions of the conversion notice.

The corporate Reit Emira would internalise the asset management function currently performed by Strem by acquiring the entire issued share capital of and all shareholder claims against Strem from the shareholders of Strem for their nominal and face value of R2.2-million which would be payable in cash.

In terms of the transaction and with effect from July 1, 2015, Emira would dispose of all of its assets to corporate Reit Emira in consideration for the assumption by New Emira of Emira’s liabilities – including the payment of a distribution to PI holders in respect of Emira’s financial year ended June 30, 2015, on or before October 31, 2015.

Further, New Emira would assume Emira’s obligations under and relating to the domestic medium-term notes programme established on August 12, 2011.

Further, from July 1, Emira would transfer by novation all rights, liabilities, duties and obligations of Emira in respect of all of the confirmations and other definitive documentation evidencing the interest rate swap agreements and currency swap agreements entered into by Emira.

July 1 would also see the issuing of the shares in New Emira, directly to Emira PI holders on behalf of Emira in the ratio of one New Emira share for every one Emira PI held on the record date for the transaction – July 10, 2015.

Therefore, current PI holders in Emira would become direct shareholders in New Emira and would continue to be invested in the same base of assets in which they were currently invested through their holding of Emira PIs.

Following PI holder approval of and subsequent implementation of the transaction, Emira would no longer hold any assets and liabilities and would no longer qualify for a listing on the JSE.

Accordingly, the listing of Emira on the main board of the JSE would be terminated with effect from July 14, and Emira would be liquidated and wound-up.

New Emira would be established as an internally managed corporate Reit, with its issued ordinary shares listed on the diversified Reits sector of the JSE from July 6, 2015.

The transaction was subject to the fulfilment or waiver of set out conditions precedent, on or before May 8, 2015.