Shareholders of JSE-listed real estate investment trusts (REITs) Octodec and Premium Properties have approved the proposed merger of the two companies, creating a combined property fund that will attract a market capitalisation in excess of R5-billion and comprise 325 properties valued at some R10-billion.

The merger, which was expected to become effective in September, would result in Premium and unlisted property ownership and development vehicle IPS Investments – in which Premium and Octodec each held a 50% share – becoming wholly owned subsidiaries of Octodec.

The swap ratio of 88.5 Octodec shares for 100 Premium linked units was determined by taking into account historical volume weighted average prices for both companies as well as forecast distributions and the net asset values of both companies.

“We are pleased with the support received from our shareholders. We are now one step closer to creating a sizeable company offering an attractive investment proposition backed by a solid record of delivery, a healthy projects pipeline and strong asset mix concentrated in the high growth nodes of the Pretoria and Johannesburg central business districts,” commented Octodec and Premium MD Jeffrey Wapnick.

Post-merger, Octodec would offer investors exposure to a mix of retail, office and industrial assets as well as significant exposure to the residential sector, relative to any other REIT listed on the JSE.

Octodec and Premium financial director Anthony Stein added that the scale of Octodec would facilitate improved liquidity and, in addition to the existing facilities already in place for both entities, enable access to fresh capital at more attractive rates.

The merged entity was expected to attract interest from a wider group of investors, including tracker funds and international investors.

“Today’s announcement demonstrates that our shareholders share our view that a combined entity makes strategic sense. Both companies [use] a number of [the same] administrative and operational services and have complementary portfolios.

“Ultimately, the merger will support our objective of delivering above-average returns and growing distributions for our shareholders,” concluded Octodec and Premium chairperson Sharon Wapnick.

The proposed transaction remained subject to several conditions, including approval by the competition authorities and other regulatory approvals.