South African real estate investment trusts Vukile Property Fund, Arrowhead Properties and Synergy Income Fund have teamed up to form a R4-billion new investment prospect for listed property investors.
The proposed new high-yielding, high-growth fund would be established within the existing entity of Synergy, which Vukile acquired last year.
“We believe we have found the best way to optimise this valuable structure in partnership with Arrowhead, which will achieve our goal to breathe new life into Synergy as a high-growth investment vehicle,” Vukile CEO Laurence Rapp said in a statement on Thursday.
Synergy’s new asset base would include properties from both Vukile and Arrowhead.
The bulk of Synergy’s retail assets would be moved into Vukile and Vukile would transfer most of its office and industrial assets into Synergy in an asset swop deal, while Synergy was set to acquire Arrowhead subsidiary Cumulative Properties in return for the issue of Synergy B shares to Arrowhead.
Arrowhead would have an active management stake in Synergy, while Synergy’s asset management would be internalised and staffed by a dedicated management team provided by Arrowhead.
“The vision for Synergy is to be income-focused. It will only undertake yield-enhancing transactions that grow sustainable earnings,” said Arrowhead COO Mark Kaplan.
The final terms of the potential transaction still needed to be negotiated and approved by the boards of the transacting parties, as well as Synergy shareholders.