Liberty Two Degrees, a property portfolio established by financial services and holdings company Liberty Group, on Friday announced its intention to convert to a corporate real estate investment trust (Reit) and list on the JSE as a new company (NewCo).
This is subsequent to the cancellation of the existing put option between Liberty Group and Liberty Two Degrees, in terms of which Liberty Group has the option to sell further portions of its undivided shares in properties co-owned by it and Liberty Two Degrees for no consideration.
This also follows the acquisition of a further R1.2-billion of properties from the Liberty Property Portfolio (LPP).
The internalisation of the management company of Liberty Two Degrees will result in NewCo taking over from the manager the asset management functions in relation to both the Liberty Two Degrees and the LPP co-owned property portfolios.
Collectively, in terms of the internalisation, it is anticipated that NewCo will buy the business of the manager for R300-million.
The consideration in respect of the internalisation and the acquisition, which totals R1.5-billion, is intended to be funded by debt.
The Liberty Group board believes the proposed transaction is in the best interest of unitholders and that these measures should assist in achieving a better correlation between the unit trading price and the net asset value of Liberty Two Degrees’ underlying asset portfolio.
Further, the proposed transaction represents an opportunity to introduce a conservative level of debt to NewCo’s capital structure, serving to reduce its weighted average cost of capital, while still providing Liberty Two Degrees with flexibility to execute on its investment objective and strategy.
The board does not expect the proposed transaction to affect the distribution guidance for the year ending December 31.
It is anticipated that the transaction will be concluded during September.