Listed group Arrowhead Properties has announced the opening of an offer to invited shareholders to subscribe for shares in its residential property portfolio Indluplace Properties to raise R400-million, as well as the subsequent listing of the subsidiary on the JSE, transforming it into the first dedicated residential Real Estate Investment Trust (Reit) on the Johannesburg bourse.

The private placement of 40-million shares at an indicative issue price of R10 apiece was expected to enhance the liquidity and tradability of Indluplace’s shares and provide the company with a platform to raise equity funding to pursue growth and future investment opportunities.

Indluplace, which held a portfolio of 95 residential properties worth R1.6-billion, would focus on owning and expanding a substantial residential property portfolio from which it would pay distributions to its shareholders.

“Listed residential property comprises over 13% of the total listed property      market in a developed economy such as the US. In South Africa, it is under 2% and [we] believe that there exists an opportunity for significant growth in this sector of the real estate market,” Arrowhead FD and Indluplace director Imran Suleman told Engineering News Online on Wednesday.

He added that the company would continue to grow its portfolio aggressively through acquiring yield-enhancing properties and portfolios that provided income from the first day of acquisition.

“Investments in residential rental properties nationally will focus on affordable housing where a proven demand exists, generally in larger urban centres close to work opportunities and transport infrastructure.

“Other residential forms such as student housing or higher-income housing will be evaluated on a case-by-case basis,” he commented.

Citing a shortage of affordable, well-managed rental housing, as evidenced in the relatively low vacancy rates in this market, the property group was confident that it would be able to “substantially” grow its portfolio in the coming years.

“Similarly, good demand exists for affordable student accommodation…[and] the group aims to position itself as an exit for developers or owners of residential stock or portfolios,” said the company.

The placement, which opened on Wednesday, would close on June 10, after which Indluplace shares were expected to begin trading on the JSE on June 19.

The proceeds of the private placement would be used to partially settle interest-bearing borrowings, as well as the preliminary and issue expenses.