Premium, Octodec to up stake in IPS to 50% each
JSE-listed property funds Octodec and Premium Properties will increase their respective 40% stakes in IPS Investments, after IPS bought out the 20% shareholding in IPS that was held by City Property Administration.
IPS agreed to pay City Property a cash consideration of R127.5-million and repay a R48.1-million City Property shareholders loan to buy back the 20% stake.
The transaction, which will result in Octodec and Premium each owning 50% of IPS, marks the first step towards a possible merger between the funds after Premium lists on the new real estate investment trust structure of the JSE next year.
"The combined entity would make strategic sense in that it will simplify the corporate structure, free up management time and create a more sizeable company with increased liquidity,” said Octodec and Premium MD Jeffrey Wapnick in a statement.
The parties would gain increased exposure to a market characterised by strong demand and low vacancies, he added.
Octodec primarily invested in the retail, industrial and office property sectors, with a growing exposure to residential property, while Premium offered significant residential-sector exposure.
The transaction remained subject to various conditions precedent, including regulatory and shareholder approvals.
City Property would continue to manage the Premium, Octodec and IPS portfolios.
Further, Octodec would issue 9.1-million linked units at R19.25 apiece to City Property in exchange for a cash consideration of R175.6-million.
“The capital raised by Octodec will be used to reduce debt in the short term and to fund future developments and acquisitions,” Wapnick explained.
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