Redefine Buys Pivotal to Add 13 Billion Rand of Property Assets

  • South Africa’s second-largest REIT agrees to share swap
  • Pivotal had to reconsider future in a stagnating economy

Redefine Properties Ltd., South Africa’s second-largest real estate investment trust, agreed to buy Pivotal Fund Ltd., valued at about 6.1 billion rand ($425 million), in a share swap. 

Shareholders in Pivotal will get 138.5 Redefine shares and 9.38 shares in Echo Polska Properties NV for every 100 Pivotal shares they own prior to implementation of the transaction, the companies said in a joint statement on Tuesday. Pivotal dropped 4.2 percent by 3:51 p.m. in Johannesburg.

“Within a stagnant domestic economy and rising interest-rate environment, we experienced significant pressure on our ability to generate satisfactory development profits and investment returns,” Pivotal Chief Executive Officer Jackie van Niekerk said in the statement. “We had to weigh up the benefits of becoming a smaller-cap REIT in a highly congested sector, or merge with one of the largest REITs in the Johannesburg Stock Exchange’s listed property index.”

The deal will add property worth 13 billion rand to Redefine’s portfolio, expanding its premium office space offering and giving the company a total of 350 properties covering 6 million square meters (64.6 million square feet), the Johannesburg-based company said in a separate e-mailed statement.

Pivotal’s net asset vale per share increased 24 percent to 22.8 rand and rental income jumped 57 percent in the year through February, the company said May 25. Redefine bought what is now a 49.9 percent stake in Polish real estate company Echo Prime Properties in March. Pivotal owns 6.1 percent of Echo, according to company filings.

Redefine, valued at 57 billion rand, raised 1.5 billion rand in an accelerated book build on July 13. The company reported profit of 1 billion rand in the six months to Feb. 29, down from 2.1 billion in the same period a year earlier. The Redefine shares will be issued ex-dividend, anticipated to be at the end of November, and the EPP share will be delivered during January 2017. Redefine’s investment in EPP will remain intact, the company said.

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