Gemgrow has acquires an effective economic interest of 95% in Moolgem (comprising largely of a retail portfolio) totalling twenty-six properties in the Limpopo region for approximately R628 million, yielding 11.48%.
The acquisition is subject to the fulfilment of certain conditions with effect from the 1st of November 2018. In addition, the group has acquired another portfolio of ten retail properties to the value of R99.9 million at a yield of 12.46%. These two transactions increase Gemgrow’s investment in property assets by R728 million.
The Moolgem properties are 85% retail which include prominent retail shopping centres such as Jane Furse Crossing and the Game Centre in Thohoyandou, with the remainder comprising of a mix of industrial and office assets.
Junaid Limalia, CFO of Gemgrow comments:
“The R550m worth of retail acquisitions concluded in the past year and the transactions above demonstrate the Company’s ability to implement sizable acquisitions in line with our objective of growing the fund through yield accretive transactions.”
These two transactions will be funded by the issue of Gemgrow’s A shares to the sellers of the respective portfolios to the value of R150 million with the balance payable in cash. Upon completion of the two transactions valued at R728 million, the group’s ‘Loan to Value’ will increase from 29% to 36%. The implementation of the transactions will result in Gemgrow’s retail exposure increasing to approximately a third of the fund, with the office income reducing to around 40%, considerably lower than the 55% when the fund was repositioned on the 1st of October 2016
“Since the inception of Gemgrow we have embarked on a process of growing and diversifying the portfolio, which includes an acquisition of R550m of outlying retail assets, strategic disposals of non-core assets and the current R728m purchase of predominantly outlying retail properties. In addition, the dual expertise of Gemgrow and the Moolman Group, through the Moolgem vehicle, will allow us to leverage off future opportunities and ensure we extract further value from our retail assets. Gemgrow continues to demonstrate its ability to grow its portfolio and earnings, while managing to be innovative in a challenging market. We further reiterate that we are on track to meet our guidance for 2018”concluded Alon Kirkel, COO of Gemgrow