Freedom Property Fund is set to debut on the JSE with an initial market capitalisation of R1 billion and a diverse property portfolio of R1,56 billion, introducing a distinctive property capital growth investment proposition to the market.
Freedom will list on the main board of the JSE under “Real Estate – Real Estate Holdings and Development” sector under the share code “FDP”. Its listing is expected to take place in the next few weeks.
Not only is it a capital growth fund, but it is unique in providing shareholders with the prospect of participating in a diverse portfolio of property assets. It has a strong weighting in high-demand, selective residential property segments which are forecast to generate significant rental incomes. In doing so, it takes advantage of the limited access for investors to the listed residential property industry in South Africa.
Freedom Property Fund CEO, Tyrone Govender says: “Freedom was created to provide a platform for property owners and developers to unlock the value in their development projects. With access to funding becoming increasingly challenging to secure in the current economic environment, it is Freedom’s strategy to provide a vehicle through which property owners can secure the necessary development funding.”
With the objective of listing on the JSE, in 2012 Freedom began identifying viable properties and projects with excellent prospects in areas with proven, sustainable demand, which required a platform to secure the capital and property expertise necessary to optimise development potential and unlock value. The vendors of these properties became Freedom’s first investors.
Govender explains that Freedom’s listing will provide a significant base for the company to achieve its phased approach to growth and raise new funding to progress its growth strategy. “The listing of Freedom will enhance its market position and provide its investors access to a market in which its shares can be traded,” he adds.
“It will enhance Freedom’s ability to raise both debt and equity finance to develop the Freedom projects and take advantage of any acquisition and growth opportunities which may arise in the future.”
Govender says the identified pipeline for future acquisition and development growth is significant over the next three to five years and promises to deliver significantly higher capital growth.
On listing, Freedom’s gearing will be less than 3%, and its net asset value (NAV) per share will be around 35% greater than issue price of a Freedom share.
“The discount that the listing share price represents offers unique market prospects,” says Govender. “Freedom will unlock sustainable value and growth prospects for shareholders by capitalising on the largely ungeared value in our property portfolio. We will do this by securing reasonably-priced debt funding to develop a substantial portfolio of income-generating assets.”
Govender explains that Freedom’s focus on long-term sustainable capital growth differentiates it from investments such as REITs that mainly focus on income distribution. This makes it a defensive investment relative to REITs in the current property cycle.
“Freedom will deliver long-term sustainable capital growth through unlocking the opportunities in its immediate and long-term development pipeline,” says Govender. “We have a long-term view to investing in South Africa, and eventually into the rest of Africa, and we see incredible potential for growth with proven demand for the product we are launching.”
Freedom’s assets comprise income-yielding properties and developments across the office, industrial and residential property sectors. Its yielding properties include Steelpoort Industrial Park in Limpopo, Wespark Palms in the Free State and Stellenbosch Industrial in the Western Cape. This is complemented by a secured pipeline of five commercial developments, nine residential rental property developments and two residential sale property developments, as well as a long-term development pipeline in decentralised areas throughout South Africa.
Govender notes that Freedom’s residential portfolio will span a variety of structures and markets from student rental accommodation to housing on head-lease to mines
Driving the company forward, the management team behind Freedom comprises respected, experienced professionals knowledgeable in property and business.
Freedom’s executive team includes CEO Govender, a former executive director of Growthpoint Properties who has gained 18 years of listed property experience. Freedom Chief Financial Officer, Richard Eaton, is a chartered accountant with some 40 years’ experience, specialising in management consulting to multinationals across industries and financial services.
Property Development Manager, Gerhard Erasmus, is qualified in taxation and has gained a wealth of experience in deal making, business structures and property development. Freedom’s Business Development Manager, Graham Stavridis, a driving-force in establishing Freedom, is a charted accountant with vast experience in business development having executed many transactions in numerous industries. With his team, Graham negotiated and concluded all acquisition agreements which comprise the Freedom property portfolio.
Freedom’s management team scores strongly on Property Sector Charter requirements for the representation of black persons at board and senior management level. It also benefits from the insight and input of the vendors of the Freedom projects, who will collectively continue to hold a significant shareholding in Freedom in terms of the acquisition agreements.
“Our vendors have market knowledge, skills and expertise as well as a vested interest in the development of the Freedom property portfolio,” explains Govender.
And, Freedom’s in-house asset and property management expertise provide a solid basis for its internal management structure.
“Freedom provides investors the benefits of participating in significant capital growth opportunities in a property fund with good access to capital, a growing profile, and a larger investor base. All this strengthens Freedom’s market prospects,” says Govender.