The Johannesburg Stock Exchange. File picture: Siphiwe Sibeko
JOHANNESBURG – Liberty Two Degrees (L2D),the real estate investment trust (Reit), acquired a further R1.2billion in property assets from the Liberty Property Portfolio (LPP) and cancelled the existing put option it had with Liberty Group.
In terms of the put option, Liberty Group had the option to sell further portions of its undivided shares in properties it co-owned with L2D for no consideration. L2D also confirmed on Friday that it would convert to a corporate Reit to be listed on the JSE as a new company and to internalise its management company, which would result in a new company taking over the asset management functions of both L2D and the LPP co-owned property portfolios.
These steps were to fully align L2D with similar entities in the listed property sector on the JSE. L2D said its board believed the proposed transaction was in the best interests of unit holders and should assist in achieving a better correlation between the unit trading price and the net asset value of L2D’s underlying asset portfolio.
It also represented an opportunity to introduce a conservative level of debt to the new company’s capital structure, thereby reducing its weighted average cost of capital while still providing L2D with flexibility to execute its investment objectives and strategy. In terms of the internalisation of its management company, L2D said it was anticipated that the new company would purchase the business of the manager for R300million subject to the necessary regulatory approvals.
L2D said it was intended that the consideration for the internalisation and the acquisition, which totalled R1.5bn, would be funded by debt. Its board currently did not expect the proposed transaction to require any change to the distribution guidance provided previously. Units in L2D rose 5.56percent on Friday on the JSE to close at R7.60.
– BUSINESS REPORT