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Seems like now is a great time to be selling new shares on the JSE – the last few companies to float stock in the current market have seen strong prices, good demand, and high volumes. In the latest of these success stories, property group Redefine successfully raised R1.3bn selling newly issued linked units in a book build that was 1.5 times oversubscribed. As Redefine FD Andrew Konig explains, a chunk of money will go towards financing the purchase of half Maponya Mall in Soweto with the rest earmarked for other acquisitions. – FD
ALEC HOGG: Andrew Konig is with us now. He’s the Financial Director of Redefine, a R29bn property investment fund listed on the JSE. Andrew thanks for joining us. It is interesting to notice that Redefine has gone through a process of a book build rather than placing stock directly, but that this book build was a lot better supported than anticipated, particularly given the fact that property shares have not done that well so far, this year. Were you surprised?
ANDREW KONIG: I don’t think we were surprised at all. We were actually delighted. Given the level of support that we’ve seen of late – I think there have been two listings in the last while – they’ve been very well supported and we believe that if you have a good investment story, if your requests for funds are asset-specific, and you have good results as we just reported, there will be support for your offering.
ALEC HOGG: That’s a lot of money – 1.3 billion. You do have an ADR in the United States. Did much of it come from offshore?
ANDREW KONIG: It was all local. When you have to go offshore there’s a whole regulatory process attached to that, and we kept it simple. We kept it local, and that’s why we were targeting one billion rand. We felt that if we were to go well beyond one billion rand, we probably would have had to go offshore, but at that level, we were confident that we could get it away here and we didn’t focus at all offshore.
ALEC HOGG: And the pricing at R9.60: how did you arrive at that?
ANDREW KONIG: R9.60 represents a four percent discount to the opening price of R10.00 and it just so happened that our 30-day V Wap was also at the same level. We would have preferred a little bit of a tighter discount. I think we’ve been spoilt, especially prior to the May announcement by Bernanke of the easing of quantitative…
ALEC HOGG: QE? (Quantitative Easing)
ANDREW KONIG: Since then the yield has obviously blown out, but before that we were pricing probably at a discount of about two percent. Four percent is reasonable, but yesterday we did have some adverse impact emanating from the GDP and growth announcement. As you know, it was lower than expectations. There was an element in terms of slippage of price, but nonetheless that level – R9.60 – represents an approximate forward yield for Redefine of about 7.75 percent, which, in our view, is an attractive value to realise capital.
ALEC HOGG: And a big chunk of it is going into the Maponya Mall in Soweto.
ANDREW KONIG: It will eventually find its way there, yes. The Maponya Mall transaction is subject to Competition Commission approval. That process will unfortunately, be delayed to some extent, given the festive season break that’s looming, so we anticipate spending the money on Maponya early in the New Year – probably round about February. For now, we’re parking the money against access facilities that we have, to save some money on our borrowing costs. We felt that we’d rather tap the market now while we’re still at the end of this calendar year, because who knows what’s holding out for early on in the New Year.
ALEC HOGG: Its big numbers, though – R727 million – half of the Maponya Mall. Just to close off with… We asked Alan Knott-Craig a moment ago about his dad. He’s doing better. Another good friend of ours – your Chief Executive and colleague, Mark Wainer, is also not well at the moment.
ANDREW KONIG: Yes, Mark’s had an infection in his colon. He’s back on his feet. He’s gone home today and we hope to have him back at the office soon.
ALEC HOGG: Tell him to throw away those cancer sticks, Andrew.
ANDREW KONIG: I don’t think…that’s part of his brand. You know Mark.
ALEC HOGG: Indeed it is. That was Andrew Konig, the Financial Director of Redefine Properties.
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