Gemgrow diversifies its portfolio further with retail acquisitions
Gemgrow Properties, a diversified property company that invests in high-yielding assets, has made its biggest acquisitions since it listed in 2016.
The company said on Monday it had acquired an effective economic interest of 95% in Moolgem, which comprises a portfolio totalling 26 properties in the Limpopo region, for approximately R628m. The investment currently provides a yield of 11.48%.
The acquisition will be effective from November 1 2018. In the same announcement, Gemgrow said it had also acquired another portfolio of 10 retail properties, to the value of R99.9m, at a yield of 12.46%.
The Moolgem properties consist of 85% retail stock, including prominent retail shopping centres such as Jane Furse Crossing and the Game Centre in Thohoyandou, with the remainder made up of a mix of industrial and office buildings.
The company, which listed with about R4.3bn in assets, has spent nearly R1.3bn since, including these latest acquisitions.
"The R550m worth of retail acquisitions concluded in the past year and these transactions demonstrate the company’s ability to implement sizable acquisitions in line with our objective of growing the fund through yield-accretive transactions," said Gemgrow CFO Junaid Limalia.
The two transactions will be funded by the issue of Gemgrow A shares to the sellers of the respective portfolios to the value of R150m with the balance payable in cash. Upon completion of the two transactions, Gemgrow’s loan to value will increase from 29% to 36%.
The acquisitions shift the fund's bias away from offices. COO Alon Kirkel said this would help Gemgrow maintain strong dividend growth as the office market was suffering from weak demand.
Gemgrow’s retail exposure will increase to approximately a third of the fund, with income earned from offices doming down to about 40%.