GEPF plans to acquire 30% shareholding in Waterfall City owner, for R2.8bn

Share in Attacq surged by 20.45% in early trade on Monday, after the JSE-listed real estate investment trust (Reit) announced the Government Employees Pension Fund (GEPF) is planning to acquire a 30% shareholding in its Waterfall Investment Company (AWIC), for an estimated R2.8 billion in cash.

AWIC is a wholly-owned subsidiary of Attacq and the owner of Waterfall City in Midrand.

Shares in Attacq traded as high as R8.71 on the day, after closing at R7.14 per share on Friday.

Attacq said it has entered into a non-binding term sheet with the GEPF, represented by the Public Investment Corporation (PIC), in terms of which the GEPF will acquire the 30% interest in AWIC.

Attacq said the investment will be made through issuing new AWIC equity, acquiring AWIC shareholder equity and shareholder loans from Attacq, and the extension of an additional pro-rata shareholder loan by the GEPF.

Should the proposed transaction be implemented, the GEPF will hold a minority shareholding of 30% in AWIC, with Attacq retaining control of AWIC with a majority shareholding of 70% and continuing to provide asset management and administration services to AWIC at market-related fees.

Explaining the rationale for the proposed transaction, Attacq said it will be transformative in furthering its strategic objectives.

These include:

• Introducing a long-term investment partner to AWIC, thereby securing funding for its ongoing Waterfall City development rollout;

• Optimising AWIC and the Attacq Group’s capital structure by improving debt metrics and investment capacity; and

• Enhancing the liquidity position of the Attacq Group.

The PIC has not yet responded to a Moneyweb request for comment on the proposed transaction.

Attacq CEO Jackie van Niekerk said the transaction aligns with Attacq’s strategy to optimise the group capital structure by creating a significant de-leveraged balance sheet, with the capacity to fund the Waterfall City development pipeline with no additional capital required from shareholders in the medium term.

Van Niekerk said Attacq will benefit from numerous cost savings and efficiencies while retaining its important Reit status.

“We are pleased by this transformative transaction for Attacq, to introduce the GEPF as a long-term strategic investment partner to AWIC.

“Working closely alongside our new partners, we remain committed in fulfilling our strategic purpose of creating sustainable value for all stakeholders,” she said.

Attacq chief investment officer Peter de Villiers said attracting this significant investment from the GEPF is a major affirmation of the quality of Waterfall City, one of South Africa’s fastest-growing work and lifestyle precincts.

“We can now expedite the ongoing rollout of developments within Waterfall City as part of our precinct strategy, which focuses on creating safe, smart and sustainable retail-experience, collaboration and logistics hubs,” he said.

Commenting on the “milestone transaction” for Attacq and Waterfall City, Attacq CFO Raj Nana said: “It also provides the GEPF with a unique investment opportunity in the co-ownership of a world-class city.

“Once implemented, Attacq will see its gearing reduce from 37.2% to c. 24.0% on a pro-forma basis providing the balance sheet to develop out Waterfall City.

“Attacq’s capital structure will also be optimised, resulting in a reduced cost of capital, thereby enhancing returns for Attacq’s shareholders,” said Nana.

“It’s a win-win for all stakeholders.”

The proposed transaction is still subject to the fulfilment of certain conditions, including the approval of Attacq shareholders.