Heriot REIT Announces Share Disposal and Portfolio Rebalancing

  • Heriot REIT Limited announces the disposal of 1,571,645 shares in Safari Investments RSA Limited to Heriot Investments Proprietary Limited for a total consideration of R8,801,212, as part of a portfolio rebalancing strategy.
  • Proceeds from the Safari Investments share disposal will be utilized to address Heriot's debt facilities. Safari is a JSE-listed REIT with a diversified portfolio primarily comprising retail properties in and around Pretoria.
  • Heriot REIT Limited also plans to dispose of Hagley 3865 Proprietary Limited, a subsidiary, to Heriot Investments, aiming to mitigate development risks associated with a property in Cape Town. The transaction allows Heriot to repurchase up to 100% of Hagley's equity at cost within five years.

Heriot REIT Limited revealed its plans for the disposal of shares in Safari Investments RSA Limited and Hagley 3865 Proprietary Limited to a related party. These strategic transactions have been announced to rebalance the portfolios of the entities involved and mitigate potential development risks.

The disposal of shares in Safari Investments RSA Limited involves Heriot Properties Proprietary Limited, a wholly owned subsidiary of Heriot. Under this arrangement, Heriot Properties will sell 1,571,645 shares to Heriot Investments Proprietary Limited, another related party. The transaction will take place on-market, with each share priced at R5.60, resulting in a total disposal consideration of R8,801,212.

After the completion of this transaction, Heriot Properties, along with its concert parties, will retain ownership of 146,516,751 Safari shares, which represents 56.8% of the total Safari shares in circulation. The proceeds from the share disposal will be utilized to address Heriot’s existing debt facilities. Safari Investments RSA Limited is a REIT listed on the Johannesburg Stock Exchange (JSE) and boasts a diverse portfolio comprising retail, office, and residential properties, primarily situated in and around Pretoria.

The financial performance of Safari for the fiscal year ending March 31, 2023, highlights the following key metrics:

  • Distributable earnings per share: 65.00 cents
  • Basic earnings per share: 125.40 cents
  • Headline earnings per share: 69.22 cents

Heriot Investments, the majority shareholder of Heriot, is fully owned by The Gusi Trust, a trust benefiting Steven Herring and his family. Steven Herring holds directorship positions in Heriot, Heriot Investments, and Safari. As the size of the transaction in relation to Heriot’s market capitalization is substantial, but not significant enough to require shareholder approval, the disposal of Safari shares to Heriot Investments is subject only to announcement requirements.

In addition to the Safari Investments RSA Limited share disposal, Heriot REIT Limited also intends to sell Hagley 3865 Proprietary Limited, a wholly owned subsidiary, to Heriot Investments. Hagley owns a property spanning 70,000 square meters, located at Erf 3865 in the City of Cape Town Stellenbosch Division, Western Cape Province. Currently, a 35,000 square meter distribution center is being constructed on the property for Ackermans. The disposal of Hagley aims to mitigate any potential development risks associated with the project.

As part of the agreement, Heriot will retain an option to repurchase up to 100% of Hagley’s equity at cost. This option will be valid for five years from June 30, 2023, and can be exercised at Heriot’s discretion. The equity at cost includes the purchase price plus additional development costs minus any liabilities of Hagley on the date the option is exercised.

The net asset value of the transaction amounts to R40.3 million, with an anticipated loss attributable to the net assets of approximately R280,000 for the fiscal year ending June 30, 2023. The proceeds generated from the sale of Hagley will be used to reduce Heriot’s existing debt.

Similar to the Safari share disposal, the transaction involving Hagley 3865 Proprietary Limited is considered a transaction with related parties due to the involvement of Heriot Investments and its relationship with Steven Herring. However, given its size relative to Heriot’s market capitalization, it only requires an announcement and is not subject to shareholder approval.

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