Emira Property Fund has made an offer to buy the remainder of Transcend Residential Property Fund that it doesn’t already own to increase its exposure to residential properties in the lower living standards measure (LSM) sector of the market.
Emira, which owns retail, office, industrial and residential properties, is offering R5.38 per Transcend share, it said in a statement on Wednesday. Transcend confirmed the offer in its own statement on Wednesday.
Transcend will achieve greater stakeholder value if it becomes a subsidiary, because less effort will be spent on “increasing the size and liquidity of Transcend” as it focuses instead on “what will drive existing shareholder value”, Emira said in the statement.
Emira first bought a stake in Transcend in 2018 and now holds 40.69% of the company, which focuses on affordable housing in high-growth urban areas in Gauteng and the Western Cape. Transcend is a real estate investment trust, which first listed on the JSE’s AltX in 2016 before moving to the main board in 2020.
Emira said on Wednesday that Transcend’s ability to grow has “stalled with significant changes in the nature and dynamics of equity capital markets, particularly in SA” as it is now “restricted to issuing new equity at a substantial discount to net asset value, thereby diluting existing shareholders”.
Transcend shareholders have the option of converting their shares into cash as part of the proposed transaction or “remaining invested into an illiquid small-cap property fund that cannot achieve sufficient scale to justify the original listing intentions”, Emira said.
“We firmly believe that operating Transcend in the unlisted environment is the only realistic alternative for the future, given its limitations. Controlling it as an Emira subsidiary makes sense from a cost, access to capital and investor interest perspective,” Emira CEO Geoff Jennett said.
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