GemGrow Properties Limited came about as a deal to create a pool property fund and was concluded between the Vukile Property Fund, Arrowhead Properties and the Synergy Income Fund. The new created fund, sourced from the coming together of the two, created an entirely new entity renamed GemGrow Properties. The goal of this coming together was to establish a high-yield, high-growth listed niche property fund.

According to Vukile CEO Laurence Rapp, the goal, in terms of its history, had been for some time to craft Vukile’s direct South African assets into a specialist retail property fund. The merger of the two companies to form GemGrow is this vision of the specialist, retail property fund.

According to Vukile CEO Laurence Rapp, the goal, in terms of its history, had been for some time to craft Vukile’s direct South African assets into a specialist retail property fund. The merger of the two companies to form GemGrow is this vision of the specialist, retail property fund.

Gerald Leissner will be the CEO of GemGrow. He is described as someone with vast experience in optimising A and B share structures and higher-yielding funds.

“The transaction addresses various strategic objectives of three separate entities, in turn creating a vehicle that offers shareholders exposure to a unique dual-class share structure with a focus on acquiring assets at attractive yields that will enhance earnings and growth prospects for the company,” explained Leissner.

“With this transaction, Vukile will look to achieve its goal today, placing over 90% of our live online asset portfolio in the most defensive and preferred property sector. At the same time, it reduces Vukile’s gearing and achieves our objectives for Synergy only 18 months after successfully acquiring it,” said Rapp.

Mark Kaplan, COO of then called Arrowhead Properties, said transferring its high-yielding properties into a separate listed subsidiary that is positioned for yield-enhancing growth is a strong and definite strategic objective.

“Although this kind of fund is not a first for the South African market, it will still be a niche operator focusing on existing opportunities in the property market.” Mark Kaplan, Chief Operating Officer of Arrowhead Properties is quoted to have said at various live stock trade events.

His professional annotation was also the explanation that most listed property companies evolve and as a process of this evolution end up mainly being the ones that buy the bigger properties.

“GemGrow will buy smaller properties. Currently the listed property companies don’t really focus on properties below 76m and we think that means there is an opportunity for us to explore,” said Kaplan.

“Because these smaller properties are not in the focus of the bigger listed property companies, they are usually also attractively priced, yet normally out of reach of individual buyers. It creates a kind of no man’s land.”

Kaplan believes that it is these opportunities that will afford GemGrow the property diet it needs to grow and develop and as such GemGrow’s share price and GemGrow’s shareholdership has the potential to grow quite rapidly

The transaction is expected to increase Synergy’s market capitalisation to R3.4bn, with a property portfolio valued at around R4.4bn.

“The GemGrow vehicle will re-energise and differentiate Synergy and give it a new platform for performance growth with yield-enhancing acquisitions,” according to a statement released on behalf of Vukile and Arrowhead.

To establish GemGrow, Synergy’s portfolio will be reconstituted with properties from both Vukile and Arrowhead for its asset base.

The company will be staffed by an experienced management team, subject to strategic oversight by Arrowhead, focused on growing the portfolio on an accretive basis. Going forward, GemGrow will not only benefit from asset management expertise relevant to its new investment strategy, but will also leverage off its appealing dual-class “A”and “B” share capital structure; a strategic and scarce instrument in the market.

Arrowhead considers there to be significant opportunities for growth within this market and believes that its dedicated and incentivised internal management team can add significant value to GemGrow.

GemGrow’s stated purpose will be to continue to deliver long-term sustainable growth in distributions and to sustain investor, creditor and market confidence and future development of the business by maintaining a strong capital base.

The primary objective of the company will be to pay increasing dividend returns to investors through managing and reducing, where possible, costs, acquiring revenue enhancing properties, escalating rentals, satisfactory renewal of leases and the renting of vacant space.

The company’s profits will be distributed quarterly as a rental distribution qualifying as a tax deductible expense. GemGrow shareholders are taxed according to their specific tax status.

In the case of Vukile, a R2.45bn asset swap will see Synergy exchange its entire portfolio of 14 retail shopping centres in return for 29 of Vukile’s higher-yielding office, retail and industrial properties. This will transform Vukile into a specialised retail property fund in South Africa with over 90% of its portfolio comprising high-quality retail assets, according to the statement. Vukile is also expected to benefit from its passive stake in the high-growth of new GemGrow.

In the case of Arrowhead, its subsidiary, Cumulative, which holds 100 high-yielding office, retail and industrial properties valued at R1.9bn, will be acquired by Synergy in return for the issue of Synergy B shares to Arrowhead. This will realise Arrowhead’s strategy of placing its high-yielding properties in a separate JSE-listed subsidiary. Arrowhead property portfolio will consist of large quality properties.

Synergy’s asset and property management will be internalised. To achieve this, Synergy will acquire its asset manager, Vukile Asset Management, in return for the issue of Synergy B shares to Vukile.

With Synergy’s A and B share structure, each share offers investors a different risk and reward profile. Synergy A shares offer more risk-averse investors preferential dividends capped at 5% growth per annum, representing secure, predictable earnings. Its B shares make it the ideal structure for investors looking for a higher-growth proposition. After paying dividends to A shareholders, remaining distributable earnings accrue to B shareholders.

Real Estate

Real Estate

We have made it simple to buy JSE listed firm shares online. The easiest way to buy GemGrow shares or stocks is to; start by submitting the ‘BUY THIS SHARE’ form. Next, one of our experienced and certified stock brokers will personally get in contact with you to discuss your custom stock request. Finally, a stock advisor will confirm the amount of shares you are looking to invest in GemGrow and assist you with the setup and management of your stock portfolio account.

1. Start by Filling in the BUY THIS SHARE form.
2. Insert your name, email, telephone number and monthly remuneration.
3. Then, Indicate the amount you are looking to invest in GemGrow.
4. Click the “ INVEST NOW” button
5. Once we have received your info, a dedicated stock advisor will personally call you back to discuss your personal share request.
6. Lastly, your newly appointed personal stock advisor will handle all account setups and reporting as stipulated by the financial services board of South Africa (FSB)

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