Redefine Properties Ltd., South Africa’s second-largest real estate investment trust, announced its intention to acquire the entire issued share capital of Johannesburg Stock Exchange listed Pivotal Fund in a deal valued at R6.1 billion ($425 million). Pivotal is a development focused investment fund with a Grade A portfolio of completed income producing properties and developments.

Under the terms of the transaction, shareholders in Pivotal will receive 460 million new Redefine Properties shares and 31 million shares in Echo Polska Properties (EPP). According to Redefine, Pivotal’s property portfolio is valued at R12.9 billion in 21 income producing assets and 4 active developments. Pivotal’s African assets, such as The Wings in Lagos – Nigeria (37.1%) and other markets such as Mauritius, Mozambique, Morocco, Kenya and Zambia will be sold post implementation. Once the deal has been finalised, Redefine will operate approximately 350 properties totalling nearly 5.7 million square metres across the country.

It is subject to the usual regulatory processes for a transaction of this nature and will be implemented through a scheme of arrangement which requires 75% approval at a general meeting of Pivotal shareholders. Redefine Properties will delist Pivotal once the deal has been concluded which is expected before the end of the year.

Andrew Konig, CEO, Redefine Properties says,

“Development funds like Pivotal are seeing twin challenges of increasing cost of capital as well as the macro environment putting pressure on development returns…”

The acquisition of the Pivotal portfolio enables Redefine to continue with its investment philosophy to recycle its capital through disposing assets no longer aligned to its long term investment strategy and replacing them with prime (Pivotal) assets. Redefine has shifted its strategy in recent years to become a more urban focused landlord by acquiring modern properties in better performing nodes.

According to Konig, the deal provides Redefine with “a unique opportunity” in the current environment to acquire a portfolio of well leased modern properties in a single transaction. The acquisition further cements our position as one of the top landlords in Sandton, a node where we have grown to almost 30% of our office portfolio from almost no exposure five years or so back and allows us to make meaningful expansion into Bryanston and Centurion.