HARARE (FinX) – The Tigere Real Estate Investment Trust (REIT) has announced a strategic move to acquire Highland Park Phase 2, a premier shopping center adjacent to its existing Highland Park Phase 1 from Modern Touch Investments (Private) Limited.
This acquisition is poised to significantly enhance the value of the REIT, providing a range of benefits for its unitholders.
The proposed transaction involves the issuance of 351,282,000 new Tigere REIT units to Modern Touch Investments in exchange for the completed Highland Park Phase 2 development. This acquisition will allow the Tigere REIT to fully control the Highland Park Shopping Centre, which is expected to significantly increase its asset base and overall value.
Post-transaction, Modern Touch Investments will hold approximately 32.8% of the total units in the Tigere REIT.
The dilution to shareholders results from the issuance of 351,282,000 new Tigere REIT units for the acquisition of Highland Park Phase 2, increasing the total units from 719,323,000 to 1,070,605,000. Thus, existing shareholders will experience a dilution of approximately 32.8%.
The decision to acquire Highland Park Phase 2 is driven by the asset’s potential to increase the REIT’s yield and diversify its tenant portfolio. Currently, Highland Park Phase 2 boasts an impressive income yield on net asset value (NAV) of 8.8% per annum, a stark contrast to the combined yield of 4.9% from Highland Park Phase 1 and Chinamano Corner.
This acquisition is expected to elevate the consolidated yield for the Tigere Property Fund to 6.07% per annum, translating into higher distributable income for unitholders.
In addition to yield accretion, the acquisition will enhance lease diversification. Highland Park Phase 2 has a variety of quick service restaurants to the REIT’s tenant mix, which is anticipated to boost foot traffic and overall performance of the shopping center. This diversification is crucial in mitigating risks associated with tenant turnover and market fluctuations.
The acquisition is also set to improve the REIT’s NAV, which is a critical indicator of the fund’s overall health and performance. By increasing its asset base, the Tigere REIT aims to grow its NAV from approximately US$22.5million to nearly US$33.8 million upon completion of the transaction. This growth aligns with the REIT’s ambitious target to reach a NAV of US$100 million within the next five years.
In terms of earnings, the acquisition is projected to result in a 25% increase in earnings per share (EPS), rising from 0.15 to 0.19 post-transaction. This increase in EPS indicates a positive impact on the overall earnings of the REIT, benefiting unitholders through higher distribution.
Furthermore, the acquisition is expected to generate substantial economies of scale. By consolidating operations between Highland Park Phase 1 and Phase 2, the REIT can achieve cost savings through shared infrastructure and reduced operational expenses. This synergy will not only enhance profitability but also improve the overall efficiency of the fund.
The Tigere REIT’s management team is optimistic about the transaction, viewing it as a pivotal step towards realizing its growth strategy. “The acquisition of Highland Park Phase 2 represents a significant opportunity for us to enhance our portfolio, increase our yield, and provide greater value to our unitholders,” said Tigere in its circular.
With the potential for increased income, diversified leasing, and improved NAV, the acquisition of Highland Park Phase 2 is set to position the Tigere REIT for a prosperous future.
