The initial issue on the Bond Exchange of South Africa of five-year floating-rate notes of R805 million is the largest commercial property securitisation issue placed in South Africa to date. The notes are linked to the three-month JIBAR (Johannesburg Inter Bank Agreed Rate).

The issue is secured by 36 prime investment properties across South Africa valued at R1.34 billion with a total gross lettable area of 259,371m².

"The majority of our securitisation bonds were rated AAA.zaf by Fitch Ratings, and achieved a credit margin of 0.34% over three-month JIBAR while the transaction achieved a weighted average credit margin of only 0.47% over three-month JIBAR," says Growthpoint Properties Limited CEO Norbert Sasse.

Fifteen investors bid for the securitised bonds, resulting in significant demand and record low pricing. The refinancing of the securitised portion of Growthpoint's debt has consequently reduced the funding rate by over 1.15% per annum.

"Securitisation will benefit Growthpoint's linked unitholders with increased distributions. Further benefits include the lowered average cost of borrowings, diversification of borrowing sources and the increased competitive advantage of Growthpoint to make value-enhancing acquisitions," explains Sasse.

"Tapping into capital markets through securitisation will be central to Growthpoint's future funding and will result in even further financial benefits as the required structure has already been put in place for the initial issue by the Investec Debt Capital Markets team, lead arranger and manager of Growthpoint's securitisation," says Sasse.

Richard Wainwright, head of treasury and specialised finance at Investec Bank (INL), points out that "there is currently in excess of $3 trillion securitised paper in issue worldwide, of which over $500 billion is secured by commercial property. As with international markets, there is a growing trend towards securitisation funding in South Africa, and Investec actively supports this trend."

The primarily AAA.zaf bond rating was achieved, in large part, due to the unique low-risk structure of Growthpoint's securitisation special purpose vehicle (SPV).

The securitised portfolio has been successfully ring-fenced into a trust, Growthpoint Securitisation Warehouse Trust, which was registered for the sole purpose of holding properties for its securitisation programme.

"Growthpoint Securitisation Warehouse Trust has been structured in such a way that Growthpoint will provide all operational and strategic management services to the trust. Growthpoint, which is managed by Investec Property Group, will also effectively hold the trust's property ownership powers," explains Sasse.

The trust also provides Growthpoint with "transparency" for tax purposes, as all amounts accruing to the trust are deemed to accrue to Growthpoint as the sole vested income and capital beneficiary. The properties held by the trust are ring-fenced, insolvency remote and carry no operational risk of the holding company, which is a necessary requirement  for successful securitisation.

I-Net Bridge