WestProp in ‘brave test’ of the market

BUSINESS REPORTER

Real estate developer, WestProp, says it is testing the market with preference shares as it seeks to raise US$30m to finance its pipeline projects.

The company has launched an initial public offering and will list on the Victoria Falls Stock Exchange on April 29.

It will offer 1m ordinary shares at US$10 each and 5.4m preference shares at US$5 per share.

“This round of investment is one first of many that we will be raising and we want to see how the market performs. We are testing the market. If it is successful, then there will be more rounds of these preference shares,” CEO Ken Sharpe told an analyst briefing on Tuesday.

After five years, preference shareholders have to be converted to ordinary shares, converted to a sale or property or redeem and they get back their money, Sharpe said.

He said the preference share was the company’s way of giving the message clear to the market that “we are here to stay” and “want people to participate with us in this early journey and stay with the company”.

“That is the idea of a preference share. It’s an initial stage of engagement between us and the public to invest together to build Zimbabwe,” Sharpe said.

The real estate developer wants to finance pipeline projects that include Millennium Heights, Pokugara Residential Estate, Millennium Office Park, The Mall of Zimbabwe, Pomona City, Warren Hills Golf Estate and a 60-ha eco-park village.

Transaction advisor Itai Chirume said WestProp would generate monthly income in rentals from Millennium Office Park and The Mall of Zimbabwe.

“You are going to get a string of income and it’s very well possible that in future a portion of the portfolio will be collapsed into a REIT [real estate investment trust] and shareholders then get a dividend in specie into the REIT units to allow the rest of the company to operate on a model of a property development company,” Chirume said.

“The income side of the portfolio can transform into a REIT portfolio then shareholders participate in that through a conversion of their shares into REITs units.”

He said the transaction has the shareholder as an underwriter. However, one does not want the shareholder to come and fully underwrite an issuance otherwise they might as well not even go to the market, Chirume said.

“This is a brave test of the market to say the shareholder has put skin…let’s see how the market responds. The balance is exposure to the market.”

In the event of an under subscription, the real estate developer will have to prioritise projects, Chirume said.

“Because of the multiplicity of projects, then it will be an issue of prioritizing to say from the wallet that has come through at the market, which projects are going to be prioritised to spend that and to also consider to say do you then keep a tap open for the underwriting shortfall to allow participation post listing,” he said.