HEARTWOOD PROPERTIES
HEARTWOOD PROPERTIES
Property Pioneers Make Landmark Listing PRODUCTION: Timothy Reeder
Heartwood Properties is known for innovative, sustainable developments with high occupancy levels no matter the prevailing economic conditions. Its pioneering listing on South Africa’s new 4AX exchange has been a huge coup for the company, and will see many others follow suit. “The exchange will really help us to grow our business further, and to raise more capital. It suits a small business like ours perfectly,” summed up CEO John Whall.
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The Johannesburg Stock Exchange (JSE) is far and away Africa’s largest, and the 19th largest stock exchange in the world. It has a market capitalisation of $150 billion, but is now facing a new wave of competitors, previously unheard of, who will look to offer alternatives to the current exchange giant. This phenomenon has been put down in large part to introduction of stricter trading regulations South Africa back in 2014, which stopped some smaller, unlicensed companies trading their stocks privately, and in turn created opportunities for new nimble stock exchanges. This disruption of the exchanges market will spell good news for investors, according to economist Jannie Rossouw in The Conversation, who pointed to examples of rival stock exchanges in other middle-income countries like Chile and Brazil.
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“More than one stock exchange in a country offers investors choice and rivalry puts a limit on the ability of a monopoly stock exchange to charge inflated prices for trading and settlement services,” he explained. AFRICA’S NASDAQ? Arguably the biggest threat to the current order is 4 Africa Exchange (4AX), established in South Africa in 2014 and backed by a fearsomely strong consortium of names such as Bravura, Trifecta Capital and Intercontinental Trust lending their expertise in banking, finance and securities. The group is also fronted by Chichi Maponya of the Maponya Group, one of South Africa’s richest black families. 4AX will look to make financial markets more inclusive by providing, in short, a licensed exchange that is billed as red-tape free, more affordable than the JSE and more accessible to ordinary South
Africans than any other current iteration. Moving forward, the JSE may no longer suit the needs of growing companies with its sometimes onerous and expensive listing procedures. As a result, many have described the need of a new exchange to act as South Africa’s version of the US Nasdaq composite. “Our vision is for 4AX to be the preferred alternative exchange for Africa’s top companies and innovators,” outlined Fay Mukaddam, CEO of 4AX, in an open discussion with Business Report. “We are the only other exchange, apart from the JSE, that is licensed to list equity and debt. “What really differentiates us is that because of our structures and listing requirements, we are able to accommodate diverse listings - offering innovators and entrepreneurs the opportunity to list new ventures, including bankable projects,” she said. Even the JSE itself has come
INDUSTRY FOCUS: PROPERTY
around to the idea that diversity is the way forward, despite an early appeal on the award of the exchange licence to 4AX, with Donna Nemer, Director of Capital Markets at the JSE, attributing this to, “a better understanding of 4AX’s market approach, which will increase the diversity of financial markets in South Africa.” LANDMARK LISTING Founded by entrepreneurs with extensive property development experience and a passion for the industry, Heartwood Properties Limited has built up a proven track record of successful developments primarily focussed in the warehouse and commercial development sector in Gauteng and the Western Cape. Heartwood offers green and sustainable developments ranging from serviced co-working office space to innovative warehouse facilities. Its biggest undertaking to date is Block A of the popular Willow Wood Office Park in Broadacres, completed in 2011, initially for The Business Centre and
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// THIS EXCHANGE WILL ENCOURAGE A MUCH BROADER PARTICIPATION OF SHAREHOLDERS AS WE LOOK TO GROW THE BUSINESS FURTHER // now Regus with a 10-year lease. The drive, in partnership with SolarSaver, to convert this site to solar power, brought Willow Wood back into the headlines in December last year. “We realise the potential of solar,” said CEO John Whall, “and the great relief it will bring to our tenants who won’t have to rely on Eskom’s failing system or be at the mercy of its exorbitant pricing structure. Solar is also friendlier to the environment and as property developers we must reconsider the impact we have on nature.” A joint venture between Gauteng property developers Brydens Group and Montagu Property Group, Heartwood’s is a top-quality portfolio of properties, and current projects include the R80 million multi-tenanted Northriding Showroom Development. It is now also the first property company to proudly list on 4AX.
“The listing of Heartwood Properties on 4AX will assist in bringing into fruition our goals,” explained Whall, “which includes raising capital for deployment in our developments; organically growing the company through new acquisitions, and continuing to enhance our existing real estate portfolio. “At the same time, the listing of Heartwood Properties also provides potential investors, and tenants, a unique opportunity to invest in a dynamic listed property equity.” Whall added that 4AX had been chosen because it was an inexpensive listing option for the firm whose assets are worth around R120m. In his view, 4AX offers investors guaranteed good governance, transparency and all the controls that go with listed entities. “4AX is a very attractive proposition and I think more property companies
HEARTWOOD PROPERTIES
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looking to list specialised portfolios at low cost will join in,” Whall asserted. “As a development company wanting to expand to meet the market’s demands and keep abreast of trends, listing on the 4AX has been revolutionary.” Pallidus Capital will act as the ongoing external issuer agent of Heartwood Properties, whose exchange advisory division Head, Johan Fourie, further explained Heartwood’s choice to list on the new exchange. “4AX brings an alternative model, which reduces regulatory costs and inefficiencies, but promotes and is compliant with the highly regarded financial regulatory standards enforced in SA,” he summed up. INSTANT RESULTS Shortly after completing its 4AX listing, at the end of 2018 Heartwood Properties successfully conducted a capital raise
on the new exchange, which saw 4.5 million new ordinary shares issued to participants and resulted in a material increase of Heartwood Properties’ shareholder base. “Our objective was to grow the net asset value on the balance sheet and provide retail cash for this new development,” explained John Whall, of the private invitation-only offer to submit subscription offers in order to raise capital to fund future developments, in particular the Soleil commercial property development project in Bryanston, Johannesburg. Heartwood Properties’ property investments have all experienced significant organic growth during the past few years, which has seen the company’s property portfolio grow from an asset base of R52.6m in February 2014 to R120m in August 2018.
Heartwood’s listing on 4AX can only propel this growth further, as Whall agreed at the listing announcement. “This exchange will encourage a much broader participation of shareholders, which is exciting for us as we look to grow the business further. Our business has been syndicated up until now and this exchange allows us to expand and grow our shareholder base. “We have some exciting developments in the pipeline and we look to this listing to allow us to raise capital in the future in a way that is transparent but not as onerous some of the other exchanges. It is perfectly aligned to our growth path going forward.”
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