Afine Investments, which owns a portfolio of income-generating gas station properties in four of South Africa’s nine provinces, will be listed as a Real Estate Investment Trust (Reit) on the JSE Alternative Exchange (AltX) on Friday (December 9). ).
Afine was founded by Peter Todd, with strategic input from former Redefine International (now RDI Reit) CEO Mike Watters, who are notable investors and traders in the listed property space.
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The purpose of the establishment of Afine was to create a holding company for a Reit focused on the oil sector in South Africa.
Watters will serve as chairman of Afine’s board of directors.
The JSE has granted Afine approval for a primary listing of the company’s 64 million shares in the ‘Other specialized income’ sector.
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The shares are trading at a listing price of R3.67 per share, giving the company an initial market capitalization of approximately R235 million.
Afine’s real estate assets were valued at R307 million by the independent property appraiser.
Afine was created with the key leadership of the Petroland Group, which was established in 1993 by Anton Loubser, who has been appointed CEO of Afine.
Since its inception, Petroland has developed more than 60 new gasoline service stations.
Watters confirmed to Moneyweb that they had obviously “thought a lot” about the accelerating changes taking place in the auto industry.
The transition to new energy vehicles, including electric vehicles, is likely to lead to changes in the revenue-generating model of gasoline service stations to ensure their sustainability.
But Watters believes that South Africa is 15-20 years old before these changes occur.
“South Africa can’t even keep the lights on, let alone be able to load a fleet of 20 or 30 million vehicles.
“We do not see it as a problem in the short term, but certainly in the long term the network of your service station will continue to be very useful to comfortably shop, repair cars, tires, batteries, recharge,” he said.
“So we see a transformation over time, which is going to happen much faster in the first world, whereas in the third world and South Africa there is going to be gasoline and diesel for a long time. It’s not going to happen [change] overnight, ”added Watters.
SA (Sapra) Petroleum Retailers Association national director Vishal Premlall is not aware of Afine and its impending listing, but stressed that the industry is changing and there are new entrants to the industry all the time.
He said Sapra has worked hard in recent years to drive discussion around the changing environment.
“The change is real and [fuel retailers] I need to start accepting that this change is going to happen in the near future, “he added.
Premlall said that the alternative fuels environment with electric vehicles and the like will mean that the gas station model will have to change completely and become more customer-centric.
“That’s very different than it is the moment you ‘fill up the tank and go,'” he said.
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Premlall said fuel retailers will no doubt have to look for alternative revenue streams on their sites and may want to add things like restaurant facilities that fit into small meeting rooms and boardrooms.
He declined to comment on the potential impact on the affordability of fuel retail site rentals due to the transition from gasoline retail.
Watters believes that the rationale for Reits’ existence – producing income – is there and will be there forever.
“People need income and that is why the Reits are so well qualified. If you have an investment that gives you solid, stable and growing income, that’s what people want to invest in, ”added Watters.
“I think Reits will get stronger, regardless of all these fundamental problems around the world. There is a convergence of Reits all over the world that resemble each other to meet the requirements that global investors must mark.
“You need scale, liquidity, good corporate governance and the right levels of debt. If you meet those requirements, people will invest in you, ”he said.
Watters added that the recent trend in investment demand for Reit from investors has been for specialized Reits rather than generalized portfolios.
He said this has gained momentum with logistics specializations such as Equites Property Fund, self-storage (Stor-Age Property Reit) and multi-rental industrialists (Stenprop Limited and Sirius Real Estate).
Watters said that ownership of gasoline service stations in South Africa was not until recently concentrated.
“Afine’s goal is to consolidate the ownership through a Reit structure, with an acquisition strategy to grow the business substantially over the next five to 10 years,” he said.
Llewelyn Gerber, director of corporate finance at Bravura, an independent investment bank that acted as corporate advisor on Afine’s listing, said the specialty Reits trend is not unique to South Africa and is well known on the Australian and international listed markets.
“Specialized investments in real estate, including investments in gas stations, are drawing interest from both investors and lenders,” Gerber said.
“This is not surprising considering the returns offered by this specialized real estate investment subsector. Even in a confinement, gas stations offered a great opportunity, in the right places, of course, ”he said.
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AcaciaCap’s Michelle Krastanov, who acted as a designated advisor to the listing, said Afine has secured long-term leases with Big Oil, providing reliable and sustainable income, and has also signed an agreement with Petroland, one of the major oil stations. South Africa service. developers, in terms of which Petroland will provide strategic management services.
Krastonov said Afine has also negotiated a right of first refusal on all of Petroland’s new development projects.