South African property developer Moolman Group has agreed to sell nine shopping centers to Dipula Properties for R2 billion ($124 million), giving the listed real estate fund its biggest acquisition to date. The deal, announced Aug. 24, covers about 90,000 square meters of retail space across Limpopo, the Free State, Gauteng and North West. For the Moolman family, however, the sale is not a retreat from commercial property. It is a way to free up cash for new projects while reducing its holdings in some established centers.

Moolman Group recycles capital from sale

Pieter Lombaard, chief executive of Moolman Group, said the decision came down to knowing when an asset has reached the point where its value can be put to better use elsewhere. “Growth is not only about holding assets indefinitely,” he said, adding that the group wants to realise value, recycle capital and create room for future developments. The money from the sale will help fund projects already under construction, including Kings Walk Mall, Green Gate Shopping Centre, Canal Plaza and the redevelopment of Faerie Glen Shopping Centre. The group is also preparing projects in the Western Cape, including De Poort Lifestyle Centre and Diemersfontein Markt, as well as other retail expansions.

The properties being sold to Dipula include Checkers Centre Polokwane, City Centre Polokwane and Great North Plaza in Musina; Bloemfontein Makro and a 50 percent stake in Sasolburg Mall; Kaalfontein Corner in Tembisa and Rand Steam Shopping Centre in Richmond; and Game Centre Vryburg. The centers are anchored by retailers including Shoprite, Checkers, Game, Cashbuild and Makro, giving the portfolio a steady base of rental income. Dipula will also acquire a 50 percent stake in Lephalale Mall in Limpopo, the largest asset in the transaction. The 38,000-square-meter mall is valued at R1.03 billion ($63.7 million), putting the value of Dipula’s half at R516 million ($31.9 million), or about a quarter of the total purchase price. Moolman Group and its partner will retain the other half.

Moolman Group reshapes six-decade portfolio

The sale marks a change in the composition of a property portfolio the family has built over six decades. Moolman Group was founded in Polokwane about 60 years ago by Jan Moolman, together with Friech and Jannie Moolman. The private company now manages about 1.2 million square meters of commercial property across nearly 100 properties and has about 2,700 tenants. Jannie Moolman, who joined his father in 1973 after earning an accountancy degree from the University of Pretoria and later serving as mayor of Polokwane, helped shape the group’s preference for partnerships and joint ventures.

The company co-owns the 77,000-square-meter Mall of the North with listed fund Resilient and developer Flanagan & Gerard. It also owns Rustenburg Mall, which has 30,000 square meters of retail space, and shares an office park in Midrand with Attacq. The next generation is now involved in running the business. JZ Moolman, who has degrees in construction and financial management and previously worked at Beckers Construction and Resilient, joined the company as a development manager in 2012. Lombaard, a Pretoria native who joined Moolman Group in 2005, oversees its day-to-day operations.

Dipula acquisition adds immediate earnings

The family has also been putting more money into investments outside property. Internal filings show that it operates a family office serving more than 20 relatives, with a mandate to build investments beyond real estate. Those non-property assets now represent more than 40% of the family’s total net asset value. For Dipula, the acquisition expands its retail portfolio and adds assets with established tenants. The company is funding the purchase with a 1.1 billion rand ($68 million) private placement, together with existing credit facilities. The new shares are expected to list on the Johannesburg Stock Exchange on Sept. 1.

Dipula Chief Executive Izak Petersen said the acquisition would add to earnings immediately, with the portfolio carrying a blended yield of 9.3%. That is below Dipula’s weighted average cost of capital. The transaction also enabled the company to lift a cautionary announcement on its shares that had been in place since May 22. Moolman Group has not disclosed its value. As a privately held company, it does not publish the financial accounts that would allow investors to put a precise value on the business. Its scale is instead reflected in the size of its property portfolio, the number of tenants it serves and the projects it continues to develop.