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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No:
84/LM/Aug12
(015610)
In the matter between:
Fairvest Property Holdings Limited Primary Acquiring Firm
And
A portfolio of commercial properties of
SA Corporate Real Estate Fund Primary Target F irms
Panel : Andreas Wessels (Presiding Member)
Medi Mokuena (Tribunal Member)
Takalani Madima (Tribunal Member)
Heard on : 24 October 2012
Order issued on : 24 October 2012
Reasons issued on : 07 November 2012
Reasons for Decision
Conditional approval
[1] On 24 October 2012 the Competition Tribunal ( “ Tribunal ”) conditionally
approved the acquisition by Fairvest Property Holdi ngs Limited of a portfolio
of commercial properties of SA Corporate Real Estate Fund.
[2] The reasons for conditionally approving the p roposed transaction follow
below.
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Parties to transaction
[3] The primary acquiring firm is Fairvest Proper ty Holdings Limited
(“Fairvest” ), a JSE-listed property investment holding company . Fairvest
currently holds a number of commercial properties in the Eastern Cape, Free
State, Gauteng and KwaZulu-Natal.
[4] The primary target firms are a portfolio of c ommercial properties of the SA
Corporate Real Estate Fund ( “SACREF” ). SACREF is a diversified real
estate investment fund invested in retail, office a nd industrial properties
situated in the major metropolitan areas of South Africa.
[5] The to be acquired properties comprise of one office rental property, namely
Omniplace located at Rosen Park in the Western Cape, and the following ten
retail properties:
(i) 210 Church Street – Pietermaritzburg;
(ii) 212 Church Street – Pietermaritzburg;
(iii) 425 West Street – Durban Central;
(iv) The Ridge – Honeydew Ridge;
(v) Clubview Corner – Clubview;
(vi) Middelburg Pick ’n Pay - Middelburg;
(vii) Tokai Junction – Tokai;
(viii) Main Street – Gingindlovu;
(ix) Mkuze Corner – Mkuze; and
(x) St Georges Square – George.
Proposed transaction and rationale
[6] In terms of the proposed transaction, Fairves t will acquire the above-
mentioned eleven letting enterprises from SACREF, e ach as a going
concern (hereinafter referred to as “the target properties” ). Post-
transaction, Fairvest will exercise sole control over the target properties.
[7] According to Fairvest, the proposed transacti on is in line with its current
expansion strategy.
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[8] The seller, SACREF, no longer wishes to hold the target properties.
Competition and public interest assessment
[9] Although both the merging parties own rentabl e retail and commercial office
space in South Africa, there is no geographic overl ap between their activities
since their properties are located in different geographic nodes.
[10] The Competition Commission ( “Commission” ), however, in relation to
three of target shopping centres, namely St Georges Square (George),
Mkuze Corner (Mkuze) and Middelburg Pick ’n Pay, r aised a concern
pertaining to certain exclusivity clauses contained in the existing lease
agreements with anchor tenants. These lease agreeme nts expire in 2013
and 2014.
[11] The Commission was concerned that these excl usivity clauses could have
the effect of preventing small businesses, such as butcheries, bakeries,
delicatessen stores and the like, from gaining acce ss to rentable retail space
in the respective shopping centres. In order to add ress this concern the
Commission, based on certain undertakings by the me rging parties,
recommended that certain conditions be attached to the approval of this
transaction.
[12] The above-mentioned exclusivity clauses in the lease agreements with
anchor tenants raise likely public interest concern s in terms of section
12A(3)(c) of the Competition Act of 1998 1 and conditions are therefore
warranted to address such concerns. As such, the Tr ibunal has approved
the proposed merger subject to the following conditions:
a. Fairvest shall negotiate with Checkers, Pick ‘n Pay and Bridge
Wholesale in the utmost good faith to have the excl usivity clause in the
lease agreement removed at the renewal of the lease in respect of
each of the following centres and on the dates indicated below:
• St Georges Square (2013)
1 Act No. 89 of 1998, as amended.
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• Middelburg Pick ‘n Pay (2013)
• Mkuze Corner (2014)
b. Fairvest shall within thirty days after entering into a new lease
agreement with Checkers, Pick ‘n Pay and Bridge Who lesale in the
above listed centres, provide the Commission with a report setting out
in detail the extent to which they have complied wi th the above
condition.
[13] The merging parties confirmed that no negative effects on employment are
envisaged as a result of the proposed transaction. 2 Apart from the above-
mentioned likely effects on small businesses as a r esult of certain exclusivity
provisions in certain existing lease agreements, th e proposed deal raises no
other public interest concerns.
CONCLUSION
[14] We approve the proposed transaction subject to the above highlighted
conditions. A full set of the imposed conditions is attached hereto as
“Annexure A ”.
____________________ 07 November 2012
ANDREAS WESSELS DATE
Medi Mokuena and Takalani Madima concurring
Tribunal researcher: Nicola Ilgner
For the merging parties: Ahmore Burger-Smidt of We rksmans Attorneys
For the Commission: Zanele Hadebe
2 See pages 10, 89 and 121 of the merger record.