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[2014] ZACT 9
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Trustees For The Time Being of the Truzen 113 Trust and Redefine Properties Limited v Sycom Fund Collective Investment Scheme In Property, In Respect of The Property Enterprise Known As The Discovery Building (018648) [2014] ZACT 9 (2 July 2014)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case No: 018648
In the matter
between:
THE TRUSTEES FOR
THE TIME BEING OF THE TRUZEN
113
TRUST AND REDEFINE PROPERTIES
LIMITED
.......................................
Primary
Acquiring Firm
And
SYCOM FUND
COLLECTIVE INVESTMENT SCHEME IN
PROPERTY, IN
RESPECT OF TH PROPERTY ENTERPRISE
KNOWN
AS THE DISCOVERY
BUILDING
................................................................
Primary
Target Firm
Panel : Dr T Madima
(Presiding Member)
: Prof F Tregenna
(Tribunal Member)
: Mr A Roskam
(Tribunal Member)
Heard on: 4 June
2014
Order Issued on: 4
June 2014
Reasons Issued on: 2
July 2014
Reasons for
Decision
Approval
[1] On 4 June 2014,
The Competition Tribunal (“Tribunal”) unconditionally
approved the acquisition by The Trustees for
the time being of the
Truzen 113 Trust and Redefine (Pty) Ltd for an undivided half share
in the Discovery Building from Sycom
Property Fund Collective
Investment Scheme as a going concern.
[2] The reasons for
approving the proposed transaction follow hereunder.
Parties to the
transaction
[3]
The first primary acquiring firm is The Trustees for the Time being
of the Truzen 113 Trust
(“Truzen
Trust”).
The
Truzen Trust is controlled by Mr Tannenenberger, Mr Blow and Mr
Mundell. The Trustees are also executive directors of Zenprop
Property Holdings. Zenprop has Gingko Trust, Fynbos Trust, Hisbiscus
Trust, Palmer Trust, Allan Mundell Family Trust and Karoobos
Trust as
shareholders. The Trustees of these 6 Trusts are also Mr
Tannenenberger, Mr Blow and Mr Mundell.
[4]
The second primary acquiring firm is Redefine (Pty) Ltd
(“Redefine”)
a
company listed on the Johannesburg Securities Exchange
(“JSE”)
and
not controlled by any firm. Redefine controls various firms for
purposes of this transaction. What is relevant for purposes
of this
transaction is Redefine’s control over Fountainhead Manco
Property Trust Managers Limited
(“Fountainhead
Manco").
[5]
The primary target firm is the Discovery Building which is owned by
Sycom (Pty) Ltd
(“Sycom”)
a
company represented by FirstRand Bank Limited in its capacity as
Trustee. Sycom is listed on the JSE and carries Real Estate
Investment Trust status.
[6] Sycom is
controlled by Acucap Properties Limited, in its capacity as the
management company Sycom Property Fund Managers Limited.
For the
purposes of this transaction, only Sycom’s ownership of the
Discovery Building is relevant.
Proposed
Transaction and Rationale
[7] The Truzen Trust
and Redefine intend to acquire undivided half shares in the Discovery
Building as a going concern from Sycom.
The Truzen Trust and Redefine
will each have 50% of the shares in the Discovery Building which they
will jointly control.
[7] The Truzen Trust
and Redefine have identified the transaction as a worthy investment
opportunity which will complement their
existing portfolio. Discovery
Health (Pty) Ltd is currently the only tenant, it is unlikely to
renew its lease at the end of March
2016. Sycom’s has therefore
decided to dispose the property to mitigate risk of a substantial
vacancy in the 2016 financial
year as well as the risk associated
with re-developing and re-tenanting the property in an uncertain
office market.
Relevant Market
and Impact on Competition
[8]
The Truzen Trust as already mentioned is controlled by 3 trustees who
also are trustees for 6 Trusts
(“6
Trusts”).
1
These
6 Trusts control Zenprop, a company that manages a portfolio of 84
properties ranging from retail, commercial, industrial
and the hotel
sector throughout SA. Zenprop only manages the properties which are
owned by various trusts.
2
[9] Redefine is a
property loan stock company that comprises of a diverse portfolio of
retail, office and industrial space throughout
SA. Redefine Group
owns 123 590m
2
(one hundred and sixty three thousand four
hundred and twenty square metres) of rentable A-Grade office space in
the Sandton and
Environs node.
[9] Sycom is a
closed -end unit trust which owns the Target Property which is
classified as rentable A-Grade office and retail property
located
within the Sandton node. Sycom invests directly and indirectly in
retail and office space in Gauteng and Western Cape.
[10] The proposed
transaction does result in horizontal overlap in regards to
activities between the merging parties in respect
of rentable A
-Grade office space in the Sandton and Environs node.
[11] The relevant
market is therefore the provision of rentable A-Grade office property
rentable A - Grade office property within
a 7km radius from the
Discovery Building. This includes Sandton, Enviros, Rosebank,
Morningside, lllovo, Hyde Park and Dunkeld
area.
[12] In this market
the 6 Trusts market share will increase post transaction from 12.1%
to 13.77%, this is a 1.67% accretion. The
market share of Redefine
will increase post-transaction from 9% to 10.67%, this also results
in a 1.67% accretion. If the Commission
considers the wider market
and includes B-Grade property in the node as substitutable,
Redefine’s market share will increase
from 10.67% to 14.54%,
this is a 3.87% accretion.
[13] The Commission
is of the view that the market share accretion is minimal and the
proposed transaction is unlikely to result
in the Trusts or Redefine
exercising market power in the affected node. It is further of the
view that given the prevailing vacancies
in the area it is unlikely
that the merged entity will exercise market power in the market for
A-grade office spaces in the node.
There are also numerous large
competitors such as Growthpoint, Vunani, Momentum and Old Mutual that
will continue to constrain
the merged entity.
[14] The Commission
also considered whether information sharing between Redefine and the
Trusts should be of concern. However, both
merging entities do not
control a significant portion of the market to such an extent that
the exchange of sensitive information
between the two parties was
likely to significantly affect customers in the market.
Conclusion
[16] In light of the
above I conclude that the proposed transaction is unlikely to
substantially prevent or lessen competition in
the market for
provision of rentable A -Grade office property. In addition, no
public interest issues arise from the proposed transaction.
Accordingly I approve the proposed transaction unconditionally.
2 July 2014
DATE
Dr
T Madima
Mr
A Roskam and Prof F Tregenna concurring
Tribunal Researcher:
Moleboheng Moleko
For the merging
parties: Vani Chetty - Vani Chetty Competition Law (Pty)
Ltd
For the Commission:
Hardin Ratshisusu, Grashum Mutizwa and Lana
Norton
1
Gingko
Trust, Fynbos Trust, Hibiscus Trust, Palmer Trust, Allan Mundel
Family Trust and Karoobos Trust
2
Due
to the links between the 6 shareholders, the Trustees of the Truzen
Trust and Zenprop, the Commission has adopted a conservative
approach
and will take into account all the properties owned by the 6
shareholders in assessing the transaction.