COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM174Jan23
In the matter between:
Growthpoint Student Accommodation Holdings
(RF) Ltd
Acquiring Firm
and
Feenstra Group Developments (Pty) Ltd in respect
of the immovable property and letting enterprise
known as Brooklyn Studios
Target Firm
Approval
[1] On 3 March 2023, the Competition Tribunal (“Tribunal”) unconditionally approved the
large merger in which Growthpoint Student Accommodation Holdings (RF) Ltd
(“GSAH”) will acquire the immovable property and letting enterprise known as “Brooklyn
Studios” from Feenstra Group Developments (Pty) Ltd (“Feenstra”). Post -merger,
GSAH will own and control Brooklyn Studios.
Parties to the transaction and their activities
Primary acquiring firm
[2] GSAH is an unlisted real estate investment trust and is controlled by Paramount
Property Fund Ltd (“Paramount Property”). Paramount Property is a wholly -owned
Panel: Mondo Mazwai (Presiding Member)
Jerome Wilson (Tribunal Member)
Andreas Wessels (Tribunal Member)
Heard on: 16 February 2023
Last submission on: 20 February 2023
Order issued on: 03 March 2023
Reasons issued on: 03 April 2023
REASONS FOR DECISION
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subsidiary of Growthpoint Properties Ltd (“Growthpoint”), a real estate investment trust
listed on the Johannesburg Stock Exchange. Shareholders in GSAH, apart from
Growthpoint, include [shareholder names listed]
.
[3] GSAH’s investments are exclusive to purpose -built student accommodation. Its
properties are situated in Johannesburg, Pretoria, and Cape Town.
Primary target firm
[4] Brooklyn Studios is wholly owned and controlled by Feenstra, which is in turn, a wholly-
owned subsidiary of the Feenstra Group (Pty) Ltd (“Feenstra Group”). Feenstra Group,
controlled by the Feenstra Business Trust, is a property development and property
holding company, and a non-controlling shareholder in GSAH.
[5] Brooklyn Studios is purpose-built student accommodation located in Brooklyn, Pretoria.
Brooklyn Studios is a newly constructed building comprising of 714 student beds.
Proposed transaction and rationale
Transaction
[6] In terms of the proposed transaction, GSAH intends to acquire Brooklyn Studios from
Feenstra. Following the implementation of the proposed transaction, GSAH will
exercise sole control over Brooklyn Studios.
[7] Feenstra Group will continue to hold a non-controlling share in GSAH and to provide
property management services to GSAH’s properties (including Brooklyn Studios) post-
merger.
Rationale
[8] GSAH submitted that the acquisition of Brooklyn Studio s will allow it to expand its
geographic reach within Pretoria for purpose -built student accommodation , and to
respond to the increasing demand for such accommodation within this area.
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[9] Feenstra submitted that the proposed transaction follows the implementation of an
earlier transaction1 between Growthpoint and the Feenstra Group. GSAH, which was
then known as Joburg Stay (Pty) Ltd and a subsidiary of the Feenstra Group, was
acquired by Growthpoint, and entailed Growthpoint acquiring control of GSAH’s entire
purpose-built student accommodation portfolio. Brooklyn Studios was still under
construction at the time of that transaction, and therefore was not included in it.
Competition assessment
[10] The Competition Commission (“Commission”) considered the activities of the merging
parties, and found that the proposed transaction raises a horizontal overlap as the
parties are both active in the provision of rentable space in res idential property for
student accommodation.
Product market
[11] As regards the relevant product market, t he Commission found that both GSAH and
Feenstra are involved in the provision of rentable space in residential properties used
for student accommodation and, following Respublica2 and Urban Impact,3, defined the
relevant market as such.
[12] Based on this market definition, the Commission found an overlap between Brooklyn
Studios and four4 of GSAH’s student accommodation properties.
[13] For purposes of its assessment, the Commission did not draw any distinction between
private student accommodation and student accommodation offered in residences of
the University of Pretoria (“university residence accommodation”). The Tribunal raised
the question (which it has not specifically considered before) whether university
residence accommodation necessarily forms part of the same market as private student
accommodation. For example, university residence accommodation might be
differentiated from private student accommodation insofar as factors such as subsidised
1 Growthpoint Properties Ltd and Joburg Stay (Pty) Ltd (Tribunal Case Number. LM048Jul21), approved by the
Tribunal on 15 September 2021.
Tribunal on 15 September 2021.
2 Respublica Student Living (Pty) Ltd & Midrand Varsity Lodge (Pty) Ltd, Masingita Estates (Pty) Ltd, Sam King
Investments Holdings (Pty) Ltd re target properties Midrand Student Village & White House Lodge (Tribunal Case
Number: LM245Mar16)
3 Urban Impact Properties (Pty) Ltd & Pulse Student Lifestyle (Pty) Ltd (Tribunal Case Number: LM099Jun18)
4 These properties of GSAH include Hatfield Studios, Varsity Studios, Studios@Burnett, and Festival Edge.
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accommodation, dining services and security are concerned. Mr Muchanya of GSAH
explained the dynamics of student accommodation as follows:
“But what however does happen here is that Universities when it comes to fill, they’re
always filling their beds first before they – before everyone else, because the first port
of call is anyone who applies at the University they always apply for tuition plus
accommodation. They fill their beds first and the private sector is then left to fight for
whatever is there, or whatever the rest is.”5
[14] For the reasons set out below, the Tribunal has concluded that the present merger does
not raise competition concerns irrespective of whether university residence
accommodation is included or excluded from the relevant market, and therefore leaves
this question open in this matter . However, this question may warrant further
investigation in future mergers in this market.
Geographic market
[15] The Commission assessed the product market for the provision of residential properties
used for student accommodation within an 8km radius from Brooklyn Studios. This
geographic market definition was accepted in Respublica6, where the Commission
found that residential properties located further than 8 kilometers apart did not pose a
competitive constraint on each other.
[16] We leave the exact parameters of the relevant geographic market open. It does not alter
our conclusion on the competition effects in this case.
Impact on competition
[17] In its market share assessment , the merging parties and the Commission calculated
market shares based on the number of beds offered for student accommodation within
an 8km radius of Brooklyn Studios . The Commission, based on information provided
by the merging parties, found that GSAH’s four properties in the relevant market
5 Transcript, p29
6 Respublica Student Living (Pty) Ltd & Midrand Varsity Lodge (Pty) Ltd, Masingita Estates (Pty) Ltd, Sam King
Investments Holdings (Pty) Ltd re target properties Midrand Student Village & White House Lodge (Tribunal Case
Number: LM245Mar16)
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accounted for 3 538 beds, and Brooklyn Studios accounted for 714 beds, out of a total
market of 22 143 beds, i.e. a total market share of approximately 19% with an accretion
of approximately 3%.
[18] The Commission found that there are several alternative providers of student
accommodation in the relevant market, including university residence accommodation
offered by the University of Pretoria, Respublica and others.
[19] If the University of Pretoria’s residen ce accommodation is excluded from the relevant
market, GSAH’s market share would (on the merging parties’ c alculations) be
approximately 23% and Brooklyn Studios’ market share approximately 5%, i.e. a total
market share of approximately 28%.
[20] The Commission and merging parties submitted that these market shares are all
overstated because the total market figure used for their calculations excludes various
firms listed by the University of Pretoria as accredited student accommodation
providers, as well as various other providers of private student accommodation in the
relevant market, in respect of which bed numbers were not readily available.
[21] The Tribunal requested the Commission to obtain an estimation of the number of beds
associated with the accredited student accommodation providers. According to the
updated information provided by the Commission, there are (excluding the merging
parties) over 35 accredited private student accommodation providers providing over
10,000 beds.
[22] In addition, the Tribunal asked the merging parties for information on the five properties
in the relevant market that are geographically the closest to Brooklyn Studios. The
merging parties submitted that these are Apartments on William 7, Brooklyn House 8,
Unilofts9, IQ Brooklyn10, and Hatfield Square11. All of these properties are in a walking
distance of 1.2km or less from Brooklyn Studios, and in a driving distance of 2.5km or
distance of 1.2km or less from Brooklyn Studios, and in a driving distance of 2.5km or
less. These properties in total provide just under 6000 private beds for students as
alternatives to the merged entity.
7 Owned by Caliber 651 (Pty) Ltd.
8 Owned by Mile Investments.
9 Owned by Letprop (Pty) Ltd.
10 Flats in the building are owned by various individual investors and are specifically leased for student
accommodation.
11 Owned by Respublica.
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[23] Given the relatively low market shares of the merging parties, and the number of
alternative providers of student accommodation (irrespective of whether or not
university residence accommodation is included in the relevant market), we agree with
the Commission’s conclusion that the proposed transaction is unlikely to give rise to any
significant unilateral concerns.
Assessment of potential information exchange
[24] The Tribunal also enquired whether Feen stra’s ongoing role, post -merger, as a
shareholder in GSAH, a property manager of the properties in the GSAH portfolio, and
as a property manager of other properties outside GSAH, raises information exchange
concerns.
[25] The merging parties explained that Feenstra only has a minority, non -controlling,
shareholding in GSAH, the purpose of which is to protect GSAH’s value for incoming
investors.12
[26] As regards property management,[explanation by Mr Muchanya of the manner in which
the GSAH property portfolio is managed ]
13
[27] Importantly, Ms Human of Feenstra also explained that Feenstra will not, post-merger,
manage any properties in the relevant market other than those contained in the GSAH
portfolio.14
[28] The Tribunal was therefore satisfied that the proposed merger does not raise any
information exchange concerns.
12 Transcript, p13.
13 Transcript, p15.
14 Transcript, p17.
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[29] The Tribunal therefore concurs with the Commission’s conclusion that the proposed
transaction is unlikely to substantially prevent or lessen competition in the relevant
market.
Public interest
Employment
[30] The merging parties submitted that the proposed transaction will not have any negative
impact on employment as there will be no job losses or changes to employment
conditions as a result of the proposed transaction.
[31] The merging parties explained that GSAH does not have any direct employees, and its
day-to-day operations are conducted externally by the Feenstra Group, which will
continue to be the case post-merger.15
[32] A representative of Feenstra Group confirmed that their employees were notified and
raised no concerns regarding the proposed transaction.16
[33] Based on the above, the Commission concluded that the proposed transaction is
unlikely to have a negative impact on employment, and we agree with this conclusion.
Spread of ownership
[34] The Commission found that GSAH has an historically disadvantaged person (“HDP”)
shareholding of 62.38%, while Feenstra has no HDP shareholding.
[35] The merging parties submitted that the proposed transaction will thus promote the
greater spread of HDP ownership through GSAH.
[36] The Commission concluded that the proposed transaction does not raise any concerns
under section 12(3)(e) of the Act, or any other public interest concerns.
[37] The Tribunal agrees with this conclusion.
Conclusion
15 Email dated 19 January 2023 (Merger Record, p370)
16 Email dated 16 January 2023 (Merger Record, p368)
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[38] Considering the above, the Tribunal concludes that the proposed transaction is unlikely
to substantially prevent or lessen competition in any relevant market and does not raise
any public interest concerns. Accordingly, we approve the proposed transaction
unconditionally.
3 April 2023
Jerome Wilson SC Date
Concurring: Ms Mondo Mazwai and Mr Andreas Wessels
Tribunal case manager: Leila Raffee
For the merging parties: Misha van Niekerk of Adams & Adams
For the Commission: Horisani Mhlari and Grashum Mutizwa