HYPROP AND STANDARD BANK INNOVATE FUNDING STRUCTURE TO REDUCE FINANCE COSTS
Leading listed retail property fund Hyprop Investments has joined with Standard Bank to introduce an innovative capital market debt funding structure appropriately suited to listed property companies. The first of its kind in the listed property sector the structure offers significant savings on finance costs for Hyprop, which will in turn help drive future distributions growth.
Standard Bank’s newly established funding platform, Blueprint Originator, offers property companies such as Hyprop access to debt funding through the capital markets, resulting in flexible, lower cost financing. Effectively the Originator houses a conduit vehicle which holds a range of financial assets such as corporate loans, and in turn issues commercial paper backed by these assets to a range of investors. In order to achieve a high investment grade rating to the satisfaction of its investors, the Originator applies strict selection criteria to its assets and carefully structures its funding transactions with companies such as Hyprop.
The restructure of R900 million of Hyprop’s external debt to be funded by the Originator is a strategic move which MD Pieter Prinsloo says will benefit the company and its unitholders. “Hyprop’s finance costs will be substantially reduced as the funding is cheaper than ordinary bank funding. This will translate directly onto our bottom line and drive up our future distributions to unitholders.”
He explains further that the structure has a low initial transaction cost. In addition the flexibility of the structure places no restriction on capital movement or on the trading of Hyprop’s portfolio properties. In this respect the Originator offers a competitive alternative to commercial mortgage backed securitisations (CMBS), in terms of which there is a requirement to ring-fence a company’s assets in a separate vehicle and to obtain rating agency approval.
Stewart Shaw-Taylor, MD of Standard Bank’s Property Finance and Advisory Services Division, says that the Blueprint Originator is in line with the global trend towards simplified funding solutions that afford clients the benefits of traditional capital market debt funding without the added rigidity. “Hyprop is an ideal partner in this funding innovation because of the quality of its retail property assets,” he says. “We expect that other listed property companies will follow Hyprop’s lead in making use of similar funding solutions,” Shaw-Taylor added.