Kevin Kerr, joint head of corporate finance at Investec, says each empowerment deal is different and it is necessary to fully understand a business’s requirements and what participants will contribute before formulating a structure.

For example, the Growthpoint empowerment deal involved a number of empowerment parties, including Amabubesi Investments, Miganu Investment Holdings and Unipalm Investment Holdings.

“It was a R1bn deal. The Mines Pension Fund issued an option to Investec Property Group that was then used to facilitate an empowerment deal.

“As Growthpoint is a linked unit company it was possible to split the shares from the debentures and use that structure to help to finance the deal.

“The debentures were used to obtain as much third-party funding as possible, most of which came from Absa and Old Mutual at favourable long-term rates.

“Growthpoint contributed the balance of the funding, which, along with the value from the option helped to make the deal possible,” Kerr says.

He says other linked unit companies, including variable rate loan-stock companies, should be considering similar structures.

The property charter is due to be finalised in the near future and this is likely to spark a series of deals in the sector, he says.

Property unit trusts, though different from variable rate loan stocks such as Growthpoint, have the opportunity to structure deals of a similar nature, Kerr says.