Development Partnerships
An advantage of Pod is that it has direct and preferential access to the development pipeline of Abland, the intention being to partner with Abland in the developments.
As co-developer within the various partnerships, Pod provides its share of equity required and secure its share of the necessary debt funding for each specific development in question. Pod shares in the risk and reward associated with development, leasing and the consequent income returns; these being the key fundamental value drivers of any development.
Pod as a principle looks to pass the project execution risk onto the development partners ie. the development partner executes the development on a turnkey basis and assumes the risk associated with the agreed budget, programmed completion date and quality of construction.
Pod also seeks to encourage other development partners (investor developers) to facilitate and introduce development opportunities to Pod.
Investment Structures
Direct Greenfield DevelopmentsLeveraging off the development skills of Abland and other developers, Pod undertakes direct Greenfield developments. These A-grade retail, office, industrial and motor developments allow Pod to develop high quality property assets and provide it with exposure to development risk and return, bringing with it the potential for higher investment growth for shareholders. Pod seeks to further enhance equity returns by optimizing capital employed including debt at gearing levels of around 60%.Direct Brownfield Developments
In addition to Greenfield development activities, Pod takes advantage of opportunities to acquire appropriate A-grade assets, which have expansion or redevelopment opportunities. Where appropriate acquisitions may be made together with strategic partners.Development Introduced
Pod undertakes developments, identified by investor developers, in return for preference shares in Pod. Once the development reaches commercial viability and a loan to value ratio of 60% is achieved the preference shares convert into ordinary shares. This unique structure limits the development risk for ordinary shareholders until such a time as commercial viability is reached.The investor developers are required to procure or provide the necessary security for the development prior to commercial viability. The gearing level of 60% has been identified as the most optimal point to trigger commercial viability as financial institutions are willing to release debt security at this point whilst the relatively high gearing level still achieves the objective of continued growth.The preference share structure provides Pod with the ability to obtain a secured pipeline of high quality developed assets, that it might not otherwise have had access to.
Exit Strategy
The fundamental objective of Pod is to accumulate a portfolio of prime properties through its development focus, yielding above average growth. The fundamental Net Asset Value growth play for the investors is the effective participation at cost in the developments undertaken by Pod and to remain invested until Pod’s intended liquidity event.
Once the requisite number of developments and or properties have been secured by Pod; determined on the basis of optimal Net Asset Value growth, Pod will be closed to any further investors. Pod will at this optimal point commence a process of maturing the development pipeline to prepare and package itself as a fund comprising a prime portfolio of income producing assets with a view to disposing of the shares in Pod to a listed REIT. It is anticipated that such a sale would take place after a medium-term time horizon of five to seven years, given favourable market conditions.
The shareholders of Pod will in terms of the sale transaction receive shares in the listed REIT and should accordingly obtain roll over relief in terms of Section 42 of the Income Tax Act. In the event that the shareholders subsequently choose to sell their listed REIT shares they would be liable for the associated tax. The intention is to sell Pod as a private unlisted entity to the REIT to ensure that the pricing is determined on the basis of true Net Asset Value.
Shareholders wishing to exit before the five to seven-year time horizon has been met, will be entitled to sell their Pod shares to the other existing Pod shareholders or to external third parties. Podman will undertake to identify potential buyers and facilitate the negotiations under such circumstances. Investors will be liable for any tax liabilities associated with the sale.
