Pivotal’s structure has been designed to accommodate projects from the early stages of the development cycle right through to completion, whilst including the original Developers as Shareholders. Investors that have identified and initiated a Greenfields development with Pivotal retain the benefit of the initial capital growth of the project whilst it is ring-fenced from other developments and completed properties in the portfolio. Ring-fencing is achieved through the issue of convertible redeemable preference shares with certain rights and obligations. In terms of the Pivotal vesting structure, any development that has a Loan to Value (“LTV”) greater than 60%, and or which falls within the time frame stipulated for that development, forms part of the “unvested” portfolio. The unvested buildings will "vest" when their LTV reaches 60%.
At this stage, the majority of the properties fall in the unvested portfolio and these properties are either under development or have recently been completed. To date, 1 property has vested into Pivotal, having been the first project to complete the vesting cycle from Greenfields development to a completed office park. As the development of Pivotal gains momentum, it is expected that 3 properties will vest into Pivotal in the 2012 financial year.
Pivotal currently views itself as a development fund, and therefore focuses on capital growth as the main return to investors. Dividends have thus not been paid out to date, but rather re-invested in the fund to facilitate capital growth. It is however, the intention of the fund to make dividend distributions in the future, subject to prevailing market conditions and the recommendations of the Board of Directors.
Pivotal intends increasing its property portfolio through direct acquisitions as well as participating in Greenfields developments. Abland and its many loyal partners will continue to play a significant role in the development of the current and future Greenfield properties, providing a competitive advantage in terms of a development pipeline. Pivotal will continue to focus on A-grade commercial and retail properties, whilst exploring further opportunities in rural developments that can offer exceptional initial yields.
Pivotal expects to list in about 5 to 7 years, upon which, an application would be made for Pivotal to convert to a Real Estate Investment Trust (“REIT”), provided that it meets the requirements of a REIT (which are still to be determined by the National Treasury), and that the Board of Directors is of the view that such conversion is in the best interests of the Company and its shareholders.