Property loan stock company Acucap would be closely watching its 68% exposure to the retail sector so that it is not caught napping by a shift in the property cycle, the group's CEO, Paul Theodosiou, said yesterday.

Acucap, which is bidding for The Mall of Rosebank and an adjoining office building, JHI House, has chosen to maintain an underweight exposure of 23% to the office sector.

The office sector has underperformed in the past few years.

While the retail sector has outperformed office and industrial property, some commentators believe retail property might slip in the medium term.

If retail does slip, it would badly hurt property companies with a retail overexposure, as the office sector did to companies overexposed to the sector.

Figures of commercial property data bank SAPIX/IPD show that the retail sector outperforming other sectors with a 13,3% total return in 2001, and this trend was expected to continue in last year's figures.

The office sector recorded a total return of 7,7% in 2001 while the industrial sector scored 7,4%.

In his group's latest annual report, Grayprop MD John Rainier said there were increasing signs that the economy might be slowing. 'This is suggested by the change in gross domestic expenditure, which fell in the second quarter of 2002, as well as the recent downturn in manufacturing volume,' said Rainier.

He said retail sales continued to post strong gains 'but leading indicators for this sector suggest weakness in 2004'.

Asked about the strategy of Acucap going forward, Theodosiou said: 'We will not remain with this retail exposure forever.'

Theodosiou said the group's portfolio was actively traded in line with the prevailing macroeconomic trends.

Acucap commands a property portfolio valued at R864,7m.

About 75% of this portfolio is located in Gauteng and the rest in Western Cape.

Theodosiou said the group would like to have a 10% exposure in KwaZulu-Natal and boost its Western Cape holdings going forward. The group was also pursuing other acquisitive opportunities that could boost its portfolio by R200m.

He declined to divulge further details but said the pursued portfolio was largely retail property with a little bit of industrial.

He said the group was also looking to exploit development opportunities that existed within its portfolio.

The portfolio carries further development opportunities with usable space of up to 35000m².

Theodosiou said: 'I should, however, warn that we are sticking to our core values of maintaining a quality and actively traded portfolio. We will not grow for the sake of growing.'

The group's main objective for this year was to deliver the earnings forecast of 138c a linked unit. He said the company was slightly off the target because of last year's interest rate increases, but they were hoping conditions would improve.