Corporate activity places listed property sector on the map

Posted On Thursday, 18 November 2004 09:08 Published by eProp Commercial Property News
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The past 18 months have seen a flurry of corporate activity in the listed property sector with property acquisitions, mergers and new listings invigorating the sector and commentators expecting this trend to continue in the medium term.

Colin YoungAlthough mergers between listed property funds have been the terrain of the large listed property stocks, most property funds on the JSE Securities Exchange SA have been on the property acquisition trail.

Colin Young, fund manager of Old Mutual's South African-listed property funds, says fixed property is still generally cheaper than listed property units.

This makes it attractive to buy fixed properties.

"As long as direct property's capitalisation rates are above listed-property yields there will be an incentive for listed property funds to purchase fixed property," says Young.

He says the sector will see more acquisitions and listings.

Young says the main activity of the listed property sector will centre on property funds continuing to develop their own properties, followed by acquisitions and new listings.

"The quicker it (the listed property sector) grows, the more pressure there is on the fund managers of institutions to acknowledge the listed property sector and start investing in it."

He says there are still a couple of full discretionary funds with no exposure to listed property.

Angelique de Rauville, MD of listed property portfolio management company Provest, part of the Investec Property Group, says it is expecting the real-estate sector to sustain further corporate activity in the next 12 to 18 months.

"Over the past five years there has been more corporate activity out of the real estate sector than any other sector on the JSE. This is expected to continue with further consolidations, mergers and acquisitions," says de Rauville.

De Rauville says as a result of various corporate activities over the past five years there are as many as 18 property listings that no longer exist.

One of the highest-profile mergers was between listed property loan stock companies Growthpoint Properties and Primegro Properties last year, which established Growthpoint as the largest listed property fund on the JSE.

Since the announcement of the merger in May last year Growthpoint has been steadily growing its property assets.

Growthpoint, which now has a market capitalisation of about R4-billion, also concluded one of the largest single-tenant property deals in the listed property sector when it bought Investec Bank's head-office buildings in Sandton and Cape Town for R975-million.

As far as property acquisitions are concerned, listed property loan stock company Hyprop Investments concluded the largest property acquisition deal when it, together with Ellerine Brothers, purchased the Canal Walk Shopping Centre in Cape Town for R1,16-billion in July last year.

In terms of the deal Ellerine Brothers acquired a 20% share in Canal Walk, with Hyprop acquiring an 80% stake.

Listed property loan stock company ApexHi Properties has also been busy with acquisitions.

Earlier this year it bought the entire retail property portfolio of listed-property loan stock company Shops for Africa for R415,3-million. Shops for Africa has since delisted from the JSE.

ApexHi is now battling rival listed property loan stock company Vukile Property Fund to acquire listed property fund MICC Property Income Fund.

In July this year listed property unit trust Capital Property Fund, chaired by businessman Cyril Ramaphosa, announced it was acquiring a large bundle of properties worth R760-million from four key players in the property industry.

It has since purchased properties from Old Mutual, Resilient Property Income Fund, Standard Bank and Acucap Properties.

These acquisitions have lifted Capital's assets past the R1-billion mark and increased its market capitalisation to about R900-million.

Property loan stock company Arnold Property Fund is due to acquire a portfolio of properties worth more than R300-million from Momentum Property Investments.

Since October last year there have been a number of new property listings.

Funds that have been listed include Vukile Property Fund, MICC Property Income Fund, Ambit Properties and Emira Property Fund.


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