Sycom MD Gerald Nelson says few listed property funds are in a position to take advantage of this benefit. He says Sycom is using its in-house property development expertise, and is developing three properties and investigating additional opportunities.

Sycom, which is managed by Grapnel Property Asset Managers, is developing Paarl Mall in Western Cape and Vaal Mall in Vanderbijlpark.

Sycom is also redeveloping two of its existing buildings in Sandton for Discovery Health and is planning the final phase of its commercial property Harrowdene Office Park in Sandton.

Sycom says it has benefited from the higher returns afforded by the managed risk of property development in the past.

These include the development of Somerset Mall and SHG Place in Cape Town, as well as the first five phases of Harrowdene Office Park.

"In addition to providing superior returns, developing is one way of achieving specific investment criteria for an ideal portfolio," says Nelson.

He says that when a portfolio is grown through acquisitions, the purchase is often made at a substantial premium and selection is limited by the availability of properties on the market.

"Investment criteria are frequently compromised and, despite extensive preparation, you can never be completely sure of what you are getting."

He says development carries a longer roll-out period and so a higher risk than acquisition.

But Nelson says this is managed risk. "Sycom will invest in a development only when it is no longer speculative. A minimum pre-let level of about 70% is normally required and all town planning and other development aspects should be fully resolved with all agreements in place."