PIC investments may underpin property market

Posted On Friday, 23 November 2007 02:00 Published by eProp Commercial Property News
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'Excitement' has been building in property circles about the impact that the Public Investment Corporation (PIC) property investment strategy should have on the local property landscape. While some underpin can be expected, but it may not live up to initial expectations

Craig HallowesThe PIC upped the ante during the 2006 Financial Year when Wayne van der Vent (an ex-director of Futuregrowth Asset Management) was installed as its new Head of Properties, stating “We are confident that he will help position the PIC as a premier property asset manager in South Africa.”

In August this year, the PIC finalised its acquisition of the CBS Property Portfolio, which took the corporation’s property investments to R15bn.

The organisation has stated that it aims to grow its property exposure to 8%-10% of its assets over the next few years. Given that just the assets of the Government Employees Pension Fund (GEPF, which accounts for 92% of PIC assets) are now R750bn, this implies that there is some R45bn to R60bn earmarked for property investments.

Pouring cold water on speculation, Van der Vent notes that: “It’s important to remember that we don’t have to invest the full amount. We are not going to invest at all costs: we are mindful of our fiduciary duties and we are not going to invest in a reckless fashion.”

Some reports have claimed that the PIC does not have concern itself about diluting earnings as it is not listed. However, Van der Vent is at pains to point out that what not being listed implies is that decisions can be taken with a much longer time horizon. “We do not have to provide investors with short-term returns, so we can take a longer term view on properties. We are not voraciously hungry: we have walked away from deals at 8.5%,” notes Van der Vent.

Still, R45bn to R60bn is no small amount, especially when compared to the current domestic listed property sector’s market cap of R106bn.

“This is an important prospect for the property market. It implies that there will be some underlying support for the market over the near to medium term,” comments Craig Hallowes, spokesperson for the Association of Property Unit Trusts.

The additional investment is likely to take the form of both direct property interests as well as some rise in listed property holdings. While the CBS acquisition saw that fund being delisted from the JSE Securities Exchange in late October, it is not the PIC’s strategy to buy and delist funds. The corporation currently owns about 5% of the listed property sector, largely through its 30% holding in SA Corporate and potentially 16% of Growthpoint (depending on the outcome of the claw-back rights offer).

“The CBS acquisition was a special case,” explains Van der Vent. “We essentially bought a strong property management company which came with a juicy property portfolio.”

There is still some scope for further buying of property unit trusts and property loan stock, but the PIC is unlikely to reach even 10% of the sector. The corporation does not want to “be the sector”, while also wanting to retain a balance within its own holdings.

Listed property affords the portfolio good liquidity, but the PIC would like to see only 10% to 15% of its overall portfolio – R7.5bn to R11bn in value – in listed property, implying some support for the sector.

Last modified on Tuesday, 22 April 2014 17:26

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