Nick Wilson

Property Editor

CORPORATE activity in the listed property sector is expected to continue this year with indications that the number of property counters could diminish further because of the shortage of quality fixed properties available.

Stanlib fund manager Keillen Ndlovu said yesterday that the acquisition of physical properties “continues to dry up” for listed property companies.

“To grow their asset base, companies are compelled to eye each other. The number of listed property counters could fall from over 25 to less than 20 by the end of the year,” said Ndlovu.

“Whether consolidation is going to be friendly or hostile is anyone’s bet.”

However, he said that funding rates and property yields continued to move in “the opposite direction” and this year might not see any new listings.

Ndlovu said equity-based black economic empowerment deals were also becoming more difficult to structure without any dilution to unitholders.

“Property companies will have no option but to look at other aspects of empowerment, like enterprise development.”

Macquarie First South property analyst Leon Allison said he believed there was going to be “more of the same” this year in terms of corporate activity.

He said acquisitions and mergers were going to continue, as well as further strong distribution growth from the listed property sector.

“Property fundamentals are expected to remain strong, although there could be an effect on share prices from external shocks, for example the subprime crisis and real estate fallout.”

David Green, MD of commercial and industrial property brokers Pace Property Group, said there would “definitely be further consolidation in the listed property sector” as listed property funds attempted to grow their asset bases to encourage further liquidity of their stock.

“Larger funds such as Growthpoint Properties and Redefine Income Fund enjoy favourable levels of liquidity, which make them attractive to domestic and international investors alike.”

He said although many international investors felt that South African funds were not large enough, they were still attracted by the higher yield offered.

As far as the underlying property market was concerned, Green said the strongest performers this year would be the industrial and office sectors “as the shine comes off the retail sector”.