New property listing for JSE

The recapitalised company is rather cheekily named SA REIT, no doubt in anticipation of the much talked about conversion of local property stocks to the international real estate investment trust (REIT) structure.

SA REIT is currently structured as a normal company and not as a property loan stock or property unit trust. So it won't be paying out its income to shareholders through regular distributions.

"We are not an income play. We wanted to differentiate our product from the existing offering so our focus will initially be on capital growth only," says SA REIT CEO Arnold Maresky.

Heavyweights on board

Maresky, who is a former executive director of Paramount Property Fund, is joined on the SA REIT board by quite a formidable team of heavyweights. They include CEO of listed investment trust Trematon Capital Investments Arnold Shapiro, former CEO of Cape of Good Hope Bank and an ex-Spearhead director Monty Kaplan, ex-Spearhead man Allan Groll, MD of developer Rabie Property Group Leon Cohen, and architect Dennis Fabian.

Although SA REIT initially comes to the market with a relatively small Cape-based portfolio of only 10 buildings and a market cap of less than R350m, the stock offers interesting growth opportunities particularly given its tie-up with the Rabie group.

Rabie is rated as one of SA's biggest developers. It has, amongst others, Cape Town's mixed-use precinct Century City in its stable.

Initially none of Rabie's properties is going into SA REIT, but some of its developments - both commercial and residential are likely to find its way into the fund. Maresky concedes that SA REIT will explore future development opportunities with Rabie that could include some Century City stock.

'Quality, not quantity'

"The aim is to grow the fund through a blend of investment, development and trading opportunities. But we don't want to rush into deals. We're looking for quality, not quantity."

Given how scarce and expensive prime investment property has become, Maresky says management sees upside in turning older stock around. The initial portfolio includes three re-development opportunities: 33 Waterkant, and the Curry and CMH buildings in the Cape Town CBD, which will be redeveloped at a cost of about R500m.

Property analysts are keen to see new funds being assembled for listing, particularly if they bring an entrepreneurial-type offering to the market.

Catalyst Fund Managers analyst Paul Duncan says strength of the management team is key with any new listing. "The market is looking for new opportunities. And although SA REIT will initially be a small company, if the fundamentals stack up, it won't preclude us from investing in small-cap stocks. The most important thing is that management has a proven track record,and that the underlying portfolio and pipeline are sound."

SA REIT's newly acquired portfolio of 10 properties for R370m will be settled through a vendor placement of shares at 50c/share. So investors won't be able to pick up shares through a pre-listing public offering. Shares will initially be relatively tightly-held by management: Trematon will hold an 18% stake, while Absa and Nedbank will jointly own 14% of the shares and Cohen and fellow directors of the Rabie group owning 15% of the equity.

- Fin24