Share

Property stocks lure more offshore money

WHILE overseas buying of general equities may well have dwindled over recent months, it appears the JSE's R125bn listed property sector is becoming a hot commodity among investors offshore.

Prominent global asset managers in search of high-income yields - including the likes of BlackRock, State Street, Principle Global Investors and Singapore Investment Corporation (GIC) - have been pouring millions into some of the bigger property counters over recent months.
  
Sector heavyweight Growthpoint Properties [JSE:GRT], with a market cap of R27.4bn, has seen its overseas shareholding jump from 3% to 11% over the past year, which represents an additional offshore capital inflow of around R2.2bn at current share price levels.

Redefine - SA's second-biggest listed property counter, with a market cap of R20.3bn - doubled its offshore shareholding from 4% to 8% in the same period.
 
More capital is likely to flow to SA's property funds following Bank of America Merrill Lynch’s annual foreign investment conference held at Sun City last month.
 
It was the first time property companies - such as Growthpoint and Emira Property [JSE:EMI] - were invited to put their case to a strong contingent of fund managers from the United States.

Growthpoint executive director Estienne de Klerk says interest in SA-listed property has never been so keen.

“Global investors are now taking note of the fact South African-listed property offers far more attractive returns - total returns of close to 30% last year - than other global real estate markets."

Redefine CEO Marc Wainer agrees fund managers overseas are buying into SA's growth story.

"Not alone do our property stocks offer higher initial yields of more than 8% on average, but unlike most other parts of the world our yields are still growing at 6% to 7%/year."

Macquarie First South Securities property analyst Leon Allison expects more fund managers overseas to discover SA's listed property sector over the next 12 months as the sector continues to grow in size and liquidity - key criteria - with offshore fund managers generally only interested in counters with market caps north of $1.4bn (around R10bn) and trading volumes of at least $5m (R35m)/day.
 
Allison notes the sector is likely to have six funds - up from the current two - with market caps of more than R10bn by year-end.

They include Hyprop Investments [JSE:HYP] (once the Attfund acquisition is completed), the merger between Capital Property Fund [JSE:CPL] and Pangbourne Properties [JSE:PAP], a potential merger between Acucap Properties [JSE:ACP] and Sycom Property Fund [JSE:SYC] and the much-anticipated listing of Old Mutual's R12bn property portfolio.

Allison says the majority of new assets coming to the listed sector are of high quality, including seven of SA's top 30 biggest shopping centres.

If all the new listings and acquisitions materialise, the overall market cap of SA's listed property sector could swell to R150bn.
 
Says Allison: "We believe the combination of quality new listings/acquisitions and more stocks with market caps of more than R10bn offering decent liquidity would attract more interest from foreign investors. In addition, a uniform and simplified REIT structure, a rising number of internally managed funds and continued uncertainty in global markets should also create more interest offshore."

Allison notes a trend among investors overseas looking to establish emerging market property funds.

"Property in SA has a significant weighting and is a good diversifier to other emerging markets."

Although returns over the next decade will be more subdued than has been the case over the past 10 years, Allison says current positive structural changes will make the sector more investor-friendly.

He forecasts a 12% to 15%/year total return for SA-listed property over the next three to five years.

* This article was first published in Finweek.

* To read more Finweek articles, click here.
We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.01
-0.4%
Rand - Pound
24.12
-0.0%
Rand - Euro
20.63
-0.2%
Rand - Aus dollar
12.38
+0.3%
Rand - Yen
0.13
+0.4%
Platinum
901.05
-0.2%
Palladium
999.00
-0.7%
Gold
2,150.65
-0.5%
Silver
24.88
-0.7%
Brent Crude
86.89
+1.8%
Top 40
66,017
-0.4%
All Share
72,221
-0.3%
Resource 10
53,216
-0.2%
Industrial 25
99,605
-0.9%
Financial 15
16,696
+0.5%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders