In a deal announced last week, Growthpoint acquired R650m worth of linked units in 12 listed property funds and became the second hybrid property loan stock company on the JSE Securities Exchange SA, by mixing direct property holdings and listed exposure under one roof.

The other hybrid property loan stock company is Redefine Income Fund. The Association of Property Unit Trusts Chairman John Rainier says the question is whether the decision to invest in linked units serves shareholder value enhancement or other strategic reasons.

Rainier says he doubts the merits of this move because it represents a shift into a foreign area as far as the skills of property fund managers are concerned. 'This is an area which can be best handled by professional asset managers and not property managers,' says Rainier. 'I personally do not like hybrid property loan stock companies because I prefer to pick stocks myself,' he says.

He says people who lack knowledge of the market but want a portfolio exposure can get a better service from funds of funds.

Observers say the interest of property loan stock companies in other property funds feed corporate politics more than value enhancement. They say this interest is more of a drive to take control of other property funds and taking out their assets.

Redefine's acquisition of the entire Rand Leases' property portfolio was in part helped by the holdings that Redefine had in Rand Leases'.

The same can be said of attempts to take out the property assets of Cenprop.

Norbert Sasse, the head of property fund management at Investec Property Group, says the decision to invest in the portfolio of linked units is primarily a business objective and is expected to boost earnings by up to 4,8%.

Sasse says the benefits of mixing direct property and linked units are visible in Redefine, which has managed to deliver good earnings growth in a flat market.

He says the criticism that they are not specialist in asset management is valid to a certain extent 'but it is counter balanced by the fact that we will remain predominantly a fixed property investment company'.

The R650m linked units acquired by Growthpoint leaves the group with a 26% exposure in other property funds and 74% in direct property holdings.

Sasse says the group will maintain a split of 25% to 30% listed property and 70% to 75% fixed property.

Sasse say they do not have an agenda of taking control of the sector but the group will not shy away from corporate deals which pose good synergies.

'The fact is the market is looking for fewer stocks with bigger market capitalisation,' says Sasse.

Sasse says the move will serve the group's strategic objectives of acquiring high quality, low yielding properties, which are difficult to achieve under the prevailing market conditions.