THABANG MOKOPANELE

THE launch of new black economic empowerment-managed property funds supported by institutions is expected to become more common in the local market as the property industry aligns itself with the Property Charter, which aims to place 25% of the South African property industry in black hands.

Two property funds run by blackowned management companies will merge into one and list this year.

Dipula Property Fund and Mergence Africa Property Fund will merge and list on the JSE as Urban Growth Fund with a portfolio initially valued at R1,4bn.

Many listed property funds derive black economic empowerment (BEE) credentials from selling negligible stakes to black groups and the listing of a black-owned property fund is seen as a step in the right direction for the property sector.

JSE-listed property company Redefine Properties owns a stake in Dipula and Mergence. The merger will create a property portfolio comprising 320000m² of gross lettable area that serves more than 500 tenants. Stanlib head of property funds Keillen Ndlovu said: “This is good for the property industry. It is great to see previously disadvantaged people being given an opportunity and support to run property companies and not just own equity stakes.”

Meago Asset Management portfolio manager Jay Padayatchi said that in line with the property charter he expected larger property funds to develop enterprise development initiatives in the property sector, preferably in areas that would not pose a direct competitive challenge to these funds. Mr Padayatchi said the launch of new BEE-managed funds supported by institutions should become more common in the local market.

But he said he was cautious about the launch of funds that primarily focused on developing their business plan around the Department of Public Works strategy for broad-based black economic empowerment.

“With the National Treasury indicating fiscal constraints, we believe Public Works will want to ensure leases are competitive in the market and BEE funds will largely succeed to the extent they are able to acquire properties competitively in the market to ensure public works is satisfied that new long-term leases remain value-enhancing to government,” Mr Padayatchi said.

He said the Urban Growth Fund had merit in pursuing a responsible investment strategy in the property sector. “We would follow with interest the fund’s ability to attract institutional investors based on a valid business case with a demonstrable pipeline and appropriate yields being provided according to the pipeline’s risk-reward profile.”

He said the launch of new property funds was always welcome as competition in the sector needed to be encouraged.

The fund is run by Vusi Nondo and Anil Dhanjee, formerly portfolio managers at Omigpi. A property investment subsidiary of Old Mutual, Omigpi also plans to list a R12bn empowerment fund on the local bourse by midyear.

The black empowerment group Billion Group — which owns Rebosis Property Fund — also plans to list this year.

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Source: Business Day