Market isn't buying the story

Posted On Thursday, 11 August 2011 02:00 Published by eProp Commercial Property News
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Property analysts are not buying the reasons why Old Mutual Property decided to scrap the eagerly awaited listing of its R12bn Triangle Real Estate Core Fund

Ben KodisangThe proposed JSE listing, announced a year ago, would have given JSE investors the opportunity to share in the spoils of some of SA’s biggest shopping centres, including Menlyn Park in Pretoria, Gateway in Umhlanga and Cavendish Square in Cape Town.

Last week’s unexpected announcement cited “changing market conditions” as the reason for canning the listing .

Old Mutual Property MD Ben Kodisang says local and, more so, international appetite for large capital raising has waned during 2011.

He says to achieve a free float of 30%-40%, the fund would have had to raise R5bn in new capital, which would partially have had to come from offshore investors. And in light of the poor international demand for initial public offerings , Kodisang believes it would have been difficult to achieve “optimal pricing” for existing Triangle shareholders. Tax amendments introduced in June have also created negative consequences for listed property loan stock companies.

Kodisang denies the decision has anything to do with the co-owner of Menlyn and Cavendish, Pareto, and its 40% shareholder, the Public Investment Corp, wanting to exercise their right of first refusal instead of taking the two properties to the JSE.

But Sesfikile Capital director Evan Jankelowitz says it seems Old Mutual chose the easy way out when it realised the market might not be prepared to pay the premium at which it hoped to list the stock. It was initially suggested the fund would list at a yield on a par with that of Hyprop Investments — the most expensive property counter at a forward yield of 7,4%. Jankelowitz believes that level of pricing would have been too aggressive, given Triangle’s lack of a track record as a listed entity.

The argument that value can be better enhanced for existing Triangle investors if the fund remains unlisted also doesn’t hold water. Angelique de Rauville, property portfolio manager at Investec Asset Management notes that the listed property sector is trading at an 11,1% premium to net asset value. “That implies value could have been unlocked for existing investors if the fund were to re rate to where the sector is currently trading.”

She says Investec Property Fund has enjoyed a considerable re rating since its listing on April 14. “Rebosis also listed successfully this year while sector giant Growthpoint, as well as Hyprop, Fountainhead and Nepi, have all deemed current market conditions appropriate for raising new equity.”

Last modified on Thursday, 24 April 2014 16:25

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