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Australia draws SA property companies

Posted On Thursday, 27 October 2011 02:00 Published by
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Longer leases and a livelier market down under are attractive to SA investors

Keillen NdlovuThe Australian property market is increasingly appealing to South African property companies. Local companies benefit by exposure to Australian property through currency diversification, the quality of tenants, long leases, high occupancy and continuing demand.

South African property companies are gradually putting money into the Australian market and making good returns on their investments.

Meago asset manager Thabo Ramushu, who visited Australia with JSE-listed Growthpoint Properties early this month, says retail is the weakest of the sectors while offices and industrial space in Perth, Brisbane and Melbourne are holding up "reasonably" well.

He says in SA, the office market is sluggish while the retail sector, especially in the "super regional" and "regional" shopping centre categories, is buoyant. An example of a "super regional" shopping centre is Canal Walk in Cape Town, while a good example of a regional centre would be Hyde Park Corner in Johannesburg.

Mr Ramushu says in SA the industrial sector, specifically warehousing and logistics, is showing better growth.

"The Australian property market and SA’s market are contra-cyclical. Australia is experiencing a two-tier economy, with the resources and corporate economy still showing solid growth, while the consumer or domestic economy is sluggish, with caution and a lack of confidence constraining consumer and retail spend."

Two years ago Growthpoint Properties — SA’s largest listed property company — agreed to acquire a controlling interest in Australia’s Orchard Industrial Property Fund for R1,3bn.

This was Growthpoint’s first venture offshore.

Releasing Growthpoint’s results for the year ended June, CEO Norbert Sasse said in August that he attributed the company’s solid performance to the distribution-enhancing performance of 61%-held Growthpoint Properties Australia (Goz), previously Orchard. Goz contributed 8,1% to overall distributions and although the market there remained tough,

Mr Sasse said the group had doubled its investment in the past two years there, which had helped. "We continue to seek opportunities in Australia," Mr Sasse said.

Fairvest , a property company listed on the JSE, has invested R4,9m in Australian listed property. Redefine International, a subsidiary of SA’s second-largest property company, Redefine Properties, has a 22% stake in Cromwell Property Group in Australia. Mr Ramushu says Cromwell earns 95% of its income from rent.

Emira Property Fund, a listed property unit trust, has put R61,1m into Goz saying the investment was earnings enhancing for both companies.

Stanlib’s head of property funds, Keillen Ndlovu, says Cromwell, with an office-focused portfolio, has a weighted average lease expiry of seven years. The figure for Goz (65% industrial and 35% offices) is nine years. In SA, by contrast, the weighted average expiry is three to four years.

Last modified on Wednesday, 23 April 2014 15:18
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