Brexit fallout could benefit local property trusts, say analysts

Posted On Wednesday, 27 July 2016 20:01 Published by
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Now may be Growthpoint Properties' best opportunity to buy a UK company outright or an interest in one.

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Now may be Growthpoint Properties’ best opportunity to buy a UK company outright or an interest in one, according to Stanlib’s head of listed property funds, Keillen Ndlovu.

Many South African property companies with UK exposure have seen their share prices take a hit following the fallout after the Brexit referendum.

Growthpoint, the largest listed real estate investment trust (Reit) based in SA, has been under pressure to make a meaningful acquisition. Some analysts feel the company has been a reliable performer, but could be more ambitious.

“Growthpoint’s management has been looking around the UK for a while, but they have not made a deal. They were an early South African entrant into Australia, and that investment has worked well. Now with the Brexit vote having impacted share prices there, it could be the best time for Growthpoint to move into the UK,” Ndlovu said.

Growthpoint CEO Norbert Sasse had said at the beginning of June he was looking for opportunities in Europe, but had not found anything suitable, while Australia was perhaps offering better opportunities.

Grindrod Asset Management chief investment officer Ian Anderson said he expected Growthpoint and other large Reits to look for acquisitions in the UK and Europe.

“There will be a number of desperate and forced sellers of good-quality UK properties and I do believe the likes of Growthpoint and Redefine will take the opportunity to acquire some of those properties, if the deals make commercial sense.

“Growthpoint’s management team are cautious and take a measured approach when acquiring new properties. It’s probably a little early to commit to anything in the UK right now, given the uncertainty around the timing and mechanism of Brexit,” he said.

But not every analyst thought Growthpoint would manage to find a suitable deal.

“In order to acquire highquality assets in the UK, the costs are still relatively high for South African investors, and they are certainly not cheap,” said Garreth Elston of Alternative Real Estate Capital Management.

“Investors paying in US dollars are getting potentially attractive deals, and this is why we’ve seen interest shown by several large US companies, such as Blackstone, in acquiring certain UK assets,” he said.

“But when we look at South African companies paying in rand, the exchange rate has only improved to where it was early 2015, and while assets are certainly cheaper than they were at the start of the year, they now come with a host of potential issues, thanks to Brexit.”

source: Business Day

Last modified on Wednesday, 27 July 2016 23:46

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