Grayprop takes on the world

Posted On Monday, 01 August 2005 02:00 Published by eProp Commercial Property News
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The Allan Gray Property Fund (Grayprop) makes it into the Morgan Stanley Capital International Global Index (MSCI) - an achievement that is sure to get the attention of international investors. With Grayprop managing director John Rainier

John RainierLINDSAY WILLIAMS: I spoke to Boston-based Fidelity Investments from the US - the world’s largest fund manager - they were over here for the Stanlib International Investment Conference in Cape Town. Their property representative was here for the conference and to look at listed property investments on the JSE. Liquidity was his main concern - he loved the sector, he loved the fact that it’s yielding so much and returning I think 42% last year - do you think now you’re in the MSCI you may get the attention of fund managers like Fidelity?

JOHN RAINIER: Certainly. I spoke to Steve Buller when he was here - there are a number of international fund managers that are actually very interested in what’s happening in South Africa.

LINDSAY WILLIAMS: Have you got the liquidity? Have you got the free flow to satisfy their demands?

JOHN RAINIER: I think so. Grayprop over the last year has traded over R130-million a month - that certainly brings it onto the radar screens.

LINDSAY WILLIAMS: have you had enquiries from the international investment community about taking stakes in your company?

JOHN RAINIER: Yes, numerous. I think one of the things about inclusion in the MSCI index is that many of the index tracker funds have to take us - but they would like to know a little bit about the company before they do so.

LINDSAY WILLIAMS: So it’s not an immediate jump to R5.50 because of this inclusion - you’re going to have people knocking on your door saying: "Right, exactly what do you hold? What’s your history, etcetera?

JOHN RAINIER: That’s right. They still want to make sure what we do makes good business sense, and that a rand invested with us will give them the kind of returns they anticipate.

LINDSAY WILLIAMS: What would you say then to somebody who held Grayprop stock? It closed at R4.79 today - pretty quiet compared to yesterday when there was about 1.5-million shares traded, only about 320,000 traded today. Do you think the prospects for the future are quite good - apart from the domestic property story, the international story almost puts the icing on the cake?

JOHN RAINIER: I think so, and I think the fact that so few shares traded today, specifically, is a sign that at kind of prices that were being offered there are not a lot of sellers!

LINDSAY WILLIAMS: Good point. The property market in general in South Africa - commercial, industrial, retail - people keep on talking about a bubble mainly relating to the residential side, is there any chance of a bubble forming?

JOHN RAINIER: I can’t comment on the residential side, but certainly not on the commercial side. I think we are coming out of a period where industrial rentals have been very depressed - we are now seeing very good growth. In our portfolio we’re probably getting rentals 50% up from a year ago. The office market is still showing signs of the last of the oversupply - with rentals not rising in real terms at all. With the big increases in building costs we’ve had over the last year I think that makes it a lot more difficult for people to build more space without rentals rising quite significantly - this will either keep the supply balance in place longer, or it’s going cause rentals to rise very strongly.

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