Strong demand for units in the booming listed property sector was reflected in the scramble of fund managers to obtain linked units in soon-to-be listed Hospitality Property Fund.

The hospitality-focused property company, which is expected to list on the JSE main board in mid-February, said on Friday that its private placement of linked units was about 7,6 times oversubscribed.

The company said previously that the private placement of 2,725-million Hospitality Property Fund "A" linked units and 2,531-million "B" linked units at R10 a linked unit for both A and B units would raise R512,5 million if fully subscribed.

Applications that were received exceeded R3,8 billion.

Hospitality said that it was unable to allocate full subscriptions to participants in the private placement.

The success of this application reflects strong market support for this specialised listed property vehicle, particularly given its private place status as opposed to an initial public offering, said Grapnel Property Group MD Gerald Nelson.

Grapnel said it conceptualised the assembly and listing of the hospitality-focused property fund in early 2004 and approached Horwath Tourism and Leisure Consulting to work as co-promoter of the fund.

Horwath is providing a supporting role as hospitality and industry consultants to the fund.

Colin Young, head of asset management at Old Mutual Properties, said Old Mutual was bitterly disappointed it could not get the allocation it wanted.

Young said, as there had been so much demand for units, fund managers had not been able to obtain the allocations they would have liked.

"We asked for double what we wanted because we knew there was going to be an oversubscription. We didn't realise it would be to this extent," he said.

Young said the demand for Hospitality-linked units showed that now was the time for property funds to list on the JSE.

"If anybody is wondering if now is the time to list on the JSE, the answer is, yes. There is demand for paper," he said.

Hospitality said listed property was the top-performing asset class of 2005 on the JSE and that the sector's total market capitalisation had grown from R13 billion to R60 billion over the past three years.

"It has outperformed equities, bonds and direct property ownership and there is currently strong institutional support and investor demand for listed property," said the fund.

Business Day
Publisher: I-Net Bridge
Source: I-Net Bridge