Corporate activity sparks a revival

Posted On Wednesday, 14 February 2001 03:01 Published by eProp Commercial Property News
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THE property sector is regaining its popularity as an investment class, says Nedcor Investment Bank corporate finance specialist Ernest Matthewson.

Property-Housing-ResidentialHis comment comes amid a wave of corporate activity in South African property stocks. The property loan stock sector in particular has been active.
'Along with portfolio growth, the new listings saw the sector's market capitalisation nearly double to over R11bn,' says Matthewson.


More activity is expected as pension funds and institutions, which hold just less than R60bn in direct property holdings, securitise their property holdings in the next two to three years.
It may signal a turning tide for the property sector, which became unpopular with institutional investors in the 1990s.


They offloaded most of their property holdings to pursue high-yielding and liquid investments.
Matthewson says the turnaround is largely a result of institutional investors needing to rebalance their portfolio sector allocations following the relaxation of exchange controls and the move from defined benefit to defined contribution pension funds.
This has meant that institutions have had to increase liquidity within pension funds and therefore reduced their illiquid asset holdings.


The innovations sweeping through the property industry are drawing back these investors.
The new developments include increasing use of securitisation, with groups of properties bundled together and taken to the market as a single tradable entity, reducing the traditional risk of property as an investment.


Matthewson says changing market dynamics indicate that the sector is regaining its lustre.
He says that this led to a gradual increase in corporate activity last year, when four new property companies listed.


'We expect to see the creation of a new generation of property investment opportunities with the revival of this asset class, resulting in the market capitalisation of this sector growing.'
Matthewson expects this to include increased merger and acquisition activity.
The draft Collective Investment Schemes Bill could also boost the property unit trust sector, he says.


Property unit trusts are limited to borrowing the equivalent of 5% of the value of their properties.
It is hoped that new legislation will set a much higher borrowing ratio.

Last modified on Tuesday, 22 April 2014 09:26
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