This open-ended retail property portfolio will focus on investing in properties serving C and D income consumers. It will join the list of JSE property loan stock companies early in July.
Major shareholders will be Fedsure, Shoprite, Nedcor Investment Bank and WesCape, from whom Shops for Africa has acquired properties.
Shops for Africa is forecasting an annualised net forward yield of 15,9% for the year to April 30, 2002 from its portfolio. This consists of 15 properties with a value of R320 million and 133 000m² of lettable space, principally servicing the emerging retail communities in Gauteng, KwaZulu/Natal and the Western Cape, says Royden du Plooy, managing director of Catalyst Property Asset Managers, the company managing the portfolio.
'A listing will open the door for investors to the fastest growing demographic market segment of the South African economy,' says Du Plooy. 'Emerging retail communities have not yet been represented in the property sector of the JSE.
'The buying power of C and D income groups is forecast to grow more rapidly than that of A and B income groups. Access to better paid jobs as a result of increasing levels of education and employment equity measures means shopping patterns are changing from a subsistence approach to a more regular, planned outing to properties like those inthe SFA portfolio.
'The portfolio consists of low maintenance properties. They serve well-populated catchment areas through a stable tenant mix comprising 55% national chains, with the rest being franchises and independent retailers. They are not glamourous malls, with high overheads and maintenance costs. They are properties without lifts and escalators and require cheaper parking facilities, infrastructure and amenities. The average vacancy factor, after allowing for redevelopment, is around 5%, in line with industry norms.'
Du Plooy says the portfolio has a well-spread lease expiry profile, which creates ongoing opportunities to improve the tenant mix and net income. He adds that, while a recovery in retail sales is expected during 2002, the current difficult environment should prove to be an excellent buying opportunity to acquire properties at below fair value.
He says Shops for Africa, as a specialised security, will offer yields comparable with gilts, supported by the stability of the property sector.
Erwin Rode of Rode & Associates, who valued the portfolio before its listing, says Shops for Africa is a focused fund. As such, investors will find it easier to visualise the market in which t operates. This might result in a lower income yield (higher price) for the fund once listed, all other things being equal.
'One can argue that retail portfolios have become less sexy amongst fund managers than they have been for the past decade,' Rode said.
'However, this may be a passing fashion because personal consumption spending is still growing at a healthy 3% per annum and sooner or later equilibrium in the market will return. Secondly, by listing these properties the promoters will eventually add value to the portfolio through its greater tradeability and transparency.'