Loan stocks set for growth

Posted On Wednesday, 23 May 2001 03:01 Published by eProp Commercial Property News
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ALL pointers suggest that the property loan stock sector of the JSE Securities Exchange SA will see an unprecedented scale of growth in the next few years.

RMBComplemented with sound investment fundamentals, the sector is set for a revolution a revolution that could deliver what property investors have for many years been hoping for, namely liquidity and critical mass in property as an asset class. This could bring back the interest of institutional investors who have ignored property in favour of other assets.
RMB Properties CEO Bryan Jackson believes that through the listed sector property can once again become the darling of investors, but stresses the observation of sound investment fundamentals is essential in achieving this.
He refers to fundamentals such as quality management of the listed funds from an asset management point of view and from the property management side. He refers also to portfolio mix, size, quality and full disclosure of information. With these, Jackson believes, the sector has the opportunity to grow significantly with enhanced liquidity and become a key component of investment portfolios.
The property loan stock sector represents a change in itself for the SA commercial property market.
There is a move afoot to list unlisted properties which will significantly enhance the property loan stock sector, especially its relatively illiquid status compared with other sectors of the JSE.
Jackson says current yields in the sector are governed largely by the quality and risk profile, coupled with tradability.
In general the listed sector trades at yields higher than those from directly held portfolios. This is preventing quality and mega portfolios from entering the sector for fear of destroying value in the listing process, says Jackson. This, he says, is particularly prevalent in the top-quality, direct-property portfolios and poses a dilemma. For the sector to improve its quality and liquidity it needs to draw in large, high-quality portfolios from the unlisted sector.
Jackson believes the answer is for the existing listed sector to focus more on quality portfolios which will drive down yields to bring the gap between direct and listed yields to a level where the risk of converting to listing becomes acceptable.
In relative terms the sector remains illiquid and Jackson says this fact diminishes the attractiveness of listing.
'Most investors in the sector are net acquirers who buy in and stay. They cannot get out at will and some fear to get out because it might be difficult to return when they wish to.'
He says large listed portfolios and particularly mega individual listings will encourage greater interest by analysts in the sector which in turn will enhance liquidity.
Jackson believes also that greater transparency and disclosure by the sector will encourage not only analysts but also the investors who will find research that much more convenient.
He says transparency delivers trust, which is a key factor in the investment world.
Jackson believes the listed sector can become a greater attraction to smaller investors who are otherwise not able to get access to direct property investment.

Last modified on Thursday, 24 April 2014 10:25

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