Grass may not always be greener offshore for SA listed property

Posted On Thursday, 22 February 2007 02:00 Published by eProp Commercial Property News
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More South African listed property companies and funds are expected to branch out overseas in the future, following similar moves in that direction by a number of local property companies, say property market analysts.


Property-Housing-ResidentialProperty Correspondent

But the move also brings currency risk and local property players have to be wary as they are not necessarily experts on foreign property.

Already three players have made a move offshore. Last week, Madison Property Fund Managers, the asset managers of listed property loan stock company Redefine Income Fund, said it would be expanding overseas and intended acquiring 50% of the management company of UK-based property fund CIREF.

Redefine Income Fund has an 18% interest in CIREF, which was listed on the London Stock Exchange’s Alternative Investment Market in May last year. Madison says its job will be to watch other property funds, look out for potential takeover opportunities for CIREF and advise the UK property fund. The group says it is “dipping its toes” into the UK market and is happy to partner with CIREF because its management is working on the ground in the UK.

Earlier this month, Diversified Property Fund said its wholly owned subsidiary, Fortress Asset Managers, had obtained approval from the Financial Services Board to establish a management company to manage an international unit trust, the Fortress Reit Fund. The fund invests mainly in the international Real Estate Investment Trust market. Evan Robins, head of fixed interest at BoE, says a “lot of people are talking about foreign investment into our listed property market”.

“But the flip side is that South Africans want to diversify into foreign markets as well.” Robins says the Madison transaction, for instance, could give the company a “toe hold” in the UK. He knows of several other listed property companies investigating possible investments off-shore and in Africa.

“We might very well see a more sophisticated listed property sector in the next five years. If you look at the Australian listed sector, they are well-diversified offshore,” he says. Robins says SA is taking the first steps in that direction. “I think it definitely provides portfolio diversification. People buy foreign equities, why not buy foreign property stock? I think it’s a definite trend,” he says.

Mariette Warner, head of property at Stanlib, says there will be a trend towards off-shore investment by South African listed property companies and funds. But Warner says the concern she has about the investments is the combination of domestic real estate with currency risk. “I don’t think that domestic and off-shore property should be combined in the same vehicle. The asset allocation decision belongs with the investor,” says Warner.

“Listed property tends to be the domain of investors looking for income and long-term capital appreciation. Currency risk does not belong in that space.” She says South African investors already have off-shore options for investment.

UK-based property company Liberty International has a dual listing on the London Stock Exchange and the JSE. There are also unit trusts that invest in global real estate. “If you want off-shore, you have got options.” But Warner says this option should not be contained in a domestic real estate fund.

Macquarie First South property analyst Leon Allison says that while there are some opportunities locally, South African property companies should focus on the local property market. 

Last modified on Friday, 25 April 2014 22:57

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