I suggested yesterday that Liberty International could be a buy for the portfolio Jean and I are building. This was not a contradiction of our personal view on buying property shares.

The Private Investor column is being planned independently of our own assets. Liberty International is a sensible possibility for the portfolio.

The fact is that the share price fell quickly, and when Jean looked at the technical signals there was a temptation to buy, not for a long-term hold but to trade.

If we did this, the shares would, of course, be “trading stock”, and any profit, after trading costs, would be regarded as taxable income.

The other shares in the portfolio are designated as long-term investments intended to produce growing income. We may or may not buy a few Liberty International shares to trade, but the technical signals tell us its price will probably move further down before it becomes a buying target. We’ll wait, even though we could be proved wrong.

The long-term investment fundamentals for the company are sound. The company measures its core performance on its net asset per share. The change in asset value is determined by the valuation of its properties, which are derived from rental income.

The net asset value per share should, therefore, correlate closely to the market price of the share. If the market believes there is a property boom, the share should trade at a premium to its net asset value, and vice versa when the market believes property is slumping.

Halfway through financial 2007, Liberty International’s net asset value per share was £14,29. At its current share price of £11, it is at a discount of 23%.

The price on the JSE is about R157, and the discount in the rand share price is about the same. So much for rand hedging!

Nonetheless, SA shareholders have enjoyed the gradual decline in the rand, as dividends have continued to grow in pound terms and even faster in rands over the years.

And, as I wrote yesterday, because the company is a UK real estate investment trust, Liberty International is paying less tax and, therefore, higher dividends relative to its earnings.

The problem is, as one Business Day reader wrote to the editor, it’s not easy to get the seven-percentage-point refund from the UK tax authorities — the difference between the 22% withholding tax and the double-taxation agreement of 15%.

You have to get the form from the share registrars, complete this, have the South African Revenue Service attest that you are a South African resident, post the form and wait for the refund.

If we decide to buy the share, we reckon the cost and time is worth it. The company’s website provides all the information for the process, including the rand and pound equivalents. The red tape is not its fault.