Eastern Europe-focused fund to list

Posted On Wednesday, 04 June 2008 02:00 Published by eProp Commercial Property News
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New Europe Property Investments (NEPI), which focuses on eastern Europe, will be taking a secondary listing on the JSE’s AltX next month

Jeff Zidel FortressThis comes as good news for the listed property sector, which has not seen much in the way of new listings over the past two years.

There has also been a feeling of doom and gloom because of major price volatility since November last year.

South African-controlled NEPI is aimed at individual investors rather than institutions.Diversified Property Fund, part of the Resilient stable, owns 50% of the fund’s management company, New Europe Property Investment Management.

Resilient Property Income Fund is in the process of taking over Diversified Property Fund.

Jeff Zidel, an executive director of Resilient and a director of New Europe Property Investment Management, says the NEPI fund has a market capitalisation of about €60m and is listed on the London Stock Exchange’s Alternative Investment Market (AIM). AIM and the JSE’s AltX are exchanges for small companies, with less onerous listing requirements.

Zidel says the fund has accumulated a portfolio of 29 properties with 167 tenants in Romania and Germany.

He says the fund has JSE approval for a secondary listing, which should take place during the first week of next month.

NEPI will conduct a private placement of shares.

Most of the fund’s shareholder base is South African with more than 98% of the investors being local.

Zidel says: “Because of the way the tax scenario in SA works, a South African investor can invest into NEPI on the JSE in rands.”

He says the dividend paid out is tax free because in terms of the South African Income Tax Act, any foreign dividend received by South African residents is exempt from tax if the fund is South African- controlled.

Within the listed property sector in SA, the dividend paid is perceived to be interest by the South African Revenue Service and tax is payable.

The fund is now aimed primarily at individual or private investors. Zidel says that as NEPI grows it will become “more interesting” for the institutional investor.

The fund’s investors are individuals who are “looking for a rand hedge exposure because all rentals are paid in euros”.

Zidel says the Resilient management team has made personal investments in the fund, which should give confidence to other investors. “We are confident of attracting support because of the existing track record.”

Management’s personal investment in the fund means they “are totally aligned with shareholders’ interests”.

The portfolio is spread across Germany and Romania. Zidel says the fund’s main focus will be on “central and eastern Europe countries”. This includes Romania, Bulgaria and Poland as well any “new entrants to the European Union (EU)”. Romania and Bulgaria became EU members in January last year.

“We’ve decided to make Romania the original focus area in terms of our base and we’ve got an office in Romania,” Zidel said. Top Romanian developer Avrig owns 20% of the management company of NEPI.

This will ensure that the fund “gets as much local knowledge as possible”.

“Every single property we’ve acquired, I’ve seen personally. We like a hands-on approach.”

He says the long-term plan is to build the fund up to have a market capitalisation of €1bn.

Of the portfolio’s 29 properties, 18 have Austrian-banking giant Raiffeisen as a tenant.

Raiffeisen, which is the third-largest bank in Romania, has its banking and regional offices in these premises. The properties are spread across 18 different towns.

Zidel says Romania offers good value. “It comes off a low base and since joining the EU, there has been an enormous amount of activity there.

“There is a big move of international companies coming into Romania and primarily coming into Bucharest.

The office market is booming,” he said.

 

Last modified on Monday, 21 April 2014 16:09
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