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May 31, 2007:
Earlier this month British stockbrokers Seymour Pierce sent out a strong buying signal on retail-focused CIREF. According to the report, the stock offers significant share price upside over the next three years.
With a market capitalisation of around £88m (R1,23bn), London Stock Exchange-listed property fund CIREF is admittedly still a small player. However, a growing number of international institutional investors are taking notice of this British offshoot of astute SA asset manager Coronation as overseas property analysts start to include the fund in their research reports.
Earlier this month British stockbrokers Seymour Pierce sent out a strong buying signal on retail-focused CIREF. According to the report, the stock offers significant share price upside over the next three years.
Says Seymour Pierce research analyst, Georgina Browning: "CIREF's recently announced half-year results don't demonstrate the value that's being created. With five major retail centres under development, a number of new acquisitions added to the portfolio since September 2006 and a successful £28m (R392m) equity raise completed in April 2007, CIREF is building a business that we expect to produce a net asset value by 2010 of more than 60% above current reported levels."
Browning says that CIREF also offers an attractive dividend yield of around 4% - markedly higher than the sector average in Britain of 2,5%.
Key question is how do SA investors buy into CIREF? There are three routes. The easiest, though indirect, way is probably to go via one (or both) of two SA-listed property funds: Redefine Income Fund, which already owns an 18% stake in CIREF, or Redefine's asset manager Madison Property Fund Managers.
Madison is currently negotiating an offer to acquire a significant stake in CIREF's management company, Corovest International.
Alternatively, SA investors can use either offshore funds or asset swaps to acquire units directly through a stockbroker in London.
The third route is to invest through the CIREF Feeder Fund. Investors will need offshore funds for that vehicle. It's operated by an associate company of Corovest International, Osiris Trustees, in the British Virgin Islands and acts as an open-ended mutual fund that trades only in CIREF shares.
Corovest International CEO Mike Watters says they can assist SA investors to open offshore broker accounts or, alternatively, put investors in touch with SA asset swap providers. Patient investors can wait for a possible dual listing on the JSE.
Watters says they're contemplating approaching the SA Reserve Bank later this year; a previous listings application was declined, due to it being a potential loop structure.
But SA investors may wonder why take money offshore into CIREF if they can buy British property giant Liberty International directly on the JSE.
Watters concedes that Liberty International is the blue chip of Britain's property sector and should be in any serious offshore property investment portfolio. However, he says CIREF offers an opportunity to get in on the ground floor, perhaps where Liberty International was 10 to 15 years ago.
Says Watters: "We aim to grow CIREF aggressively. Liberty International has a market cap of £4,4bn (R61,6bn), so CIREF has a long way to go. However, we're targeting to be 10% of Liberty International within two to three years. After that it will depend on the ability to secure opportunities. Growth by M&A activity will be the desired route. Madison is a big supporter of that strategy."
CIREF has already gone some way to delivering on its growth promise. Since listing on the London Stock Exchange's AIM market in May last year, the fund has more than doubled its NAV to £343,3m (R4,8bn). CIREF has 19 property investments spanning Britain, Germany, Switzerland, the Channel Islands and the British Virgin Islands. Most of its properties (73%) are shopping centres and retail outlets, the remainder comprising offices and industrial buildings.
Watters says while Britain will always be CIREF's chief investment destination, the aim is to have 20% to 25% of assets in the rest of Europe within 12 to 18 months.
CIREF's strategy of balancing exposure to potentially high-risk/high-growth markets with lower risk British income-generating assets is bound to deliver above-average returns over the next few years. Further rand depreciation would be an added bonus. So investors should get in sooner rather than later.
