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Sep 10, 2007:
Owners of commercial property are making it nearly impossible for the South African listed property sector to increase its market value sufficiently to lure foreign investors.
According to Mr Norbert Sasse, chief executive of Growthpoint, the largest listed property company on the bourse, size will matter if South Africa wants to be a player in the global property arena.
Sasse was one of the speakers at the annual conference of the South African Association of Property Owners (Veesa) at Sun City yesterday. He says a lot of money in the world is looking for a quality investment destination, and the South African listed property sector will be a good candidate if only it can expands.
At the moment, between 25% and 35% of the available commercial property in the country is listed, and the rest is owned by the government, pension funds, corporate ventures, unlisted funds and private individuals. Compare this to Australia where 70% of available property is listed.
The South African listed property sector's market value has increase dramatically over the past five years from R10bn to R100bn, which means that several billions' worth of property is not yet listed.
Returns on property in South Africa are especially attractive. According to the figures of the Investment Property Databank (IPD) for 2006, the country's commercial property sector's total returns (income and capital) was 26,4%, which is just shy of Ireland's figure of 27,2%.
South Africa was the best performer in 2005 and 2004 and has progressed better than other asset classes in the long run as well.
Mr Musa Ngcobo, chief executive of Kensani Properties, is of the opinion that it is not an impossible task to convince the government to sell its properties to the listed sector. He believes the government's priority is to get the best land usage and the best performance for its properties from a maintenance and management perspective.
"Asset managers in the listed property sector have proven themselves through effective management of their assts. By having the properties sold to the listed sector, the sector will enlarge and the value of the properties will be maximised," he says.
"Property management, with all its complexities, is a good reason for property owners to get rid of these burdens."
Sasse says a good starting point to get their assets may be to target companies whose properties do not form part of their core business.
"Such companies can sell their properties to a listed company, and lease it back. The returns can be ploughed back into the company, and at the same time the listed company increases its advantage by its market's value increasing, not to mention having gained a long-term tenant in the process." – Elma Kloppers, Sake24
