After 30 years behind a veil of silence, SA's big institutions are to reveal all the details of their R50bn property holdings.
It opens the way to settle the argument about what gives investors the best return: an unlisted portfolio in the hands of an institution, or a listed property fund under the short-term scrutiny of analysts and big fund managers.
The secretive institutions have been under pressure from pension funds adjudicator Vuyani Ngalwana, as well as from aggressive interpretation of the Freedom of Information Act, to increase transparency in the listed property sector, whose market capitalisation is R67bn.
Old Mutual's new GM in charge of its property portfolio, Colin Young, appears to have embraced transparency and the market. He is the first institutional manager to reveal his property portfolio's performance. It gave a total return (measured by the benchmark Investment Property Databank) of 29,3% on 2005, ahead of the industry average of 28,8%.
Young and Sanlam property chief Banus van der Walt have also for the first time revealed (to the FM) their strategic asset management fees. They both charge 0,3% of the net asset value of their directly held properties. With portfolios about equal at R10bn, they earn about R30m in fees.
That means these fees cost policyholders less than the 0,5% of market capitalisation and debt that Madison and the other listed fund asset managers charge their investors.
In January, Young will be splitting the Old Mutual institutional properties into three funds: Triangle Core (R8,5bn), Triangle Development (R1,5bn) & Triangle SRI (Socially Responsible Investment).
Triangle will be invested 85% in property, 10% in listed funds and 5% in cash to improve liquidity.
Young has challenged the listed property funds to explore changing the local listed structures. He claims institutional portfolios are superior because they are less volatile than listed funds, while giving similar returns. Despite being willing to compete against listed funds for performance over three years, he feels the institutions' long-term objectives are better measured over a minimum of five years. Sanlam COO Robert Roux puts it more strongly: "We don't believe a beauty contest of property funds, like the annual FM awards, achieves anything. We are happy to be completely open but our objectives are different from those of the listed funds."
Old Mutual's first step will be turning its portfolio into what Young calls "life-wrapped unlisted unitised funds that we will invite other institutions to invest in."
"They will be completely open; we are prepared to compete against the listed funds," says Young. He will also consider converting them to unlisted real estate investment trusts (Reits), which will open SA property to international investors.
Other institutions appear to be opening up in different ways. Van der Walt has listed much of Sanlam's portfolio, mainly through Vukile and MICC. But Sanlam's Roux says they haven't made a final decision on what to do with the remaining R10bn portfolio. Old Mutual has bought Marriott and some of their listed funds could be vehicles to do the same. Only Liberty appears to be keeping its portfolio, performance and fees close to its chest.