Spurt in confidence in residential listing
AS MANY as two new residential listings could come to the JSE before the end of 2016 to meet the pent-up demand for the asset class from investors.
The sector has historically had little exposure to residential property, and fund managers have struggled to find investable quality assets with enough scale for a listing. Capital and operational costs have also dissuaded people from bringing residential property into the listed sector.
Just under 3% of listed property includes residential assets in SA. But confidence in the property type is starting to grow.
Soon, Indluplace Properties, which listed in June 2015, will not be the only property company on the JSE with 100% exposure to residential assets.
International Housing Solutions (IHS), a private equity group that owns a significant portfolio of affordable housing assets, is considering a listing.
IHS partners with financial institutions, real estate developers, private capital groups and the government to provide equity finance for various residential projects. IHS has created about 27,000 new residential units for sale and rent, since it launched its first housing fund in SA during 2008.
The company has tended to fund three-storey walk-up developments that cater for buyers in the R400,000-R800,000 bracket and tenants who can afford to pay a monthly rental of R4,000R8,000. The second residential listing that is expected to come to the JSE is a student housingfocused listing, according to Stanlib’s head of listed property funds, Keillen Ndlovu.
There are numerous providers of student housing in SA, a few of which may pursue a listing in the near future as they look to fill the tremendous shortfall of adequate educational accommodation. Researchers have estimated the bed shortage to be more than 250,000 units. One group that could list is CampusKey. The company said in May that it planned to list in the next two to three years, but the listing could be sooner.
By January 2017, CampusKey will own and manage 3,217 beds. MD Leon Howell has said he would want the company to own and manage 6,000 beds before pursuing a listing. Southpoint and Respublica could also be candidates for student housingfocused listings.
Southpoint, which was formed in Braamfontein, houses more than 10,000 students attending various universities. Respublica, a subsidiary of Redefine Properties, plans to provide 20,000 beds to South Africans by 2020.
Respublica CEO Craig McMurray has said he is focused on growing the company in SA and abroad, but would consider a separate listing “when the time is right”.
Evan Robins, the listed property manager of Old Mutual Investment Group’s MacroSolutions boutique, said significant scale would need to be achieved before many fund managers would invest in another residential-only property group.
“We like Octodec Investments and SA Corporate Real Estate’s residential investments. Indluplace is an already listed residential fund and its price has not been pushed up, which suggests the market is not overly excited, but its small size could be a factor,” said Robins.