Caution rules in listed property

Investors in the listedproperty sector are likely to remain cautious for the rest of 2018 and not many companies are expected to list in the sector.

Investors in the listed property sector are likely to remain cautious for the rest of 2018 and not many companies are expected to list in the sector.

There were few new listings in 2017 and 2018 is not promising many changes until new consumer and business confidence feeds into the economy.

The South African listed property sector also suffered a shock at the beginning of the year. Rumours that Resilient Reit and its associated companies were subjects of a report by short seller Viceroy sent the group’s share prices into free fall. Later various hedge fund and investment managers said the Resilient group of companies was overvalued. Directors were accused of propping up share prices. There was criticism of how Resilient accounted for its broad based black economic empowerment trust.

The group then held a review which it sanctioned and despite being found not guilty of any wrongdoing, share-price pressure has persisted.

The group of companies has faced consistent share price downward pressure. Some analysts say the value of the assets has been corrected. But this correction means the property sector has suffered. Property indices containing Resilient and its related companies have lost points and listed property is the worst performing asset class in 2018 so far, down about 16%. This is while equities are more or less flat and bonds are up 5%.

Andrew Konig, CEO of Redefine Properties, said that the “Ramaphoria” effect of Cyril Ramaphosa becoming president had not yet led to more demand for services in the listed property sector.

He said better sentiment was important but new investment and employment growth was needed.

“We need GDP growth of 3.5% to really get momentum going in listed property,” he said.

Averting credit-ratings downgrades and interest-rate cuts had nevertheless brought some new investment and tenant demand to listed property.

Carel de Wit, CEO of Indluplace Properties, said the commercial real estate market in SA was quite suppressed and there was a lack of demand for B and C grade office space. With few smaller companies taking up such space, the result is that there is not much new demand for residential property near empty offices.

Indluplace manages and owns various residential assets. It achieved flat dividend growth last week in the six months to February. It is optimistic that conditions will improve in the second half.

In 2017 investors tried to list Inkunzi Student Accommodation Fund, but failed to raise enough cash. Analysts have said it was badly timed.