The right time for SA prop­erty com­pa­nies to take a shine to former Soviet bloc coun­tries?

There are mixed feel­ings about how JSE-listed prop­erty com­pa­nies’ new-found in­fat­u­a­tion with emerg­ing coun­tries in Cen­tral and Eastern Europe will play out, writes Joan Muller

Financial Mail - Investors Monthly - - Front Page -

When the Re­silient group chose Ro­ma­nia as its first port of call af­ter it had de­cided to ex­pand its prop­erty port­fo­lio be­yond SA’s borders in the late 2000s, many were un­der­stand­ably scep­ti­cal.

What did South Africans know about Ro­ma­nia that Euro­pean and Bri­tish in­vestors didn’t? And why not stick to the tried-and-tested prop­erty mar­kets in UK, Aus­tralia and Ger­many, like other lo­cal real es­tate funds, who were also start­ing to build a foot­print off­shore?

But the group be­lieved it had a bet­ter chance to du­pli­cate Re­silient’s SA in­vest­ment model of de­vel­op­ing shop­ping cen­tres in un­der­ser­viced, smaller cities and towns in an emerg­ing, un­der­de­vel­oped coun­try such as Ro­ma­nia than in well-sup­plied de­vel­oped mar­kets.

Their con­trar­ian move into Cen­tral and Eastern Europe (CEE) via New Europe Prop­erty In­vest­ments (Nepi) paid off hand­somely. To­day Nepi is a dom­i­nant player in the Ro­ma­nian re­tail mar­ket, with grow­ing in­ter­ests in Slo­vakia, Ser­bia and the Czech Re­pub­lic. Since Nepi’s list­ing on the JSE in April 2009, the share price has in­creased more than eight­fold. The stock has also con­sis­tently been one of the sec­tor’s top per­form­ers in terms of div­i­dend growth.

Nepi was for a long time the JSE’s sole route to CEE real es­tate mar­kets, but sis­ter fund Rock­cas­tle fol­lowed suit early last year via Poland, where it has since as­sem­bled a port­fo­lio of six shop­ping cen­tres.

In re­cent months, the race among SA prop­erty stocks to en­ter the re­gion has hot­ted up con­sid­er­ably, with Tower Prop­erty Fund, At­tacq and Hyprop In­vest­ments mak­ing ac­qui­si­tions in coun­tries such as Croa­tia, Ser­bia and Mon­tene­gro.

Last month, sec­tor heavy­weight Re­de­fine Prop­er­ties, in part­ner­ship with Piv­otal Fund, ac­quired a 75% stake in a €1.2bn port­fo­lio of 18 shop­ping cen­tres and of­fice blocks in Poland. The deal was the big­gest off­shore trans­ac­tion clinched by an SA prop­erty com­pany un­til then.

UK- and Ger­many-fo­cused MAS Real Es­tate also re­cently an­nounced its in­ten­tion to shift its fo­cus to the CEE re­gion.

The key ques­tion for in­vestors is whether lo­cal prop­erty play­ers

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