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
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