Finweek English Edition - - Companies & markets - JOAN MULLER

THERE SEEMS TO BE good rea­son for pun­ters to start adding SA Cor­po­rate Real Es­tate Fund (pre­vi­ously Mart­prop) stock to their prop­erty port­fo­lios. The Old Mu­tual-man­aged fund, which has de­liv­ered a less than spec­tac­u­lar per­for­mance in re­cent years, is start­ing to see long-awaited rental growth kick in. Last week the fund sur­prised the mar­ket with bet­ter than ex­pected dis­tri­bu­tion growth of 18% for the five months to end-De­cem­ber 2006 (year-on-year) – the new fi­nan­cial year-end.

SA Cor­po­rate is also in­volved in a num­ber of deals that pro­vides po­ten­tial up­side. The share price of the Dur­ban­based prop­erty counter has al­ready ral­lied some 14% since mid-Jan­uary when it an­nounced the pro­posed buy­out of sis­ter fund SA Re­tail. The merger should boost SA Cor­po­rate’s size and liq­uid­ity sig­nif­i­cantly, plac­ing it among the sec­tor’s five largest funds, with a com­bined port­fo­lio value of R6bn. It will also en­hance sec­toral and ge­o­graphic spread, with in­creased ex­po­sure to the re­tail prop­erty sec­tor – SA Cor­po­rate has pre­vi­ously been an in­dus­trial fo­cused fund.

The port­fo­lio has a strong pipe­line of in­vest­ment op­por­tu­ni­ties through its tie-up with Old Mu­tual Prop­erty Group. There’s talk that a size­able chunk of top per­form­ing Pre­to­ria re­gional mall Men­lyn Park could be listed through SA Cor­po­rate.

Craig Ewin, CEO of SA Cor­po­rate, says 29% of the port­fo­lio’s leases will come up for re­newal this year, pro­vid­ing op­por­tu­nity for rental up­side. Cur­rent rentals from SA Cor­po­rate’s in­dus­trial port­fo­lio are be­low mar­ket at an av­er­age gross R26/sq m – mar­ket rentals are at around R32/sq m with new in­dus­trial stock fetch­ing up to R50/sq m.

At May­don Wharf in Dur­ban, up­ward rental re­ver­sions of at least 10% are ex­pected when a num­ber of in­dus­trial leases ex­pire in Oc­to­ber. Ewin says the last time th­ese leases were re­newed was five years ago.

There’s also plenty of room for rental growth to flow from the Share­max ac­qui­si­tion, with some 75% of those leases com­ing up for re­newal over the next two years. SA Re­tail MD Peter Sparks says the through rate for rentals on the Share­max port­fo­lio is cur­rently only R65/sq m while SA Re­tail is fetch­ing R85/sq m on a sim­i­lar profile of prop­er­ties.

SA Re­tail takes ben­e­fi­cial oc­cu­pa­tion of the 10 shop­ping cen­tres ac­quired from Share­max in a R1bn trans­ac­tion on 1 March this year.

Lease re­newals of­fer rental up­side. Craig Ewin

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