The tide is turn­ing

Finweek English Edition - - Companies & markets - JOAN MULLER

THE RAPID PACE at which SA Cor­po­rate Real Es­tate Fund (pre­vi­ously Mart­prop) is rein­vent­ing it­self from a rather drab, in­dus­trial-fo­cused fund to a ma­jor player in South Africa’s R95bn listed prop­erty sec­tor is high­lighted in its 2006 an­nual re­port. The fund’s trans­for­ma­tion has no doubt been trig­gered by the ac­qui­si­tion of Dur­ban­based Mar­riott (Mart­prop’s man­age­ment com­pany) by the Old Mu­tual Prop­erty Group in the first half of 2006. It’s no se­cret that in its Mart­prop guise the fund’s JSE per­for­mance didn’t ex­actly shoot the lights out. Old Mu­tual has wasted no time in repo­si­tion­ing Mart­prop for growth, both in terms of size and stature.

Chair­man Ben Kodisang says in his re­view that the in­ten­tion is to grow SA Cor­po­rate’s port­fo­lio to R10bn (R3,1bn at end-2006) over the “medium term” – plac­ing the fund among the sec­tor’s top three in terms of mar­ket cap. Much has al­ready been achieved on that front over the past few months. In Jan­uary, SA Cor­po­rate an­nounced a pro­posed buy­out of sis­ter fund SA Re­tail Prop­er­ties fol­low­ing SA Re­tail’s ac­qui­si­tion of a R1bn shop­ping cen­tre port­fo­lio from un­listed fund Share­max.

The an­nual re­port shows SA Cor­po­rate’s mar­ket cap will be close to R7bn once the deal is fi­nalised.

SA Cor­po­rate sur­prised the mar­ket with sig­nif­i­cantly im­proved dis­tri­bu­tion growth of 18% in the five months to endDe­cem­ber 2006 (year-on-year) – the new fi­nan­cial year-end.

Kodisang says the tim­ing for SA Cor­po­rate’s repo­si­tion­ing couldn’t have been bet­ter. Prop­erty fun­da­men­tals have im­proved sig­nif­i­cantly over the past 12 months, with va­can­cies at all-time lows and long-awaited rental growth start­ing to kick in. “The fund has en­tered an im­proved earn­ings cy­cle. The port­fo­lio is well po­si­tioned to con­tinue grow­ing dis­tri­bu­tions as un­der­ly­ing prop­erty rentals im­prove.”

So far, it seems that the mar­ket likes what it sees. SA Cor­po­rate’s unit price has ral­lied 20% to 425c in the three months to 17 April.

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