The tide is turning
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.