Still bet­ting on bricks and mor­tar

Life in­surer aim­ing for R100bn port­fo­lio by 2015

Finweek English Edition - - Property - JOAN MULLER

PEN­SION FUND man­agers in many mar­kets off­shore may well con­tinue to sell down their prop­erty hold­ings on the back of global credit and re­ces­sion­ary fears. How­ever, it ap­pears South Africa’s re­tire­ment in­dus­try is not fol­low­ing suit. Large in­sti­tu­tional play­ers – such as Old Mu­tual In­vest­ment Group ( OMIGSA) and Gov­ern­ment-owned pen­sion fund man­ager Pub­lic In­vest­ment Cor­po­ra­tion (PIC) – re­main in­tent on grow­ing their ex­po­sure to com­mer­cial prop­erty.

Ben Kodisang, MD of Old Mu­tual’s prop­erty in­vest­ment arm OMIGPI, says the group’s am­bi­tious tar­get of in­creas­ing prop­erty as­sets more than three­fold over the next seven years is still on track. “We’re still back­ing bricks and mor­tar as a long-term play.’’

Much of that growth will come via di­rect in­vest­ments in new de­vel­op­ments. The group al­ready has R20bn worth of of­fice, re­tail and in­dus­trial projects in the pipe­line. A num­ber of those projects are lo­cated ad­ja­cent or in close prox­im­ity to Gau­train sta­tions in Rose­bank and Sand­ton (north of Jo­han­nes­burg) and in Midrand. New de­vel­op­ments also in­clude two multi-mil­lion rand high-rise of­fice tow­ers on Cape Town’s fore­shore and a joint ven­ture with an In­dian part­ner to de­velop a num­ber of re­gional shop­ping cen­tres in that coun­try.

The plan, says Kodisang, is to take prop­erty as­sets un­der man­age­ment from around R28bn cur­rently to R100bn by 2015. Some 20% of Old Mu­tual’s prop­erty port­fo­lio could be in­vested off­shore within 10 years. Fu­ture growth will also come from de­vel­op­ments in SA’s pre­vi­ously un­der­ser­viced ru­ral and town­ship ar­eas.

Kodisang dis­misses the no­tion that cur­rent global un­cer­tainty re­quires de­vel­op­ers and as­set man­agers to adopt a more cau­tious ap­proach to prop­erty de­vel­op­ment. “Ac­cess to debt fund­ing may be tighter but there’s still plenty of money chas­ing the kind of pre­dictable and se­cure in­come streams that fixed prop­erty of­fers.”

Kodisang notes some SA pen­sion funds that pre­vi­ously had no ex­po­sure to prop­erty are start­ing to re­gard phys­i­cal bricks and mor­tar in­vest­ments as a safer bet than eq­ui­ties and bonds.

He ex­pects de­mand for prop­erty as an as­set class to rise markedly over the next few years. Al­though the in­sti­tu­tional sav­ings mar­ket in SA has al­ready dou­bled its ex­po­sure to prop­erty be­tween 2002 and 2008, Kodisang says only around 5% of SA’s in­sti­tu­tional in­vest­ments worth an es­ti­mated R3,5 tril­lion are cur­rently go­ing into prop­erty.

Wayne van der Vent, who heads the PIC’s prop­erty divi­sion, re­cently told del­e­gates at a prop­erty con­fer­ence in Cape Town it in­tends in­creas­ing its prop­erty port­fo­lio from the cur­rent R20bn to around R75bn within five years. That will see prop­erty as a per­cent­age of PIC’s to­tal as­sets in­crease from around 3% to more than 8%. The PIC is cur­rently be­lieved to be ne­go­ti­at­ing a deal to ac­quire a size­able stake in lead­ing SA de­vel­oper Zen­prop’s R10bn com­mer­cial prop­erty port­fo­lio.

Prop­erty bull. Ben Kodisang

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