Value play

Well-priced but medi­ocre port­fo­lio

Finweek English Edition - - COMPANIES&MARKETS -

THERE’S NOTH­ING par­tic­u­larly sexy about the R1,77bn prop­erty port­fo­lio In­vestec is bring­ing to the JSE, but there are rea­sons enough why the new real es­tate list­ing is worth a punt. For starters, the fund is backed by an as­tute man­age­ment team likely to un­lock plenty of value for share­hold­ers over the next few years. In­vestec Prop­erty Fund’s two Sams – CEO Sam Leon and ex­ec­u­tive chair­man Sam Hack­ner – have built a for­mi­da­ble prop­erty de­vel­op­ment, trad­ing and ac­qui­si­tion track record over the past 20 years.

The two in­dus­try vet­er­ans were in­volved (among oth­ers) in the cre­ation of Growthpoint Prop­er­ties, In­vestec’s pre­vi­ous foray into South Africa’s listed prop­erty sec­tor. Growthpoint, the only real es­tate counter yet to make its de­but on the JSE’s Top 40 in­dex, has over the past 10 years seen its port­fo­lio bal­loon from all of nine build­ings worth R100m to more than 450 prop­er­ties worth R41bn, in­clud­ing its newly ac­quired 50% stake in Cape Town’s V&A Water­front.

In­vestec Prop­erty Fund is also well priced com­pared with the rest of the sec­tor. It of­fers in­vestors a for­ward in­come yield of around 9,5%, against the sec­tor av­er­age of 8,6%. The ini­tial port­fo­lio com­prises 29 prop­er­ties.

It’s also com­fort­ing that man­age­ment is putting a sig­nif­i­cant amount of their per­sonal wealth into the ve­hi­cle. “Clearly, that helps align the in­ter­ests of man­age­ment to that of share­hold­ers and al­lays the con­cerns we typ­i­cally have about ex­ter­nally ver­sus in­ter­nally man­aged funds,” says Kun­dayi Mun­zara, a for­mer In­vestec Prop­erty an­a­lyst and cur­rently a di­rec­tor at prop­erty as­set man­agers Ses­fik­ile Cap­i­tal.

Al­though the qual­ity of In­vestec’s prop­erty port­fo­lio is be­low the sec­tor av­er­age in Ses­fik­ile’s view, Mun­zara says the counter is fairly priced. “On a com­par­a­tive view the list­ing is com­ing in cheaper than some of the ex­ist­ing prop­erty stocks and we rate the man­age­ment team higher than

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