South Africa’s l isted propert y sector is now in consolidation mode following a f l ood of new ent r a nts f rom 2010 t hrough to 2013. Since 2010 some 17 new property players l isted on the JSE’s main board and the AltX. The sector’s market capitalisation grew to R188bn at the end of 2013 from R117bn at the end of 2010. Currently the sector is valued at around R181bn.
The trouble now, however, is that many of the listed players are small and therefore carry with them an element of concentration risk either on a particular tenant or node. There are also other issues at play, making it hard for these funds to make a significant impact on the market.
Keillen Ndlovu, head of l i sted property funds at Stanlib, says that market dynamics have changed over the last eight months or so, making the environment more challenging for smaller property funds. This presents an opportunity for the large players to acquire the smaller players and in the process diversify while bringing on board new exposure.
Nesi Chetty, head of property at Momentum Asset Management, says that consolidation is a key theme for the sector this year. This will likely result in an improvement in liquidity in the sector, and inefficient companies will either be restructured or stripped of assets.
The price-to-book valuation of the sector has been expensive from 2012
PROPERTY SECTOR CONSOLIDATION HIGHLIGHTS