Finweek English Edition - - IN DEPTH -

The big­gest threat to REITs

“The great­est threat, not only to listed prop­er­ties but to all busi­nesses, is the move­ment to­wards junk sta­tus. All listed com­pa­nies will suf­fer from in­vestors who will pull out to in­vest in ge­ogra­phies that they con­sider a lot more sta­ble and po­ten­tially pros­per­ous,” Khoza tells

Is there still value to be found in SA?

“South Africa is sup­posed to be a grow­ing econ­omy. Even though it might ap­pear that the cities are ma­ture and no longer have scope, we can see that prop­erty devel­op­ment con­tin­ues to bur­geon. Sec­ond-tier ma­jor cities like Polok­wane, Pi­eter­mar­itzburg and Port El­iz­a­beth are hardly tapped and still burst­ing with po­ten­tial for growth.” Pe­riph­eries of me­trop­o­lises, or ar­eas within me­trop­o­lises like Jo­han­nes­burg and Pre­to­ria, still have mas­sive scope as does the area be­yond Dur­ban North in KwaZulu-Natal, adds Khoza.

Sec­tor ca­su­al­ties

If there are go­ing to be any ca­su­al­ties in the REIT sec­tor, Khoza says these will typ­i­cally be greater among the small caps. But, he says, in spite of size, and de­pen­dent on how the busi­ness is run, small caps can also be very re­silient.

Could delist­ings be­come a fac­tor?

Listed com­pa­nies still have con­fi­dence in the stock ex­change and still ben­e­fit from be­ing listed, be­lieves Khoza. Those that do delist, he says, will do so upon “se­ri­ous af­flic­tion and weigh­ing up pros and cons.”

Se­ri­ously af­flicted listed prop­erty en­ti­ties could be those that are highly geared and un­able to raise cap­i­tal. Delist­ing then could be the only op­tion for them to at­tract a strong backer and achieve bet­ter gear­ing, says Ken Reynolds, Gaut­eng re­gional ex­ec­u­tive for Prop­erty Finance at Ned­bank Cor­po­rate and In­vest­ment Bank­ing.

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