DR REUEL KHOZA ON:
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.
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.