New property funds underperform

The South African listed property sector is growing in leaps and bounds, having increased its market capitalisation over the past 12 months from R122bn, with 18 counters, to R158bn, with 29 counters, as at the end of last month.

But new listed companies did not hit the ground running as their unit prices underperformed the market due to liquidity challenges and expensive pricing.

Last year was a year of new listings and capital raisings in the form of rights issues, private placements and distribution reinvestment options totalling about R16bn.

Vividend Income Fund listed with a market capitalisation of R0,5bn, Investec Property Fund with R1,8bn, Rebosis Property Fund with R2,1bn, Vunani Property Fund with R0,9bn, and Dipula Income Fund with R1,4bn. Attfund reverse-listed into Hyprop , bringing an added market capitalisation of R5bn.

Arrowhead Properties was listed after Redefine Properties unbundled properties it did not want into the new fund. This resulted in Arrowhead listing with a market capitalisation of R0,8bn. Synergy Income Fund listed with an initial market capitalisation of R0,5bn.

This year, the new listed property companies are likely to buy new buildings and raise capital to grow their portfolios.

But Catalyst Fund Managers portfolio manager Zayd Sulaiman said last week that only Investec outperformed the market last year due to its private clients supporting its listing and assisting with liquidity.

"We are expecting more smaller-cap companies to list this year, which is good for vendors. But it will be interesting to see which companies survive and grow their portfolios this year," he said.

Mr Sulaiman said the pricing of new listings would be important because last year the new listings looked expensive. "The reason the new listed companies underperformed is because they have little liquidity, meaning you can’t buy more shares." He said the under-performers were now looking attractive because of pricing, while Investec was looking expensive.

Investec outperformed the market by 13%, Vividend underperformed by 5%, Vunani by 2%, Rebosis by 10%, Dipula A units by 6,5% and Dipula B units by 10%.

Stanlib head of property funds Keillen Ndlovu said some funds that listed brought with them good-quality and dominant properties.

"For example, 19 of the top 30 biggest shopping centres are now owned by the listed property sector. Recent additions include Clearwater Mall (Roodepoort, Johannesburg), V&A Waterfront (Cape Town), Hemingways Mall (East London) and Woodlands Boulevard (Pretoria East)," Mr Ndlovu said. "Yes, we have experienced a listings boom but one thing to point out is that not all companies that were looking to list managed to," he said.

Old Mutual ’s Triangle Core Real Estate Fund, with a R12bn portfolio, did not list, as was planned.