New listings in property unlikely

Posted On Monday, 12 July 2004 02:00 Published by eProp Commercial Property News
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Demand for units will push up prices

Norbert SasseSOME leading property figures do not see any significant new listings coming on to the market in the next year, saying even the ability of established funds to enlarge their property portfolios and provide the market with new units is limited.

They say this is because of a shortage of properties and the fact that those that are available are expensive.

Des de Beer, MD of listed property loan stock company Resilient Property Income Fund, who also thinks new listings are unlikely, says: "The ability of the existing funds to grow and provide the market with new units is limited by the shortage of physical property and competition from the private investor market, which has driven down yields and made nonresidential properties more expensive."

But he says that the limited supply of units in the listed property sector and the demand for them could result in unit price appreciation this year.

Wolf Cesman, a director on the boards of a number of listed property funds including Redefine Income Fund, ApexHi Properties, Hyprop Investments and Prima Property Trust, as well as Madison Property Fund Managers, which has an asset management function in all of these funds, says there is no doubt that it is becoming more difficult to acquire property.

But Cesman says there will "always be opportunities" and the challenge is for asset managers of listed funds to find them.

On the question of potential new listings, Cesman says he does not think we are going to see a spate of small funds being listed because the market does not have an appetite for them.

"But there may just be a large fund waiting to list that we don't know about yet," he says.

Norbert Sasse, executive director of listed property loan stock company Growthpoint Properties, says that while many listed property funds and private investors were targeting the same properties and the same types of properties, he believes there is a "fortune of commercial property out there" which could be listed.

Sasse believes that SA institutional pension funds, corporates and government all have "huge sources" of commercial property which should find itself on the listed property sector "in one form or another" in the next couple of years.

Roger Perkin, MD of listed property unit trust Martprop Property Fund, agrees with De Beer that growing existing property portfolios in the sector is limited because of the scarcity of good quality investment properties in the market.

Perkin says where some activity may be seen is if other institutions follow Sanlam's lead and list their property portfolios.

He says that because of the demand, both from the listed sector and private investors, the market will probably see property yields of physical properties coming down to levels which make it dilutionary for listed property funds to buy these assets.

"There is so much focus being put on earnings growth by investors that funds would be reluctant to dilute earnings in the current market."

Perkin does not see too much activity in terms of any new listings. "I think promoters would be better served by identifying existing funds to house fixed property assets," he says.

Leon Allison, property analyst at First South Securities, says there is no doubt that physical property has become more expensive. He confirms that property yields of directly held properties have lowered and pricing has risen. But he thinks there is still some value in some listed entities and that there could be some price upside in those funds.

Last modified on Wednesday, 14 May 2014 14:15

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