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April 2016
News
H
owever, when one digs deeper
into the performance of most
of the assets underlying the
companies and funds in the sector,
they have been doing relatively well
and continue to deliver on their prom-
ises to investors. That’s according
to Ken Reynolds, Gauteng Regional
Executive for Property Finance at
Nedbank Corporate and Investment
Banking.
Reynolds contends that, while
one cannot ignore the immensely
challenging macroeconomic back-
drop against which companies in the
listed property sector are currently
operating, there are still opportuni-
ties to maintain some momentum
and growth.
“Rising interest rates are pushing
up the cost of borrowing and making
it increasingly difficult for listed prop-
erty participants to domore business.”
He explains, “While concerns about
the possibility of a downgrade of the
SA economy to junk status by global
rating agencies is certainly compound-
ing the challenges facing the sector.”
The knock-on effect of these eco-
nomic challenges has materialised
primarily as share price deteriorations,
making it difficult for undervalued
companies to raise capital and is
exerting downward pressure on their
overall growth opportunities.
However, Reynolds points out that
it’s not all doom and gloom for listed
property. “Locally, the opportunity
still exists for smart players to either
acquire or develop quality assets at
reasonable prices, or to embark in cor-
porate activity in order to strengthen
their positions.” He furthermore sug-
gests prospects particularly for those
companies that are willing and able,
to diversify internationally.
He explains, “For a number of sec-
tor participants, expansion into Africa
is presenting a real opportunity to
maintain that all-important growth
momentum.” Reynolds offers a word
of caution for listed property compa-
nies seeking prospects internationally
though.
“Successful global property diver-
sification requires a wider view than
just the property being targeted,” he
explains, “and companies or funds
considering offshore markets need to
fully understand the economic funda-
mentals and drivers of the countries in
which they are considering investing.”
On the subject of whether delisting
is a viable option for struggling listed
property entities, Reynolds says that
this course of action may have some
merit. “For listed entities that are al-
ready highly geared and are struggling
to raise capital, delisting may be a
viable approach,” he explains, “how-
ever, this will only be the case if such
delisting presents a real opportunity
for the business to attract a strong
backer and achieve better gearing.”
Irrespective of the approach taken,
Reynolds emphasises that partici-
pants in SA’s listed property sector
cannot afford to simply tread water.
“Stagnation is not an option, and it
is vital that participants in the sector
quickly develop strategies that allow
them to achieve some growth going
forward,” he concludes, “that’s the
only way the sector will successfully
weather the current economic storms
and still enjoy its historical position of
market strengthwhen the SA economy
gets back on a solid footing.”
■
SA listed property
At face value, South Africa’s listed property sector appears to have lost
some of its lustre in recent months.
Ken Reynolds