JOHANNESBURG – Despite a consolidation in the listed property sector, Freedom Property Fund (Freedom) plans to list on the JSE next week.
Freedom CEO Tyron Govender describes the fund as having a “diverse property portfolio” valued at R1.56 billion. He says the company will look beyond income distribution and focus on the need for capital growth.
“We have a long-term view to investing in South Africa, and eventually into the rest of Africa. We see incredible potential for growth with proven demand for the product we are launching,” Govender told Moneyweb.
Govender says on listing Freedom’s gearing will be less than 3%, and its net asset value per share is approximately 35% more than issue price. He expects a market capitalisation of R1 billion.
An alternative to property listings?
Govender says despite a trend of consolidation in the property sector, there is room for more listings, even smaller companies. He explains that growth in the listed property market is limited and the challenge is to offer a differentiated listing that offers investors value.
“Freedom will unlock sustainable value and growth prospects for shareholders by capitalising on the largely ungeared value in our property portfolio,” he says. “We will do this by securing reasonably-priced debt funding to develop a substantial portfolio of income-generating assets.”
Freedom’s portfolio consists of a range of office, industrial and residential properties. Some developments include Steelpoort Industrial Park in Limpopo, Wespark Palms in the Free State and Stellenbosch Industrial in the Western Cape.
Govender says there are five commercial developments, nine residential rental property developments, two residential sale property developments and developments throughout South Africa in the pipeline.
The listed property sector has seen a number of listings in just a year. Western Cape based Tower Property Fund made its debut on the JSE last year under the REIT structure. In December, Accelerate Property Fund, with a property portfolio at over R5.9 billion listed on the JSE’s main board. Property development company Visual International Holdings, with a market cap of R24.7 billion marked its foray onto the JSE’s AltX board in May. Safari Investments listed on the main board of the JSE in April, listing as a real estate investment trust with a market capitalisation of R1.4 billion.
Most of the smaller listed property funds may not survive for too long, says head of the listed property fund at Stanlib, Keillen Ndlovu, as some are in the process of being taken out of the market. “The rate of new listings will slow down. We are likely to see consolidation over the next six months or so. By the end of the year we may have ten fewer property companies or REITs,” says Ndlovu.
Over the next year Ndlovu expects income growth to average about 8% and about 7% over four years. “The income story is still intact even though it had slowed down from the boom years of double digit growth,” he says.