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GEPF’s Pareto eyes JSE listing

After mulling a listing since 2016, Africa’s largest pension fund is set to bring a retail property portfolio to the market in 2019.

The Government Employees Pension Fund (GEPF) plans to list a property portfolio of shopping malls on the JSE, bringing real estate investors more exposure to SA’s retail sector. 

Pareto Limited, which is 76% owned by the GEPF, is set to list on the JSE’s main board in 2019 – a plan first mooted by management in 2016 but put on ice due to SA’s difficult economic and trading conditions at the time. 

Kevin Roman, CEO of Mowana Properties, confirmed Pareto’s market debut for 2019 at the South African Institute for Black Property Practitioners Convention on Wednesday. Mowana Properties is 100% owned by Pareto. 

Roman and Pareto CEO Malose Kekana were not available to comment at the time of publishing. 

A successful listing means that Pareto would bring a predominantly retail portfolio worth more than R30 billion – including shareholdings in malls such as Sandton City in Johannesburg, Menlyn Park Shopping Centre in Pretoria and Tyger Valley Shopping Centre in Cape Town – to the market.

Kekana previously told Moneyweb that Pareto would only list on the JSE when economic and retail conditions had improved and once its more than R2 billion capital expenditure programme was spent upgrading its shopping malls.

This, he said, would enable Pareto to bring a large and quality property portfolio to investors.  

A real estate investment trust structure (Reit) has been mulled by Pareto, and would see it joining the ranks of Reits that enjoy tax incentives under the structure. And the GEPF, which is Africa’s largest pension fund with nearly R2 trillion worth of assets, would remain a large shareholder in Pareto post the JSE-listing. 

Some market watchers believe the timing for listing may be difficult given the volatility of the JSE’s real estate sector and institutional investors that are becoming increasingly more discerning about supporting new listings. 

In addition, the listing boom in the sector that has gained momentum since 2012 – with at least five new listings a year since then – has slowed. The only listing so far this year has been Exemplar Reit, a R5.5 billion rural retail portfolio brought to the market by property developer McCormick.

One real estate analyst said Pareto might struggle to get institutional investor support given lower sentiment towards shopping mall owners. The retail real- estate sector is buckling under the weight of lower consumer spending, rising vacancies in shopping malls across SA and retailers that are limiting their store expansion plans. 

“Pareto and other listing hopefuls would have to bring a portfolio with large scale and would need to bring something unique to the market,” said the analyst. 

Investor sentiment towards the real estate sector has also been dented by its poor performance on the JSE, largely due to the wide sell-off of shares in the Resilient group of companies.

The Resilient group has been accused by asset managers 36One and Mergence, stockbroker Navigare, and independent sell-side research house Arqaam Capital of using its cross-shareholdings, black economic empowerment trust Siyakha, and questionable accounting policies to artificially boost share prices, dividend payments, and net asset values.

The FTSE/JSE SA listed property index (Sapi), which makes up the JSE’s 20 largest real estate stocks, has lost 21.9% in total returns for the year to August 7, latest figures from Anchor Stockbrokers show.

The index was largely weighed down by the sell-off of shares in the Resilient group of companies, which made up about 40% of the index until December 2017. 

Meanwhile, equities posted a negative total return of 1.5%, while bonds and cash posted returns of 5.7% and 4.3% respectively.

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Rather late to try and reinvent the wheel or is this just another making exercise for the likes of Roman and Company.Property funds have also struggled and now is not the right time to jump on the bandwagon.

Looking at executive pay on the JSE, it is understandable that management would like to list.

Hopefully somebody takes a careful look at the fuzzy lines among the private management company fees & the public property owner assets & listed company costs. The management companies seem to all start behaving like they are R50 billion property tycoons rather than hired help to run the properties for the actual owners

Time running ZA property listings. Better get it done before EWC.

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