Mark Stevens. Picture: RUSSELL ROBERTS
Mark Stevens. Picture: RUSSELL ROBERTS

POLITICAL uncertainty and weak economic growth are dissuading foreign investors, according to CEOs of JSE-listed property groups.

Fortress Income Fund CEO Mark Stevens, who chairs the Real Estate Investment Trust (Reit) Association’s marketing committee, told the South African Reit index conference in Sandton last week that his team was committing more resources to attracting offshore investors.

"We face so many headwinds and I believe political risk is the biggest across Africa and SA. We have lost our rule book in SA. We will put our money where there is a rule book and we have certainty," Mr Stevens said.

Political uncertainty and a volatile rand have been spooking investors and turning them away from SA, according to a number of CEOs and market leaders who attended the conference.

When President Jacob Zuma fired Nhlanhla Nene as finance minister last year, investors sold down their holdings in South African Reits, said Growthpoint Properties CEO Norbert Sasse.

Andrew Konig, the CEO of Redefine Properties, said he had noted that relatively more South African investors had decreased their holdings in Redefine shares than offshore shareholders had, but offshore buyers were not flocking to the group.

Dipula Income Fund CEO Izak Petersen said that SA was relatively expensive for new investors and property funds looking to buy assets.

Mr Sasse said most investments from abroad into SA’s Reits were by index trackers.

"We are not seeing direct buying of property funds and assets from abroad. We are seeing index trackers … buying into indices that South African Reits have joined," he said.

Maurice Shapiro, the head of Ma’alot Investments, said new listings this year could be dominated by offshore companies taking up secondary listings.

He said property funds recognised that South African investors were seeking offshore exposure, and that new listings of foreign assets could find support relatively easily.

Some commentators on the sidelines of the conference said they expected some property groups to delist from the JSE.

It has become too expensive for some funds to raise capital at current prices. Also some funds have created an expectation that they will deliver double-digit returns, or close to double-digit returns in terms of distribution growth this year, as they had done in the past year or two, but these funds may fall short.

They may have delivered such growth in the past only on the back of acquisitions, which they cannot recreate now.

Ken Reynolds, the Gauteng regional executive for property finance at Nedbank Corporate and Investment Banking, said delistings could be viable for highly geared companies.

"For listed entities that are already highly geared and are struggling to raise capital, delisting may be a viable approach," Mr Reynolds said.

"However, 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."