Highly liquid property stocks feel the pain of foreign inward listings

Polish property play Echo Polska Properties (EPP) earlier this week became the third foreign inward listing to make its JSE debut in less than a month, raising concern among some local industry players about the impact so many new rand-hedge offerings will have on demand for local property shares.

Norbert Sasse, CEO of sector heavyweight Growthpoint Properties, says it is inevitable that fund managers will have to sell down their local property holdings to support the slew of new inward listings on the JSE.

“After all, there’s not a bottomless pot of capital available to invest in listed property.’’

Speaking at the company’s annual results presentation earlier this month, Sasse said highly liquid stocks such as Growthpoint are the first to feel the pain when fund managers adjust their capital allocations. He referred to recent volatility in Growthpoint’s share price, which slid 9.5% in the 10 days to September 1.

EPP’s dual primary listing on the JSE on Tuesday follows the recent secondary listings of London Stock Exchange-listed mall giant Hammerson and Global Trade Centre in August.

EPP, under CEO Hadley Dean, raised a substantial R1.6bn in an oversubscribed private placement last week. It is the seventh rand hedge property stock to list on the JSE within a year. Last week, global asset manager Schroders said it is also looking to inward list its UK-based property fund on the JSE. That follows last year’s JSE listing of the Schroder European Real Estate Investment Trust. Though inward listings create additional choice for investors, analysts say it’s time South Africans become more discerning about which new offerings they support.

“Investing in any offshore property listing purely on the back of the hard currency earnings it offers is extremely short-sighted. There have been some listings that have adopted this approach and will most likely be undone over time,’’ says Meago Asset Managers director Jay Padayatchi.