The first week of September is traditionally marked in the PropertyEU editorial calendar as the time to shake off our summer footwear and step back into our office shoes as we gear up for the annual conference of the European Public Real Estate Association (EPRA).
This year, the conference will be held in Paris where we will be treated to keynote speeches by economist Pascal Lamy and inventor, author and futurist Ray Kurzweil from Google.
On the informal circuit we will no doubt learn more about the spoils of European CEOs who have been putting on their hunting shoes recently for a trek to South Africa. Just this week, UK REIT Hammerson announced the results of its exploration of this new capital source: on Thursday the FTSE 100 European retail property specialist's shares had begun trading via a secondary listing on Johannesburg Stock Exchange (JSE).
Commenting on the move, CEO David Atkins, said he looked forward to building long-term relationships with existing and new South African investors. 'This is an important event for Hammerson as we further broaden our global investor reach and deepen the liquidity for all shareholders. Our business is in great shape and this listing will allow a wider pool of investors to participate in the company's future returns.'
New launches on the cards
Several other real estate companies in Europe are seeking to tap into South African capital via a secondary listing on JSE. London-based retail property specialist Capital & Regional started trading its shares on the JSE last October and in mid-August. Global Trade Centre (GTC) followed suit. The Polish developer and owner of 36 commercial properties in Central and South-eastern Europe with a combined floor space of 646,000 m2 valued at €1.1 bn was listed in Johannesburg on 18 August.
Echo Polska Properties (EPP) has likewise set its sights on the JSE and is due to make its debut later this month after floating on the Luxembourg Stock Exchange in late August. The company owns six office and 10 retail properties in major Polish cities valued at €1.2 bn and is a subsidiary of Warsaw-based Echo Investment and South Africa’s Redefine Properties.
During its investor roadshow in South Africa, EPP's management presented to over 100 investors, CEO Hadley Dean told PropertyEU. 'We are aiming to raise €100 mln based on an offer of a forward yield of 7.5% in 2017, underpinned in euros in debt, value and income. Early feedback suggests that we will be oversubscribed.'
'It is no surprise that those companies are trying to attract South African money at a time where investors in Europe are shying away from London-listed property stocks due to fears that the Brexit will harm the UK economy and its real estate market,' says Thomas Beyerle, head of research at Catella Property Valuation in Frankfurt. In South Africa, by contrast, investors tend to believe the Brexit will provide a boost to the UK economy in the long run, he added. 'Therefore it is currently a lot easier for those companies to tap new shareholders in Johannesburg than in Frankfurt or Paris.'
Spreading their rands
There is plenty of capital looking for a new home in the southern tip of the African continent, according to Günter Vornholz, professor of real estate economics at the EBZ Business School in Bochum. 'The JSE has performed so strongly in the last couple of years that investors in South Africa are welcoming new quality listings in order to spread their rands across a wider range of stocks in their own currency.'
According to Tony Smedley, the fund manager for Schroder European Real Estate Investment Trust, South African investors are looking to access international real estate opportunities in a currency other than the rand. 'They are very real estate orientated but face restrictions when it comes to investment abroad. Investing in our REIT allows them to access real estate in Western Europe in a way that counts as a domestic investment, because they are investing via the JSE.'
Schroder European REIT commenced trading on the London and Johannesburg stock exchanges in December 2015. For Schroder, the advantage of the JSE listing is that the added liquidity provided by the South African exchange is very helpful, Smedley said: ‘The shares are fungible, so they can be traded between the two exchanges. This provides a denomination effect – it gives you scale, presence and liquidity at different points in the cycle.’
On Friday, the company's parent Schroder REIT announced that it is now also exploring a possible secondary listing of its shares on the main board of the JSE. At present, the company has its primary listing on the main market of the London Stock Exchange, but it is now exploring this opportunity because it is aware of potential demand for its shares from South African-based investors.
Listed European firms are keen to list in South Africa because of a sharp uptick in institutional demand for property stocks. In recent months, South African investors have shown a strong appetite for foreign-domiciled, quality inward listed property stocks that have a proven track record, with over ZAR80 bn (€5.65 bn) invested in such stocks over the past three years, according to GTC.
Trekking to South Africa may well become a trend. If so, we will no doubt see more CEOs of European property companies donning their hunting shoes.
Judi Seebus
Editor in Chief PropertyEU
