In a drive to attract more capital, a number of UK and Polish property companies are pursuing secondary listings on the Johannesburg Stock Exchange (JSE) to facilitate South Africans investors searching for opportunities in European real estate markets in their own currency.
The leader of the pack is London-based retail property specialist Capital & Regional which started trading its shares on the JSE last October.
Earlier this month Global Trade Centre (GTC) followed suit. The Polish developer and owner of 36 commercial properties in Central and Southeastern Europe with a combined floor space of 646,000 m2 valued at €1.1 bn was listed in Johannesburg on 18 August.
UK REIT Hammerson is next in line. The London-based owner and developer of retail properties, including 21 prime shopping centres in the UK and France, is seeking a listing in Johannesburg on 1 September.
Later in the month, Echo Polska Properties (EPP) will likewise make its debut on the JSE 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 S.A. and South Africa's Redefine Properties which currently holds 75% of the shares.
While Echo Investment, one of the largest development companies in Poland, is listed in Warsaw and London, Redefine's shares trade in Johannesburg. GTC and Hammerson are both listed in London with secondary listings on German bourses including Frankfurt, Berlin and Stuttgart.
'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,' said Thomas Beyerle, head of research at Catella Property Valluation 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.'
UK shares
Since the Brexit vote on 23 June, British property stocks have shed 26.1% according to GPR, thereby carrying the red lantern among the European country indices. In August, UK property shares fell on average by another 0.91%, while European real estate share as a whole gained 0.35% with Swedish sector shares leading the way with an increase of 3.73%.
While Hammerson's global shareholder base includes a number of South African investors, the company's CEO David Atkins is hoping to attract more investors from that country in the future. 'This secondary inward listing will allow Hammerson to access a wider pool of international capital,' he said at the earnings presentation in July.
Indeed, 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.'
In the last 60 months, the JSE All Share index has risen by 80.92% while the Euro Stoxx 50 gained 34.39% and the British FTSE 31.30%.
The JSE may also be a better place for listed Polish real estate companies to attract capital than German stock exchanges, Vornholz added. 'While South African investors see Central Europe as a place of opportunity, many of their German and Austrian counterparts are currently shying away from the Polish real estate market, due to fears that a rental brake and outrageous property tax hikes will be introduced by the conservative government in Warsaw.'
Since 2013, South African investors have pumped ZAR80 bn (€4.98 bn) into foreign-domiciled, but inward-listed quality property stocks, GTC CEO Thomas Kurzmann noted. But that is not the only reason why the Warsaw-based company decided to enlarge its shareholder base via the JSE.
'Over the last few years, we have observed significant interest from South African investors in high-quality Central- and Southeastern European properties as evidenced by recent transactions in Poland, Romania, Serbia and Croatia,' he said.
