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Ray Mahlaka | 12 August 2016
It’s no secret that income-chasing South African investors have been fervent backers of offshore property stocks.

The appetite for hard currency earnings has grown in recent years, with the tally of offshore property companies on the JSE’s more-than-R400 billion real estate sector reaching 15.

Investors will soon have three more offshore property companies to choose from, including Polish-focused GTC Group and Echo Polska Properties (EPP), and UK shopping mall developer Hammerson.

Already, offshore exposure in SA’s listed property sector is about 48% (end of June 2016) compared with no offshore exposure ten years ago, the latest figures from Stanlib show. GTC Group, EPP and Hammerson might garner strong support, if the five-year trend of offshore property stocks outperforming SA-focused stocks is anything to go by.

GTC Group – which owns a €1.3 billion (R19 billion) property portfolio of shopping malls and office properties in Poland and other South Eastern Europe regions such as Serbia, Romania, Croatia and Bulgaria – is planning to list on August 18.

The Warsaw Stock Exchange-listed company won’t issue new shares, as it’s embarking on an inward listing. GTC CEO Thomas Kurzmann says the company has been eyeing South Africa, given how institutional investors have been infatuated with Poland in the past two years.

“The listing will enable us to enlarge our shareholder base and give South African investors exposure to Central and Eastern Europe (CEE) and South Eastern Europe (SEE) regions,” Kurzmann tells Moneyweb.

The company has three development projects (two office properties and a shopping mall) and upon completion will add about €1 billion (R14 billion) to its property value. It also owns land for future development.

Echo Polska Properties

EPP, which is 49.9% held by sector heavyweight Redefine Properties, is planning to list in September. The secondary listing of Echo on the JSE’s main board will coincide with its primary listing on the Luxembourg Stock Exchange.

EPP is also looking to diversify its sources of capital with the listing and provide shareholders with access to Poland through its €1.2 billion (R17 billion) portfolio of largely retail properties.

EPP’s CEO Hadley Dean says the company has the capacity to grow its property portfolio to about €2 billion (R29 billion) in the coming years, given its pipeline of properties. Echo has a 70% interest in a shopping mall development and has options to buy ten properties under developments in Polish cities such as Krakow, Wroclaw, Gdansk, Katowice, and Lodz. Poland’s economy is widely considered to be performing better than its European peers; figures by EPP show that its economy grew by 28% between 2007 and 2015.

Hammerson

The third offering to the market will be London Stock Exchange-listed Hammerson, which owns shopping malls and retail parks in the UK, France and Ireland, with a property portfolio valued at £9 billion (R155 billion). The company already enjoys support from South African investors, who hold about 10% of its stock in London.

Says Ian Anderson, chief investment officer at Grindrod Asset Management: “Hammerson’s inward listing makes a lot more sense than some of the other listings we’ve seen in the sector, given the fact it already has a large SA shareholder [base] on its register.”

Hammerson will join the ranks of its UK-focused peers on the JSE, such as Capital & Counties, Capital & Regional and Intu Properties. Given that Hammerson has a market capitalisation of £4.1 billion (R70 billion), it’s likely to be included on the JSE’s Top 40 Index.

Catalyst Fund Managers portfolio manager Zayd Sulaiman says the weakness of the rand has prompted South African investors to increase allocations into offshore property stocks. Given the stellar performance of rand hedge stocks in recent years, Sulaiman advises that investors look at long-term risk-adjusted total returns when judging the investment case of offshore property stocks

 

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