Why Are South African Listed Property Companies Seeking Assets Offshore?

Why Are South African Listed Property Companies Seeking Assets Offshore?

From Money Web

It is becoming increasingly difficult for JSE-listed property companies to find value and attractive deals in the local market, which has seen the offshore diversification spree continue.

Industry players believe that the sector has turned over the last few years, with more property counters eyeing offshore markets as a result of limited opportunities in South Africa.

The latest property counter to diversify outside of South Africa is Rebosis Property Fund (Rebosis), which has acquired a controlling stake in Mauritius-based New Frontier Properties (New Frontier) for R1.18 billion.

Rebosis has subscribed for 64.6 million shares of New Frontier (or 62% if its issued capital), which has a primary listing on the Stock Exchange of Mauritius and a secondary listing on the JSE’s AltX.

New Frontier embarked on a capital raising exercise, raising £84 million (R1.5 billion) by placing 83.7 million shares to market.

The proceeds from the private placement will be used to acquire two retail shopping centres in the UK.

New Frontier’s UK retail foray will in turn give Rebosis exposure to the market. Rebosis says the UK market is attractive, given that it boasts a forward yield of 7% in the pounds. “New Frontier’s acquisition pipeline provides significant opportunities for value enhancement within the company’s portfolio,” it says.

Rebosis CEO Sisa Ngebulana has also been appointed as non-executive chairman of New Frontier.

Property companies have the odds stacked against them in the local market. Sluggish economic growth, depreciating currency and borrowing costs which are higher than the yield on an investment, are factors dimming South Africa’s investment destination sparkle.

Metope Investment Managers CEO Liliane Barnard says: “There is also an attractive initial yield enhancement by investing offshore given the low interest rates these companies can secure by issuing debt in US dollar, euro or pound and investing in higher yielding assets.”

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