Construction World May 2018

PROPERTY

First issuer listing in the property sector 4 Africa Exchange Proprietary Limited (4AX) is proud to confirm and introduce the listing of its first issuer operating in the property sector, being Heartwood Properties Limited (Heartwood Properties).

4AX CEO, Fay Mukaddam, said: “We are very excited about this listing and we welcome Heartwood Properties as an issuer on the 4AX Equity Market. The Heartwood Properties listing is a new venture listing by way of introduction and the shares will begin to formally trade on 4AX.” What it is Heartwood Properties is a property development company with an attractive portfolio of commercial real estate assets focused primarily within the ware- housing and office sectors. It currently operates predominantly within the Gauteng region, however, opportunities are being pursued in other regions as well. Heartwood Properties has defined its strategy and business model to service businesses operating in the medium to large owner- managed sector; businesses that require warehousing or offices space, and/or may be looking to expand. According to John Whall, CEO of Heartwood Properties: “We are optimistic about the exciting opportunities and potential that our listing on 4AX offers us, as well as to potential investors of Heartwood Properties. The listing of Heartwood Properties on 4AX will assist in bringing into fruition our goals, which includes raising

capital for deployment in our developments; organically growing the company through new acquisitions, and continuing to enhance our existing real estate portfolio. At the same time, the listing of Heartwood Properties also provides potential investors, and our tenants, a unique opportunity to invest in a dynamic listed property equity.” The shares listed on 4AX today comprise of 100 000 005 ordinary no par value shares at a listing price of R0,59 per share. Pallidus Capital will act as the ongoing external issuer agent of Heartwood Properties. The Head of Pallidus Capital’s Exchange Advisory Division, Johan Fourie, said: “Heartwood Properties’ portfolio is of a high quality. It is currently valued at over R100-million, shows great growth potential with the pipeline properties, and it presents stable income over the short, medium and long-term. “The decision by Heartwood Properties to list on 4AX was influenced by the efficient and cost effective alternative model 4AX offers to the market. 4AX brings to the market an alternative model which reduces regulatory costs and inefficiencies, but promotes and is compliant with the highly regarded financial regulatory standards enforced in South Africa,” added Fourie. The entrepreneurial and innovative

4AX CEO, Fay Mukaddam.

nature of Heartwood Properties’ business and portfolio compliments 4AX’s vision to attract investment opportunities of this calibre – offering valuable opportunities for retail and institutional investors. “Strained economic growth experienced in the country in recent years has placed key development sectors and businesses operating in South Africa under immense pressure to grow in tougher economic times. Although markets, investors, business leaders and society, alike are cautiously optimistic of the vision and promise of the new leadership for the country, there is a renewed buoyancy that can be seen in the markets,” says Mukaddam. “Business and investor confidence is on the rise and there is definite budding new energy and excitement across all sectors in the country. With this, we are confident that the property investment appetite will grow,” concludes Mukaddam. 

International markets, but many can compete toe-to-toe when it comes to development and asset management skills. Being entrepreneurial and creating great returns are things that SA REITs are far more interested in than simply the size of assets under management.” Van Niekerk expects most new capital, debt and equity, raised by SA REITs to continue to be invested outside SA for the foreseeable future. “International markets offer attractive initial yield spreads, which is the gap between the yield on the investment and cost of debt. The offshore investment destinations also have higher GDP growth rates than SA; notably CEE, which has attracted the most from SA REITs and has a forecast GDP growth rate of 3% to 3,5% per year over the next three years compared with 1,6% for SA.” NEPI Rockcastle recently reported nominal sales growth at their shopping centres of 8%. Van Niekerk notes this is a strong result given the near-zero inflation rate in the region. Cautiously optimistic The SA economic environment is also contributing to REITs investing offshore. While current business confidence in SA could be described as cautiously optimistic, many investment decisions are still in the wings awaiting the removal of policy uncertainty and implementation of structural changes. The general state of oversupply of real estate relative to tenant demand and the weak economy means that conditions in the local

• The SA listed property sector has been on a globalisation charge in recent years. • Among those REITs that have ventured offshore, there hasn’t been a single method of doing this.

real estate sector will remain tough for the foreseeable future. “Other than economic and political reasons for investing outside SA, international investment is a natural evolution and diversifica- tion of a growing sector looking for new markets and investment opportunities,” says Van Niekerk. While SA REITs cannot yet be considered true global players, Director and Portfolio Manager at Catalyst Fund Managers Jamie Boyes stresses that the quality of the businesses – the manage- ment, balance sheet, and assets – of several SA REITs are certainly comparable to many global developed market REITs. “The market has changed quite a lot over the last five to 10 years. I expect SA REITs to continue to garner interest from non-SA inves- tors who are still looking for opportunities outside of their traditional basket of investments,” says Boyes. He adds: “As other emerging markets become more established mature businesses, investment interest into emerging market REITs is likely to grow. This would probably help the SA REITs that are looking for a more global investor base.” 

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CONSTRUCTION WORLD MAY 2018