Reits panic as Viceroy threatens report on ‘South African name’
The JSE’s real-estate investment trusts (Reits) went into free fall on Thursday morning, possibly due to rumours that one of them will be Viceroy Research’s next victim.
Worst hit was Greenbay Properties, which fell 28% to R1.62, followed by Resilient which fell 20.2% to R107.25.
Fortress’s B units also fell 20.2% to R28.65 while its A units fell 11.4% to R15.98.
The JSE’s South African property index fell 8.2% to 598 points while the CoreShares exchange-traded fund which tracks it fell 3.8% to R66.
Evan Robins, the listed property manager of Old Mutual Investment Group’s MacroSolutions boutique, said the market had reacted swiftly to speculation.
“I’ve never seen anything like this. There has been a major sell-off in the shares of companies within the Resilient stable. They may or may not be the company Viceroy was targeting and if they are there may be nothing illegal or irregular on their part. They are massive stocks within the South African property benchmark so maybe some fund managers are selling because if something untoward does come out, then they can say they sold out in time,” said Robins.
Garreth Elston, a fund manager at Golden Section Capital, said over the past twelve years of analysing the Resilient group, he had not come across anything irregular about it.
“In my experience, Resilient does everything within the letter of the law. I think they are aggressive in the market but are very good managers and excellent deal-makers. I do think however that Resilient, Fortress Income Fund’s A and B shares, Greenbay Properties and NEPI Rockcastle are among the most overvalued Reits globally,” said Elston.
“I doubt they are anything like a Steinhoff. Reports like those from Viceroy are common in the US. They are just new to SA, especially South African listed real estate.
“Resilient’s structures which tend to be hybrids of owning property and shares in other property or infrastructure companies would lead to them trading at discounts to net asset value (NAV) abroad due to perceived risks. In SA they trade at premiums to NAV. The market is willing to pay the premium and has backed the shares for years,” said Elston.
Resilient CEO Des de Beer said the group had no internal concerns and that the price drops in its member companies may have been down to hedge funds and investors trying to sell down share prices.
“I suspect the sell down is hedge fund driven. We do not have complicated structures and we do have the best disclosure in the industry, in my opinion. Yes we have cross holdings but we have explained these clearly ,” he said.
Resilient released a voluntary trading statement on Thursday wherein it said it anticipated that the dividend per share for the interim period ended December 31 2017 would be between 305.35c and 306.70c per share, which was between 13% and 13.5% higher than the 270.22c per share for the six months ended December 31 2016.
“Trading in the current financial year has been consistent with the prospects previously communicated to shareholders and Resilient confirms that the dividend for the financial year ending 30 June 2018 is anticipated to increase by approximately 13%, as previously guided,” the company said.
Viceroy said in a tweet on December 29: "Wait for our next three reports, one is a South African name."
You have no idea how to research if you think you can huddle a report together without fact checking, extensive DD inc, backtesting all areas. Wait for our next 3 reports, 1 is a South African name.— Viceroy (@viceroyresearch) December 29, 2017
Speculation that the US research firm, which became prominent via its prescience in the Steinhoff International debacle, intended releasing a report on Aspen caused the pharmaceutical group’s share price to suffer on Tuesday.