More property tie-ups likely
Tough operating conditions will encourage listed real estate companies to seek acquisitions, say analysts
SA’s listed property sector could be ripe for more consolidation as a number of real estate companies on the JSE are struggling to find attractively priced assets. More mergers look to be on the cards because yields on buying direct assets are not particularly attractive. A landmark merger has already been proposed between New Europe Property Investments (Nepi) and Rockcastle Global Real Estate, which could create one of the largest property funds on the JSE. "Yields on direct assets have remained stubbornly low, despite weak property fundamentals and the cost of capital for listed companies is high," said Catalyst Fund Managers investment manager Paul Duncan. "Development yields do not compensate for the risk assumed and speculative development is even more risky, with almost zero net new demand." Nepi, which has mainly invested in Romania, and Rockcastle, which has mainly invested in Poland, announced in 2016 that they intended to merge. The two companies had started to look for s...
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