Wider implications of Steinhoff property spook investors
The independent property valuations announcement spreads uncertainty for property investors on the JSE
Steinhoff’s announcement that at least part of the group’s European property portfolio could be overstated by as much as 50% has added considerable uncertainty to property investors on the JSE. The sector is already reeling from the upheaval involving the Resilient group, with the hardest-hit property shares those with exposure to eastern Europe.
The result of the vigorous independent valuation by CBRE of part of Steinhoff’s European property portfolio has further chilled sentiment towards property investment, which is already struggling with rising US interest rates.
Shareholder activist Albie Cilliers says that up to now, independent property valuations were often wildly optimistic and based on "the highest and best use" of the property. "Coming so soon after Resilient, the latest Steinhoff development will put pressure on property companies to disclose details of valuations and who the valuer was," said Cilliers.
Asset manager RECM’s head, Piet Viljoen, said it was strange that SA was the leading financier of eastern European properties. "I wonder how many other European property portfolios will be revalued downwards over the next few years," he said in a tweet.
The statement released earlier this week by Steinhoff has created some confusion because it relates to only a portion (€2.2bn) of the group’s non-South African property assets. The most recently available balance sheet shows the group valued its property, plant and equipment at €5.1bn at the end of 2016. It also revealed it had 9-million square metres of retail space but gave no indication if this was owned or leased.
On Thursday, a Steinhoff spokesman confirmed that all the properties would be valued by independent valuers.
"With regard to the ownership of the 9-million square metres of retail space, we have not previously disclosed separately between owned and leased, and accordingly that analysis is not available at this time," the spokesperson said.
Coming so soon after Resilient, the latest Steinhoff development will put pressure on property companies to disclose details of valuations and who the valuer wasAlbie Cilliers
The stock exchange statement said most of the revalued properties in Austria and eastern Europe were stores leased to kika-Leiner. This echoes concern raised by the controversial Viceroy report into Steinhoff.
Viceroy said that in June 2013 Steinhoff "facilitated" the acquisition of kika-Leiner by Genesis Investment Holding. Although Steinhoff had no interest in Genesis it provided €375m "to acquire the entirety of kika-Leiner". Six months later, Steinhoff acquired kika-Leiner’s property portfolio from Genesis for €452m.
Meanwhile, Rand Merchant Bank Holdings would provide the market with a full update on the December 2017 acquisition of 44% of Atterbury Europe from Steinhoff when it published its next results, CEO Herman Bosman said. He said that Atterbury Europe had eight property developments in Cyprus, Serbia and Romania and that the portfolio was recently valued by independent valuers.
"The investment in Atterbury Europe is not material in a financial sense and is less than 0.5% of our net asset value."