Len van Niekerk. Picture: HETTY ZANTMAN
Len van Niekerk. Picture: HETTY ZANTMAN

The renewed sell-off of shares in stablemates Resilient Reit, Nepi Rockcastle, Fortress and Greenbay in recent days on the back of what some believe is an attack by short sellers has prompted the JSE to review trading in the group’s shares since the beginning of the year.

Shaun Davies, director of market regulation at the JSE, told the Financial Mail this week that several parties had expressed concern about share price volatility in the Resilient stable.

Before the recent sell-off, the group’s four listed entities made up as much as 40% of the SA listed property sector’s value and were widely held by pension fund managers such as the Public Investment Corp.

Davies said once the JSE had completed its review to identify any suspicious trades it would pass its findings to the Directorate of Market Abuse at the Financial Services Board, which would consider whether to investigate further. He could not say how long it would take for the JSE to complete its investigation.

Since the beginning of the year R110bn has been wiped off the value of the Resilient group’s shares in what some analysts believe is irrational dumping triggered by an aggressive profit-taking campaign by two or three local hedge funds.

But Nedbank Securities property fund manager Len van Niekerk says the rout cannot be laid solely at the door of market speculation. He argues that the stronger rand has also played a role, with share prices of all rand hedge counters coming under pressure.

Nepi Rockcastle, the largest shopping centre owner in Central and Eastern Europe, has been hardest hit. About R55bn was wiped off its market cap alone between January 2 and February 6, driving it to a new low of R71bn. That lost the mall owner its position as the JSE’s largest property stock by gross market value to Growthpoint Properties (R79bn).

Another R55bn has collectively been wiped off the market caps of Resilient Reit, Fortress and Greenbay following share price falls of between 35% and 45% year-to-date.

Property analysts have been baffled by the sell-down given the solid results released by both Resilient Reit and Fortress last week. Rumours that the group could be a target of US-based short sellers Viceroy Research have apparently come to nought.

In a bid to reassure investors, Nepi Rockcastle issued a cautionary late on Friday confirming its annual results will be released on February 20, adding that the governance, operations and affairs of the company "remain sound".

However, renewed questions relating to the large premium to NAV that the Resilient stable was trading at before share prices started to crash from January 10 as well as the group’s cross-holding structure (Resilient Reit owns 15.92% of Fortress, 13% of Nepi Rockcastle and 21% of Greenbay, while Fortress owns 9.32% of Resilient Reit) are raised in a report published on Monday by Johannesburg-based stockbroking and equity research firm Navigare.

The report also suggests that there has been suspicious trading activity in Greenbay’s shares by four shelf-like companies of which the sole director is listed as Hendrik Johannes Oberholzer.

Responding to the report in a Sens announcement, the Resilient board said Navigare does not correctly analyse the financial and voting implications of Resilient’s holding in Fortress B, which is more complex than presented as Fortress has two classes of issued shares (A and B).

The board also defended the company’s cross-holding structure, saying "it is Resilient’s policy to acquire equities when its investment committee and board see value".

In response to share trades in Greenbay, Resilient said: "The board and management of Resilient, and Resilient itself, have no interest in or arrangement of any sort with the private companies or director in question." Resilient added that it has authorised its audit committee to review "all investment activities of and associated with the company and its directors and management".

While the market will no doubt wait with bated breath for the results of the JSE probe, all SA short sellers now face the prospect of stricter regulation; Davies said the JSE was considering the introduction of a short-sale disclosure regime.

Unlike those in many other countries, SA speculators are at present not required to disclose their short positions.