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South African Property Market Making Noise

07/25/2012 | By Carisa Chappell

The South African listed property market is both well diversified and well developed, according to Estienne de Klerk, executive director of Growthpoint Properties LTD (JSE: GRT). With 23 listed property companies currently on the market, deKlerk said South Africa has a market cap of close to $20 billion.

"There are a variety of assets listed. From mixed use to large retail to offices, industrial, hotels and one or two hospitals," he told REIT.com in a video interview at REITWeek 2012: NAREIT's Investor Forum. "So it's a very well developed and sophisticated market that is mostly listed on the Johannesburg Stock Exchange."

deKlerk said he is hopeful REIT legislation will be completed in South Africa by the end of the year.

He said South Africa has been "a paradise from an investment point of view in listed property."

When it comes to expanding his company he added that one of the key considerations will be finding ways to achieve an international growth rate like it has in South Africa.

However, with assets in South Africa and Australia, he said there are no plans to expand Growthpoint anytime soon.

"At this stage we really are focusing on those two jurisdictions," he said, adding that Growthpoint is specifically looking for commercial properties within its core competency that include regional shopping centers and grade A quality office properties.

deKlerk also said when looking to expand internationally the company needs a jurisdiction where there are established property laws. He said South Africa is part of the "bricks structure" but added that a country such as Brazil could potentially peak his interest if it gets REIT legislation in the future.

When it comes to the response from foreign investors, he said several of the listed property company's don't meet the criteria in terms of liquidity and tradability.

"Generally the large asset managers require that a company's shares trade at least about $10 million a day. At this stage there are really only two vehicles that meet that criteria including Growthpoint, the largest listed company in South Africa and a company called Redefine Properties."

However, he said both of those companies have attracted increased interest from foreign shareholders in the last few years. He added more than half of those investors have come from the United States. deKlerk said U.S. investors are similar to South African investors in that they seek yield.

"This is unlike the European or Australian investors who are very net tangible asset value obsessed," he said.