With a market cap of R18bn, the JSE property sector is a midget. And it grows mainly by feeding off the giant portfolios of SA's insurance companies and pension funds.
About 40% of the sector is owned by only a handful of investors , according to private asset manager Provest. They are Old Mutual and Marriott (R1,2bn each), Redefine (R1,1bn), Growthpoint (R750m), Standard Bank and Provest (R500m each), Pangbourne, Oryx and Compass debentures (R200m each). Other large holders are Catalyst, Oasis, Coronation and the Mines Pension Fund.
The sector needs to double in size to offer other investors a chance to get involved.
But the institutional food supply may not be so generous in future.
The institutions have built up enormous holdings through the decades (see table) because property's steady and growing income streams can easily match their long-term obligations. Securitising their properties by placing them in JSE-listed funds adds liquidity to their assets, and so gives more flexibility in adjusting them over time. It is also a worldwide trend.
Assurer Sanlam has played a part in some newer listings and plans to list two of its own funds soon. Old Mutual is also planning to list two funds.
And the Mines Pension Fund has converted R1,5bn of its directly held property into units in Growthpoint, ensuring that it will become the largest property fund on the JSE in the near future.
Some external factors, like the fall in the rand, a rise in interest rates and an increased discount to NAV in the value of listed units, delayed securitisation.
But the institutions have other reasons for being slow about it.
Many of their properties have traditionally been overvalued - and still are. It is significant that Sanlam has been the most active in listing its properties: it has also been quickest to bring unrealistic property values into line.
For other institutions, listing would mean marking down properties before they are ready to do so.
Another reason they hesitate is that they are nervous about exposing their performance to the glare of Sens (the JSE's news service) and the analysts. Even the listed institutions, such as Liberty, give only sparse information on their direct property holdings.
Neither of these is the reason Liberty Properties MD Jim McAllen gives for not listing his portfolio, worth R12bn (including minority partners in some properties). The properties perform well, he says, but they are there as long-term suppliers of income streams to his policyholders. Liquidity is not an issue.
The biggest portfolio of all may never be listed. It is government property managed by the department of public works, at R120bn probably the largest property portfolio in the southern hemisphere. Drawing up an inventory and setting up an asset management framework has taken nearly 10 years.
Some will find its way to the JSE through empowerment developers, who have first option on government properties for sale, like Mvelaphanda Properties when it reverses into RL Props, as expected.
But building a sizeable listed property sector will still take some time.
