The imminent gazetting of the property charter is unlikely to benefit the listed property sector which, for several years, has only been able to secure short-term leases from the government because of the lack of a policy on black empowerment for listed property firms.
Lydia Bici, the deputy director-general for construction and property policy regulation at the Department of Public Works, last week confirmed that leases with non-empowered companies were restricted to a maximum of two years.
However, Bici admitted the government could not demand that listed property companies be 100 percent black-owned because these companies did not have control over who owned the company’s shares.
She said there was a need to look at the listed property sector as a special category.
Although the department was looking at how to deal with this issue and would like to align this policy with the finalisation and gazetting of the property charter, this was unlikely, Bici said. “I don’t have any timelines. It is something we are working on.”
Listed property firms have said that they should not be expected to keep black economic empowerment (BEE) shareholdings at 25 percent because acquisitions were frequently paid in full or partly by the issue of shares, which continually diluted their BEE shareholding.
Former Vukile chief executive Gerhard van Zyl said in May last year that it was not in the interest of large tenants to continue entering into short-term leases because it pushed up the cost of rentals.
Property Loan Stock Association of SA chairman Norbert Sasse said on Friday that the government did not appear to have a policy on this issue. “If there is a policy it’s unclear what it is. If there is a policy of entering into two-year leases with listed property firms, there are a lot of people not adhering to this policy.”
Sasse said exposure of the listed property sector as a whole to the government was limited in terms of the percentage of funds it received, but this was not because of a deliberate attempt by companies to get rid of government leases “but the other way round”.
It appeared that as long as the property management company was 100 percent black owned, the property owning company would continue to get long leases, Sasse said. “But that is not consistent with the policy, which looked at ownership and not who manages the property. This shows the confusing messages the sector is getting around policy.”
This issue was thrown into stark focus with the listing last month of Rebosis, the first black-managed and substantially black-held property fund to appear on the JSE.
Rebosis owns a portfolio of eight high-grade retail and office properties located in Gauteng and the Eastern Cape, valued at about R3.6 billion. The five office buildings make up about 40 percent of the value of the portfolio, let to the national Department of Public Works under long leases.
In a prelisting statement, the directors of Rebosis cited a number of reasons the growth and expansion opportunities of the portfolio were favourable.
They included Rebosis’s credentials as the only black-managed listed property fund, which put it in a position to take advantage of “opportunities to secure long-term leases over properties with government tenants”.
Prior to the listing, Rebosis was 100 percent black-owned but this was reduced to 20.8 percent after a private placement to raised R1.66bn. Attempts to obtain comment from Rebosis were unsuccessful.
The charter is awaiting the signature of Trade and Industry Minister Rob Davies before being gazetted. – Business Report