Pivotal has potential but its a bit pricey

INVESTORS found the price of The Pivotal Fund expensive yesterday when it listed on the JSE, though analysts say it should provide market competitive returns in the future. Before listing, the fund raised R1bn through an oversubscribed private placement at R17 per share. However, the fund failed to maintain its opening price of R19.95 yesterday. It closed 11% lower at R17.70, with 658,597 shares having traded. Pivotal has a market capitalisation of about R5.3bn and a R9bn portfolio of property assets and developments. “Pivotal has strong potential to perform well but the current price might not be the best to buy them at,” Maurice Shapiro of Ma’alot Investments said. Pivotal’s strategy is to buy A-grade offices and develop retail assets. It also owns a small portion of industrial properties. Many of its office assets are in the Sandton area in Gauteng. Analysts believe this office exposure and its accompanying development pipeline bode well for future price appreciation. Offices are expected to perform more strongly when economic growth improves in SA. Old Mutual Investment Group’s Evan Robins said Pivotal would start to perform strongly when its retail offering gained momentum. He expected the share price to climb gradually. “Pivotal provides access to the development pipeline of one of the country’s top developers and is well positioned for long-term price appreciation,” Mr Robins said. Pivotal joins a slew of listings in the property sector this year, which is now worth about R300bn. Pivotal’s primary asset is Sandton’s Alice Lane Offices, which includes blue-chip tenants Virgin Active and Standard Bank. Alice Lane will be worth more than R3.5bn when it is developed. Investec Asset Management’s sector head for property, Peter Clark, said Alice Lane’s position “in the heart of Sandton” meant it could be used to Pivotal’s advantage in Sandton, where there was a lot of office development and a rise in vacancies in existing offices. Pivotal also owns the Centurion Lifestyle Centre, which is worth about R730m. In addition, it recently launched the R584m Cradlestone Mall in Ruimsig on the West Rand. “It may be a bit soon for Cradlestone Mall in the area but the mall has potential and, five years down the line, should be a strong performer,” Mr Shapiro said. Pivotal was established in 2005 by property developer Abland. There is concern that property companies with a development slant to their businesses will be harshly affected by the unstable supply of electricity in SA next year. Grindrod Asset Management chief investment officer Ian Anderson said yesterday: “I would think that in light of Eskom’s current woes, the South African economy is at risk of disappointing again in 2015 and this will put some strain on property companies, specifically those with large development pipelines.”
09 Dec 2014
Author Business Day