Johannesburg - JSE-listed black-owned property companies
have defended their decision to list on the stock market after an emerging
property investor warned that the listings were eroding black ownership in the
commercial property industry instead of taking it a step higher.
Monde Mbeta, a director of property development and
management firm E-Bongo Property Holdings, said the listings have led to the
reduction or heavy dilution of black shareholdings in black-owned property
companies, which some have listed on the back of leasing offices to government
departments and state-owned enterprises.
“When BEE companies list (on the JSE), there is a serious
dilution of their empowerment status.
It is categorically stated on the leases that should the BEE
status dilute after having a long lease, the lease will be reduced
proportionally or cancelled,” explained Mbeta.
“Where is the actual transformation in this model (listing)
if the benefit of long-term guaranteed income from a government lease goes back
to financial institutions, pension funds and white individuals who can afford
to subscribe for the shares?” he asked.
Mbeta also warned that the commercial property market was
susceptible to fronting and pointed out that the public works department, which
negotiates leases on behalf of state tenants, needed to be more vigilant.
“White property owners are going to create fictitious
structures by reversing property portfolios to BEE structures, list them and
give management to BEE groups, and then enjoy the liquidity and upside for
“The property ownership is transferred back to white hands
and the BEE (investors) only enjoy minority stakes and maximum 3% fees on the
management of the properties,” said Mbeta.
Eighteen years into South Africa’s democracy, the commercial
property sector is one of the least transformed industries in the economy and
is nowhere near meeting its 25% BEE target.
According to the Black Property Owners Organisation, white
companies hold about 95% of government leases while blacks only enjoy 5% of
The state has awarded nearly 4 000 leases to property
companies worth R300bn.
Even on the JSE, blacks own a small slice of the cake,
holding a paltry 3% of the market capitalisation, which is in excess of R160bn.
Izak Petersen, the CEO of Dipula Income Fund, an 8%
black-owned listed property fund, has defended the listing of black managed
He said: “Although the funds were diluted at listing they
continue to hold sizeable stakes in the listed funds and have managed to
deleverage their positions. Therefore, black investors hold debt-free stakes in
the listed funds, compared with holding highly leveraged stakes when they were
Petersen said development financiers like the National
Empowerment Fund should buy listed property shares on behalf of black investors
and warehouse them for future sale to black companies.
“Without funding it is impossible to get black investors
into deals. Black entrepreneurs should not exit at listing but should use
listings as a path to growth,” he advised.
Thabo Mofokeng, the mergers and acquisitions manager at Billion Group, which manages the Rebosis Property Fund, said black investors can prevent heavy dilution by retaining their positions and by buying more shares.
“Property funds listed under the BEE and any other banner
will not necessarily benefit black investors unless they are actively investing
in listed property,” said Mofokeng, adding that Rebosis was 38.8% black-owned.
Siga Capital, which plans to list a property fund before the
end of the year, is targeting a 75% black shareholder base and will list on the
empowerment index of the JSE, which allows only blacks to invest.
Siga chief executive David Goss said: “About 25% of the fund
will be opened to non-BEE shareholders like institutional investors and white
Public works did not respond to questions from City Press
regarding low levels of black empowerment in the commercial property market.