Property Fund seeks secondary listing in Warsaw by mid-2013

Shareholders in the EUR 2.8 billion Property Fund (FP) have passed with a sweeping majority a resolution allowing the secondary listing of the fund in Warsaw by June 2013. The move came earlier this month and the FP’s administrator, Franklin Templeton, said it had made progress in establishing the right regulation to carry out the deal.

The lack of a direct link between the depositaries in Romania and Poland has hindered the administrator’s efforts to list the FP shares on the Polish market, which is one of Europe’s best performing stock exchanges. The stock exchange regulator CNVM needs to amend the current legislation prior to secondary listing. Franklin Templeton hopes these changes could be made by yearend, increasing the chances of a listing by next summer.

“There is still no link between the depositaries and that’s what’s preventing us from starting arrangements for the secondary listing in Warsaw. We are in ongoing discussions with the CNVM and our relationship is getting ever better,” said Greg Konieczny, fund manager at FP. He added that the improved cooperation with the CNVM and other authorities made the new listing target feasible.

The FP manager has also come up with a back-up plan, proposing the listing be done indirectly through a custodian bank. However, this option seems to have been dropped as Franklin Templeton and the local regulator appear set to reach common ground.

“It was already arranged between the Polish depositary and one of the banks here. The CNVM at that time was not in favor of this solution and recommended instead doing this direct link, which we are still waiting for and getting more support right now from the changed CNVM,” said Konieczny.

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Shares in FP, a closed-end fund, are currently trading at a 45 percent discount, which is very attractive to investors, according to Mark Mobius, executive chairman of Templeton Emerging Markets Group.

“A discount of this size represents an opportunity for bargain hunters. That’s the reason why we have attracted foreign investors,” said Mobius. Franklin Templeton has been successful at attracting foreign institutional investors, which held 53 percent of the shares in October. The figure stood at 14 percent in December 2010.

The US hedge fund Elliott Associates holds a 15 percent stake, making it the largest FP shareholder. City of London, a UK-based fund management group, has close to 10 percent and RBS around 5 percent.

Franklin Templeton is working closely with the IMF and World Bank to help Romania reform some of its key state-owned enterprises (SOEs), in which the FP has minority stakes. It has also been a strong supporter of the appointment of professional management teams to these companies. At present, the private management program has ground to a near halt.

“This is just a temporary situation. We think that by next year, this process will resume and we will have professional, independent managers and directors at these companies, which would mean an immediate change in the way they are managed and, further on, profitability,” said Mobius.

Ovidiu Posirca