Bonds surpass stellar performance of listed property sector

The listed property sector has managed to outperform other equities but has been outdone by bonds during 2016 so far.

The recent financial reporting period showed that dominant large shopping centres were the most resilient subsector, while offices have struggled this year to date. Industrial property is experiencing similar headwinds to offices with regards to weak reversions but demand for good quality, modern logistics facilities remains.

For the first eight months of 2016, the SA Listed Property Index achieved a return of 7.65%, according to a report by Catalyst Fund Managers.

Other equities mustered 5.82%, cash managed 4.78% but bonds were the top asset class with a return of 11.72%.

Hospitality Property Fund’s A and B shares were the best performers among the listed property stocks over the period, but this growth came off a low base. The company, which had struggled following the 2010 Soccer World Cup tourism boom, has recently benefited from strong visitor numbers especially at its Western Capebased hotels. Many Dutch, British and German tourists have chosen to holiday in SA because of the weak rand.

Hospitality’s dual share structure is set to be converted into a single share set-up after Tsogo Sun injects 10 hotels, valued at about R1.8bn, into Hospitality, in exchange for more than 50% of Hospitality’s ordinary shares.

Hyprop Investments, a shopping centre owner, also performed strongly, achieving a total return of 27.48%.

Hyprop owns a number of malls, such as Canal Walk Shopping Centre in Cape Town and The Mall of Rosebank in Johannesburg. CEO Pieter Prinsloo said earlier in September that various factors had contributed to strong growth in distributable earnings including additional income from acquisitions in Nigeria, Montenegro and Serbia, and the opening of the Achimota Retail Centre in Ghana.

Redefine Properties has also been a strong performer this year, with a total return of 17.96%. Its performance has been buoyed by acquisition activity and solid performances by its blue chip assets, such as Centurion Mall in Pretoria and Blue Route Mall in Cape Town.

SA Corporate Real Estate has also performed well year to date, having reported 9.1% distribution growth for the six months to June and achieved a total return of 18.51% for the eight months to August. The company’s portfolio’s core income has performed well.