Reit Legislation Uplifts SA's Listed Property Sector

Ian Anderson, Grindrod Asset Management Chief Investment Officer reports that SA’s listed property sector soared more than 3% last week, as investors poured into sector heavyweights like Redefine (+4.6%) and Growthpoint (+4.5%).

South Africa’s listed property sector soared more than 3% last week, as investors poured into sector heavyweights like Redefine (+4.6%) and Growthpoint (+4.5%).

Grindrod Asset Management chief investment officer Ian Anderson says there was very little company-specific news for investors to get excited about for the week ending 12 April 2013.

Vunani Property Investment Fund announced on Friday, 12 April, the acquisition of ten properties in Greenstone Hill Office Park for a purchase consideration R137.9m, which will be funded from the proceeds of a rights offer announced at the same time.

Last week’s price action has driven valuations among the largest, most liquid companies to levels that will, in all likelihood, leave new investors very disappointed over the next two to three years.

On the other hand, valuations among the smaller, less liquid listed property companies continue to look attractive. With these companies likely to be at the forefront of much of the corporate activity expected from the sector over the medium-term, total returns could exceed 15% per annum over the next three to five years.

The introduction of SA REIT legislation from 1 May 2013 has clearly provided some uplift for the sector. Given that companies will only convert after their respective financial year-ends, this is likely to keep the sector in the spotlight for the remainder of this year.

At this stage, no company has announced a specific date for conversion, but industry leader, Growthpoint, has announced it will convert to a REIT after its financial year-end on 30 June 2013. It is expected that most, if not all current property unit trusts and property loan stock companies, will apply to the JSE to become a REIT over the next 12 months.

Top 5 performers last week 

Bottom 5 performers last week