Listed property’s bumpy road offers investment opportunity

Having declined by 5.7% in the week ending 24 May, listed property sector lost a further 8.9% last week with a number of companies registering double-digit declines, according to Ian Anderson, chief investment officer at Grindrod Asset Management.

South Africa’s listed property sector continued its slide during the week ending 31 May 2013, as the Rand breached R10/US$ and bond yields moved sharply higher.

Having declined by 5.7% in the week ending 24 May, the sector lost a further 8.9% last week with a number of companies registering double-digit declines, according to Ian Anderson, chief investment officer at Grindrod Asset Management.

Among the sector heavyweights, Resilient declined by 14.75% and Hyprop by 12.47%.

Vukile Property Fund got the week off when it reported a 5.4% increase in distributions for the year ended 31 March 2013. The company grew substantially, having acquired a portfolio of properties valued at R1.5 billion from Sanlam in April last year and 50% of the East Rand Mall for R1.1 billion in 2013.

The company also announced that the JSE Limited had approved its application for SA REIT status effective 1 April 2013. Further acquisitions can be expected from Vukile after it set a target of growing its property portfolio to R10 billion.

Dipula Income Fund reported distribution growth of 5% for its unitholders and 7.4% for its B unitholders for the six months ended 28 February 2013. The numbers were a little on the light side. Management commented that as a result of delays in the transfer of certain properties, the proceeds of a private placement undertaken in November last year created an opportunity cost of approximately R2 million (the difference between the yield on the properties and the interest earned on holding cash).

Vunani Property Investment Fund released financial information relating to the acquisition of properties in Greenstone Hill and at the same time announced a rights offer to raise approximately R455 million. The offer price of 1 140c represents a 7.5% premium to the current share price.

Later last week, the company announced that distributions for the six months and year ended 30 June 2013 could be more than 15% ahead of the comparable periods last year.

Last week’s price action resulted in the yields on listed property increasing to almost 7% from less than 6% two weeks ago. This represents an attractive entry point for investors looking to secure a high initial income yield and long-term inflation-beating income and capital growth.

However, the sector may remain volatile in the short-term and will react to shifts in the value of the Rand and bond yields.

Top 5 performers last week

Bottom 5 performers last week