Listed Property Index slips as investors take profits

South Africa’s listed property sector ended in the red as it slipped 0.3 percent during the week ended 25 October 2013.

South Africa’s listed property sector ended in the red as it slipped 0.3 percent during the week ended 25 October 2013, according to Ian Anderson, chief investment officer at Grindrod Asset Management.

Although most companies registered gains for the week, the sector’s performance was driven by price declines for Growthpoint (-0.7%), Hyprop (-0.9%) and Redefine (-1.65), as investors appeared to take some profits after an eight week rally that lifted the sector more than 13%.

Rand weakness and a moderate uptick in bond yields would also have contributed to lower prices among the industry heavyweights. The medium-term budget policy statement proved to be a non-event for the listed property sector, with investors focusing instead on company-specific news.

Octodec Investments gained more than 4% last week after the company posted a 14.8% increase in distributions for the year ended 31 August 2013. Although a substantial reduction in the company’s cost of debt contributed to the impressive growth, the underlying portfolio performed well in a tough trading environment. The company expects distributions to grow in line with the sector average next year.

Premium Properties gained 1.7% after the company posted a 10.3% increase in distributions for the six months ended 31 August 2013. Like Octodec, the company significantly reduced its cost of borrowings. The company’s residential portfolio performed well, driven by a reduction in vacancies and the market anticipates further strong growth from the residential portfolio on the back of Premium’s active asset management strategies.

Acucap Properties and Sycom Property Fund announced that they had each acquired a 50% undivided share in Greenacres Shopping Centre from Liberty Group. Acucap currently owns 27.5% of the adjoining The Bridge at Greenacres. According to Acucap, the purchase price of R1.016 billion represents an initial yield of 7.8% and the transaction is therefore earnings enhancing for both Acucap and Sycom.

Vividend Income Fund reported a small decline in distributions for the year ended 31 August 2013. Vividend is one of very few listed property companies that have been unable to grow distributions in the past year and are also not expecting distributions to grow in 2014. Vacancies jumped from 2.4% to 8.7% of the portfolio as a result of the expiry of a material lease within the Owl Street Milpark Property on 1 May 2013 and the expiry of the head lease of the Vusani Property Portfolio on 31 August 2012.

Vunanin Property Investment Fund announced the acquisition of Bryanston Gate for a purchase consideration of R174 million, which represents an initial yield of 10.8% and is therefore earnings enhancing.

Ascension Properties announced the acquisition of government-tenanted Surrey House for a purchase consideration of R104.2 million. The purchase is consistent with the company’s strategy of focusing on larger, centrally located commercial office buildings in Pretoria, Johannesburg, Cape Town and Nelspruit.

Top 5 performers last week

Bottom 5 performers last week

Source: Grindrod Asset Management