Listed property in a tough spot but opportunities exist
Phil Bertram, says property investors are having to be clever to manage very difficult trading conditions.
Phil Bertram, the vice president of New York Stock Exchange-listed MSCI Incorporated, an investment research company, says property investors are having to be clever to manage very difficult trading conditions.
These smart investors are game changers in the industry, said Bertram while addressing the Women’s Property Network (WPN) Leadership Conference which took place recently in Johannesburg.
Listed property is struggling to beat other equity markets this year but it still could so and investors are encouraged to buy into smart game changers.
These include property companies that are going abroad and diversifying.
“They aren’t just buying in countries. They have enough information to invest in particular cities. You can have London office and Hungarian residential in your fund,” Bertram says.
He says the most successful investor will find the most effective asset allocation.
“Anyone can be a game changer in a booming market, anyone can ride a wave. But it is harder in difficult times so we have to work hard and use what we know,” he says.
He explains that the market has noticed that various listed funds are moving into Eastern Europe. These include Hyprop Investments which recently went to Serbia and Montenegro, Tower Property Fund which went to Croatia and recently Redefine Properties which is doing a massive deal in Poland.
Hyprop is investing in shopping centres in Serbia, Montenegro and other east European countries. Tower has bought into an office building in Croatia and will announce more deals in the country soon.
Redefine has bought a share of 18 buildings in Poland for billions of rands.
Maurice Shapiro, portfolio manager at Ma’alot Investments, says the deal is very impressive and Redefine was showing it could develop into a "truly global property fund".
He and Bertram say that South African and global investors want globally diverse funds.
He says that property returns on average across direct and indirect listed property average out at about 5.6%. This is while inflation is going to end 2016 at probably over 7%.
“You have to be smart. You have to work hard and not just buy into property fund trying to do anything offshore. There are winners but be careful of pricing,” says Bertram.
Bertram and MSCI have also noticed that shopping centre retail patterns are changing. People are tending not to shop at massive centres anymore. They rather do large many item shops at convenience stores.
“It’s a challenge to work out how to generate strong returns from retail assets nowadays,” he says.
The fixed property market appears to be weakening a bit, with the latest data from Investment Property Databank (IPD) SA showing that capital valuations have softened.
It implies the listed property sector, which has been outperforming other asset classes this year, may be overvalued. Taken by itself, however listed property has outperformed bonds, cash and other equities.
Bertram still believes listed property specialist investors will still do well this year, beating other asset class specific investors but they need to be cautious and patient.
