Listed Property ‘fares well’ in tough year

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The South African listed property industry has risen nearly 9% in the first nine months of the year, said Ortneil Kutama, SA Commercial Prop News Media Director. The South African listed property industry has risen nearly 9% in the first nine months of the year, said Ortneil Kutama, SA Commercial Prop News Media Director.

The South African listed property industry has risen nearly 9% in the first nine months of the year, about double what equities have achieved, which was 4.82%. Bonds achieved a staggering 15.05% and Cash managed about 5.4%.

This means listed property has outperformed inflation for yet another sustained period. But stock picking is becoming increasingly difficult in the sector on the back of growing volatility in share prices.

Nevertheless, the double digit returns for the sector appear to be over, said Ortneil Kutama, SA Commercial Prop News Media Director.

ALSO READ: Bonds surpass stellar performance of Listed Property Sector

A number of South African property groups are operating overseas where developing retail assets can be cheaper than in SA and where there is more relative demand for new offices.

But various offshore companies are also listing in SA.

However, investors remain attracted to the real estate investment trust (Reit) structure of many property companies. These Reits should pay out regular income distributions which adds to their capital share price growth.

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Even though there may be somewhat fewer development opportunities in SA for new projects, existing shopping centers have generally stood up. Larger malls have especially done well as shoppers are making fewer trips but buying more items in a visit.

Retail centres for owners such as Hyprop Investments, Growthpoint Properties, Vukile Property Fund and Redefine Properties have all performed well overall. Hyprop’s Mall of Rosebank has managed to shine this month following nearly R1bn being invested into the centre.

The best performing JSE-listed property company over the first nine months of this year was Hospitality Property Fund. The hotel owner’s (A) shares achieved a total return of 23%, while London-focused Capital & Counties Properties (Capco) shed a hefty 50% over the same time, according to the latest figures from Absa Wealth & Investment Management.

ALSO READ: Not a rosy picture for Listed Property Sector

Capco’s losses are linked to lingering uncertainty about how Britain’s decision to exit (Brexit) the EU will play out and the way London’s status as a global real estate investment hub will be affected. 

Hospitality has performed well from a low base. The company has enjoyed strong returns from its Western Cape hotels.

The other stocks that join Capco at the bottom of the pile are all UK-focused companies, including Redefine International, Capital & Regional and Atlantic Leaf Properties.

It is interesting to note that three rand hedge offerings count among the sector’s top performers over a 12-month period: Investec Australia Property Fund (up 23%), Rockcastle (up 22%) and New Europe Property Investments (up 10%).

Equites achieved total growth of nearly 19% in the nine months to September. Redefine Properties, an exciting performer managed a total return of around 22.35%. Redefine has performed well with a strong deal in Australia and a strong deal in Poland.

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Various analysts feel that the listed property sector in SA has largely been affected by volatile currency fluctuations so any companies which have achieved returns because their underlying assets have done well.

Large funds such as Growthpoint Properties and Redefine Properties have performed strongly with both companies reaching double digit returns. Another winner has been Equites Property Fund, the industrial property owner which has managed to sign good long term leases with top quality multinational tenants. Equites has ambitions to become a mid-capitalization property group in the next couple of years.

SA Corporate Real Estate Fund has also been impressive, having built up a strong residential property portfolio. The company has a deal in place where affordable housing developer, Calgro M3 would create the housing and it would be housed in a private company which Calgro and SA Corporate would hold stakes in.

Offshore property companies like Echo Investment which owns more than 10 retail centres and Echo Polska Properties, a Polish owner of malls and office benefitted shareholders by paying pound and euro denominated distributions.

ALSO READ: Listed Property in limbo as investors hand on to stock

Catalyst Fund Managers said there were concerns about SA’s weak economy and its pressures on domestic property stocks.

“We remain concerned about the macro economic environment. There is generally an oversupply of office space in an environment with low GDP growth. SA property fundamentals remain challenging and asset management skills of management teams will be a differentiating factor,” Catalyst said.

In conclusion, we can expect at least three new property listings heading for the JSE next month, including a R1.4bn Western Cape-based portfolio, Spear Properties.

The other two contenders are retail-focused Liberty Two Degrees and a UK-based property play by global asset manager Schroders.


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