Listed Property performs well

SA Listed Property delivered strong returns to investors and beat other asset classes at 21.75%, for the last 12 months to the end of February 2012.

It’s back to business for the listed property sector with market leading real returns.
Over the past six weeks, nine counters - making up over 60% of the R155 billion SA Listed property sector - reported results for the six-month period to December 2011. Together, they delivered a market capitalisation weighted average distribution growth of 6.6%, compared to the same period to December 2010.

The counters include Capital Property Fund, Growthpoint Properties, Resilient Property Income Fund, Hyprop Investments, SA Corporate Real Estate Fund, Fortress Income Fund, New Europe Property Investments (NEPI), Emira Property Fund and Hospitality Property Fund.

Norbert Sasse, Chairman of the Property Loan Stock Association (PLSA) says: “South African listed property’s income returns are performing positively, showing the sector’s defensive performance in challenging economic conditions.” The PLSA is the unified voice of the property loan stock (PLS) sector in South Africa.

The PLSA reports that for the last 12 months to the end of February 2012, SA Listed Property recorded the highest total return of any asset class at 21.75%. It is followed by SA Bonds with a total return of 13.59%, equities at 9.63% and SA Cash 5.70%.

Importantly, Keillen Ndlovu, head of Property Funds for Stanlib explains the distribution growth reported by the funds to December 2011 was achieved despite tough economic circumstance, worsened by rising utility costs.

Ndlovu says that some results surprised on the upside. These include Growthpoint Properties’ distribution growth of 6.1%, NEPI’s 15.5% growth in distribution and Hyprop, which hit 10.4% distribution growth.

He elaborates that Hyprop’s performance was boosted by the structure of the Attfund transaction, which put a once-off 3.7 cents per linked unit in Hyprop investors’ pockets. “NEPI is benefiting from the under-shopped Romanian retail market and yield enhancing acquisitions. Growthpoint’s numbers were enhanced by positive letting in the office and industrial sectors,” says Ndlovu.

Performing in line with expectations, Resilient reported distribution growth of 9.1%, Capital grew its distributions by 7.8% and Fortress notched up a 10.2% increase in distribution. Ndlovu points out that while these distributions were in line with expectations; this performance is commendable given that they are coming off a high base. “All three of these funds fall under one stable, run by hands-on and competitive management,” points out Ndlovu.

On the other hand, SA Corporate delivered distribution growth of 2.1%, Hospitality -27.9% and Emira -2.5%. “These counters underperformed in the sector. Emira is feeling the pain from its exposure to the huge secondary property market. SA Corporate was dragged down by disposals and weak rental income from the retail and office sectors, and Hospitality has been hit by the weakness in the hospitality industry,” says Ndlovu.

Vacancy levels have been a major factor in performance and Ndlovu notes that office vacancies seem to be increasing, whereas industrial and retail vacancies are dropping. SA Corporate, Emira, Fortress, Growthpoint and Resilient all reported improved vacancy levels.

Looking to the six-months ending on 30 June 2011, similar levels of growth are expected from most of these counters. Fortress and Resilient have guided 10% growth. Growthpoint advised growth of 6.1% for the rest of its financial year. Hospitality’s outlook still reflects negative growth in distributions while NEPI remains positive on the growth front.

“Emira is expecting a slight drop in distributions for the balance of its financial year, and SA Corporate is finding it a challenge to beat its 2011 distributions,” says Ndlovu. Hyprop has guided 4% to 6% and Capital has given a wider guidance of 4% to 8% growth.

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