Return on property investment comes in at 11.7%


Monday 16 April 2018

Written by Alistair Anderson (This email address is being protected from spambots. You need JavaScript enabled to view it.)

This article appeared on page 10 of the Companioes & Markets Section of Business Day, Monday 16 April 2018

New York-listed MSCI has released the IPD SA Annual Property Index, which showed that the South African property investment sector delivered an ungeared total return of 11.7% in 2017, up from 10.9% in 2016.

This index has outperformed the MSCI SA Equities Index and the JPMorgan seven- and 10-year bond indices over three-, five-, and 10-year periods.

The index, which is sponsored by Nedbank CIB, is based on asset-level data collected from a sample of 1,649 properties with a total capital value of R356bn. This represents about two-thirds of professionally managed investment property in the country.

THe 80 basis point improvement in the 2017 numbers was driven by capital growth of 3.2% compared with 2.3% in 2016, as a result of positive contributions from both base-rental growth and a strengthening base-rental yield, according to MSCI executive director Phil Barttram.

The income return was down by a marginal 20 basis points to 8.3% as the market experienced yield compression through the year.

The overall commercial property vacancy rate improved 100 basis points to end the year at 5.1%, up from 6.1% a year ago.

Rental growth declined to 3.9% from 5.3% in 2016, reflecting a competitive leasing environment and more refurbishment activity in the sectors.

"Real estate is a distinct and mature asset class, with a unique risk-return profile that's attracting increased asset owner flows", said Barttram.

The IPD SA Annual Property Index "provides a perspective on the fundamental drivers of commercial real estatereturns in SA", he said.

Retail property performed the best in 2017 with a 12.3% return, outperforming industrial, which also returned a rounded off 12.3%.

Offices returned 10.3%, up from 7.6% in 2016.


Growthpoint Boss Lauds Positive Results

Friday, 02 March 2018 00:00

Written by Alistair Anderson (This email address is being protected from spambots. You need JavaScript enabled to view it.)

This article appeared on page 9 of the Companies & Markets Section of Business Day, 1 March 2018.

SA’s largest property company, Growthpoint Properties, is sticking to its knitting and not taking any extraordinary risks while its competitors face a host of challenges, according to CEO Norbert Sasse.

Sasse spoke on the sidelines of the release of the group’s financial results for the six months to December, which he said was the toughest half-year period for the real-estate investment trust (Reit) since the 2008 recession.

Growthpoint posted distribution growth of 6.5% per share, meeting its guidance, while it grew its asset base to R127.7bn.

Similar dividend growth was expected for the full year to June 2018.

Growthpoint increased its total distributable income by 10.6% from its prior half year to a substantial R2.9bn.

Group property assets increased 4.4% to R127.7bn and group net asset value grew 3.9% to R25.93 per share.

Sasse attributed this positive performance to strong contributions from the V&A Waterfront in Cape Town and its east European arm, Globalworth Real Estate Investments.

The company looks set to be a reliable performer in 2018, with Sasse confident that the economy will gain momentum. While some offshore-focused JSE-listed property companies’ returns have been weakened because of the stronger rand and some have been sold off due to the perception that they were overvalued, Growthpoint’s strength has been that it has continued to run a diversified but risk-averse strategy, according to Sasse.

“While the listed property sector’s overall returns have been weak in 2018 so far, this is because of mostly the Resilient group of companies.

“Those companies are not traditional property groups as they use various financial engineering techniques and we’ve seen a sell-off of their shares as they were perceived by some to be overvalued,” Sasse said.

Meanwhile the likes of Growthpoint, Redefine and Vukile — which operate more like traditional property companies — are actually trading at 52-week highs.

“Growthpoint’s message to shareholders is that we will remain a reliable, conservative group that meets its dividend targets while maintaining and gradually enhancing the value of its assets,” said Sasse.

Stanlib analyst Ahmed Motara said the financial results met market expectations without any negative surprises.

“The stock has recently hit a multiyear high, with the South African 10-year bond yield … reaching a multiyear low. In light of recent disappointing South African property company results, Growthpoint’s results can be considered a positive outlier, particularly for a stock exposed across a broad swathe of the South African property market,” Motara said.

The stock continued to deliver reasonable returns on a steady basis, with overall vacancies below 5%, gearing near 35% and positive portfolio revaluations.

Anchor Stockbrokers research analyst Wynand Smit said it was notable that Growthpoint had highlighted “the trend of a slowdown in new retail supply, on the back of retailers being reluctant to grow their footprint in SA”.