Rand, bonds provide support for Listed Property Sector
South Africa’s listed property sector advanced 1.5% during the week ended 12 July 2013, clawing back half of the previous week’s losses, according to Grindrod Asset Management chief investment officer, Ian Anderson.
The Rand strengthened by 23c against the US dollar and long bond yields declined by 11 basis points, providing some support for the listed property sector.
Mr. Anderson said that one of the biggest losers last week was New Europe Property Investments (NEPI). It declined by just over 3% on the back of Rand strength and the announcement from Argo Real Estate Opportunities Fund (Argo) that it had commenced legal proceedings against NEPI and Osterreichische Volksbanken-Aktiengesellschaft (Volksbank) in relation to Sibiu Shopping City (SSC).
Argo’s legal claim relates to the unlawful use and dissemination of confidential information regarding SSC, damaging public statements that have been made regarding SSC and unfair competition that Argo has suffered in Romania in relation to SSC. NEPI responded by notifying shareholders that it had received no formal notice of the commencement of legal proceedings and that the board is of the view that NEPI has at all times acted lawfully in relation to the Sibiu debt acquisition.
Both Arrowhead Properties and Synergy Income Fund announced that their applications for Real Estate Investment Trust (REIT) status have been approved by the JSE Limited.
Tower Property Fund listed on the JSE Limited last week. This marks the very first REIT listing. Tower’s property portfolio will comprise 27 properties valued at approximately R1.65 billion, including the Cape Quarter in Cape Town. The forward yield is an attractive 9% and distribution growth is forecast at more than 10% in 2015.
Currently, the listed property sector in South Africa appears to be lacking direction. Investors remain concerned about a number of short-term issues, including further Rand weakness, higher global bond yields and capital outflows from emerging markets. Increasingly, investors are also becoming concerned about future distribution growth rates as economic growth slows in South Africa and consumer indebtedness remains at elevated levels.
Notwithstanding the obvious headwinds currently facing the sector, the current initial income yield of 6.8% and three-year distribution growth of around 7% per annum should deliver inflation-beating returns for investors in the medium term.
Top 5 performers for the week ended 19 July 2013
|
SA Corporate |
5.26% |
|
Rebosis |
3.90% |
|
Hyprop |
3.90% |
|
Acucap |
3.39% |
|
Redefine Intl |
3.00% |
Bottom 5 performers for the week ended 19 July 2013
|
Sycom |
-1.63% |
|
Synergy B |
-2.19% |
|
NEPI |
-3.08% |
|
Annuity |
-3.57% |
|
Hospitality B |
-4.55% |