Real Estate Investor Magazine South Africa February 2015 | Page 52

LISTED

BY LAURENCE RAPP

Listed Property
A top performing asset class

S

outh African listed property delivered returns of
26.6% for 2014, outperforming all other asset
classes for the year.
Despite tough macro conditions, listed property
compared favourably with South African Equities
and Bonds, which delivered returns around 10%, and
cash returned 5.90%. According to Naeem Tilley, who
heads up listed property at Avior Capital Markets, local
listed property has comfortably outperformed all three
other assets classes over 10, five and three years. This is
the sixth time in the past decade it has outperformed
equities, bonds and cash.
South African Real Estate Investment Trust (SA
REIT) Association Chairman, Laurence Rapp says:
“Listed property exceeded market expectations in
2014, despite tough operating environment, to produce
capital returns of 18.59% and income returns of 8.05%.”
Curwin Rittles of Catalyst Fund Managers reports
the sector’s trio of top performing stocks were Fortress
B (100%), Rockcastle (82%) and Resilient (60%).
Keillen Ndlovu, Head of Listed Property Funds
at Stanlib, attributes listed property’s strong overall
performance to better-than-expected results, with
income growth largely boosted by counters with some
offshore earnings and the benefit of a weaker Rand.
In addition, local property fundamentals remained
fairly good, notwithstanding a weaker South African
economy.
When it comes to the increased investor appetite
for listed property, Ndlovu adds after years of doubt
and lack of conviction, generalists have really started to
recognise listed property as a separate asset class.
“We have said this before and we’ll say it again.
What makes listed property stand out is the stable and
defensive nature of the income. It is easier to predict
compared to equities. It is less volatile compared to
equities,” says Ndlovu.

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February 2015 SA Real Estate Investor

Looking to the dynamics defining the market as the
listed property sector enters 2015, it faces challenges
from global markets volatility, particularly emerging
markets, and South Africa’s credit rating con-cerns.
Ndlovu believes the Eskom power shortages can
slow down trading in shopping centres and increase
operating costs if there is a need to install generators.
The sector’s prospects will be influenced by the slowing
economy, oversupply in the office space and in-creased
competition in the retail space.
Rittles explains the direct real estate fundamentals
will remain chal-lenging and SA publicly traded real
estate companies are likely to continue to deliver
inflation-type income distribution growth over the
next year. “This will largely be driven by annual rental
escalations and support from offshore earnings,” says
Rittles, who calculates that the SA listed property
sector offers a forward yield of about 7%.

“What makes listed property stand
out is the stable and defensive
nature of the income.”
Ndlovu believes income will be a bigger component
of listed prop-erty’s total returns in 2015. He says: “We
foresee income growth of around 8.5% over the next
year. This results in a forward yield of 6.9% for listed
property, which is below 10-year bond yields (7.6%)
and cash (7.1%). Listed property however, provides the
benefit of a growing income stream in comparison to
cash and bonds.”

RESOURCES
The South African Real Estate Trust Association
www.reimag.co.za