Capital Property Fund investment portfolio includes A and B-grade offices, a small portfolio of retail properties and a portfolio of listed securities. The fund's strategy is to invest in and develop A-grade logistics facilities and premium grade offices in the major metropolitan areas. 

The South African office market is currently characterised by high vacancies, increasing supply from developers and rising operating costs. 

According to Capital's provisional financial report, average municipal rates in Capital's office portfolio now exceeds R17/m² and this is impacting negatively on both net income and valuations. 

Capital has reduced its exposure to offices from 23,7% of total assets at 31 December 2012 to 20,1% as the fund expects the distressed market conditions to remain for a number of years, making it difficult to achieve acceptable returns.

Capital's offshore investments have increased significantly and now constitute 13,3% of total assets compared with 4,5% at 31 December 2012 based on market value. 

Capital has been approved as a REIT with effect from 1 January 2014. The major advantage of REIT status is tax certainty regarding the flow-through of pre-tax income to investors and relief from capital gains tax on the disposal of investment property and qualifying investments.