Weak rand boosts property funds with offshore exposure

Posted On Thursday, 15 October 2015 10:01 Published by
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While SA's listed property index is set to come under pressure during the rest of the year‚ certain companies are standing out as top performers.

Evan Robbins Old Mutual

A common trend‚ however‚ among the best performers is that they have exposure to or are completely based offshore.

This trend means that their returns have been helped by a weak rand.

The rand had lost 19% to the dollar by the end of last month. This month the currency has gained about 3.60% against the dollar but it is still 15.6% down on the greenback since the beginning of the year.

Fortress Income Fund’s B-unit was the best performing property stock in the first nine months of this year‚ having returned a total 86.30% in that time‚ according to research by Catalyst Fund Managers.

Property company returns are made up of share price appreciation and distributions.

Resilient Property Income Fund returned 41.39% year to date. Resilient is exposed to a number of property companies that own assets overseas.

It has also seen its shopping centres located in metropolitan areas in SA fare well.

Sirius Real Estate‚ the German business park owner‚ achieved a total return of 37.97%‚ while Capital and Counties‚ the UK-based owner of the iconic London assets Earl’s Court and Covent Garden followed close behind with 37.90%.

Another sizable strong performer was shopping centre owner Hyprop Investments‚ which delivered a return of 29.69%.

New Europe Property Investments‚ the JSE-listed Romanian shopping centre‚ achieved a 27.52% return.

One exception to this rule is Capital Property Fund‚ the largest listed owner of industrial property in SA‚ which managed a return of 25.57%.

Evan Robins‚ listed property manager of Old Mutual Investment Group’s MacroSolutions boutique‚ said on Tuesday that two general characteristics had stood out among the top performers this year.

“Most of them were Resilient group companies with high see-through rand hedge exposure.

“These companies also produced high distribution growth. Hyprop Investments‚ which also managed to achieve high distribution growth‚ also delivered a strong return‚” he said.

The Resilient family firms‚ which hold stakes in each other‚ include Resilient Property Income Fund‚ Capital Property Fund‚ Fortress Income Fund‚ Nepi and Rockcastle Global Real Estate Company.

Adrian Jardine‚ an equity analyst at Avior Capital‚ said he expected more South African funds to seek new business abroad. ” Listed funds see prospects for better risk-adjusted returns on a three-to five-year view through offshore‚ primarily developed market investment than local investments‚” Mr Jardine said.

“It’s a telling sign of local economic conditions‚ and a negative read-through for growth expectations from pure SA exposure‚” he said.

Jay Padayatchi‚ executive director at Meago Asset Manager‚ said many general equity investors had been attracted to the listed property sector because of the “certainty and transparency of earnings”.

Many of these investors who may have been “underweight” in their exposure to property had since rebalanced their portfolios to include real estate‚ he said.

Source: BD

Last modified on Thursday, 15 October 2015 10:47

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