Print this page

The SA Listed Property Index (SAPY) recorded a negative total return (-0.50%) for the month ended 30 November 2015

Posted On Friday, 11 December 2015 13:41 Published by
Rate this item
(0 votes)

The SA Listed Property Index (SAPY) recorded a negative total return (-0.50%) for the month ended 30 November 2015. 

Catalyst Fund Managers

The FTSE EPRA/NAREIT Developed Rental Index recorded a net total USD return of -1.72% in November. The best performing listed real estate market was North America, which recorded a total USD return of -0.49%. Europe recorded the lowest total USD return for November of -5.68%. 

The yield to maturity (YTM) on the Long Term Government Bond Index weakened 24 bps to end the month at 8.58% (8.34% - 31st October 2015). The listed property historic yield for the 38 property companies, Catalyst Fund Managers report data on, ended the month at 5.79%. Excluding non-income distributors (Pivotal, Attacq) and 100% offshore earnings focused companies (New European Property Fund, Rockcastle, New Frontier, Capco, IntuProp, MAS, Sirius, StenProp, Redefine International and Investec Australia) the market cap weighted historic yield of the remaining companies is 6.50%.

SA Cash recorded the highest total return of 0.52% for the month. SA listed property (-0.50%), SA Bonds (-1.02%) and SA Equities (-3.86%) were the next best performing asset classes. For the last 12 months SA Listed Property has recorded the highest total return (16.32%), followed by SA Equites (6.76%), SA Cash (6.38%) and SA Bonds (1.39%).

Market fundamentals across the US remain robust with occupancy and rent growth healthy across nearly all property sectors and geographies. In the UK Deloitte released their Winter 2016 Crane Survey which highlights that the number of offices under construction in London has jumped to a seven-year high (77 schemes) but the total due to be completed this year is at its lowest level for three years. In Hong Kong, Link REIT reported another set of great results. Please see the Global monthly report for more detail.

During the month one of the longest standing property companies, Capital Property Fund, delisted after the takeover by Fortress Income Fund was completed.  This was the largest merger to take place in the SA listed property sector for the year after Growthpoint acquired Acucap in April and Redefine acquired Fountainhead in August of this year.  The new enlarged Fortress entity was included in the JSE/FTSE Top 40 Index rebalancing for December and brings the total number of property companies in the Top 40 to 5 with the others being Growthpoint, Redefine, Capital & Counties and Intu. Tradehold Limited was included in the SA Listed Property Index (SAPY) after Capital Property Fund was delisted. Other inclusions from the recent rebalancing of the SAPY were the inclusion of Stenprop Limited and MAS Limited while Delta Property Fund and Dipula B were excluded from the Index. Please see the SA monthly report for more detail.

“We reiterate that real estate fundamentals in South Africa are still challenging and this has been further evidenced by the recent reported results and listed company management team’s softer outlook over the medium term. Local listed property players continue to diversify their portfolios offshore in an effort to access stronger real estate fundamentals and attractive yield versus interest cost spreads however we caution investors to focus on the long term prospects of the assets acquired and their ability to deliver sustainable growth.

“We continue to maintain that in the short term, listed real estate pricing is likely to take its direction from capital markets rather than real estate fundamentals, earnings and earnings growth. Over the long term, real estate fundamentals, earnings and earnings growth will drive performance,” Catalyst Fund Managers said.

Global listed real estate currently trades at an estimated forward FAD (Funds Available for Distribution) yield of 4.86%, which for a long term investor still appears attractive given where current 10 year government bonds are and the current growth environment. As bond yields move out we expect some volatility in the short term but the real estate sector appears to be pricing this in.

Last modified on Friday, 11 December 2015 13:41
eProperty News

Latest from eProperty News

Related items