Improved fundamentals, sound risk management will continue driving selected property stocks in 2004

Posted On Wednesday, 04 February 2004 02:00 Published by eProp Commercial Property News
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Improved property fundamentals and sound risk management will continue to drive selected listed property prices in 2004, generating returns to investors at very acceptable levels when compared with other investments.


Gerald LeissnerApexHi Properties CEO Gerald Leissner says it is unlikely that interest rates will react as they did in 2003, and so he does not believe they will be a significant factor in any potential increase in listed property unit prices.

Leissner says interest rates are just one of a number of variables determining price. "Other important factors include the distributions on the listed property units and the risk profile of the underlying properties supporting the units. "Distributions will depend on property fundamentals as they affect the industry as a whole, the management of debt and the overall management of the listed vehicle".

Property fundamentals have been negative for the past few years. There has been over-development across most areas of commercial property, leading to an oversupplied market and falling rentals. In addition, in many instances, renewals have not kept pace with inflation or lease escalations. Higher inflation has also led to increased property operating costs. These factors have resulted in a period of little if any growth in revenue for the better listed property stocks.

Leissner says fundamentals are looking better for those funds whose rental profile will show increases on lease renewals, and those which control costs. "Some listed companies will also benefit if they were able, as ApexHi was, to restructure their debt to take advantage of the lower interest rates available last year".

ApexHi's growing and increasingly diversified portfolio should benefit from the improving fundamentals as well the lowering of interest rates. ApexHI acquired 14 shopping centres from Shops for Africa in December, and Leissner points out that the retail rental levels at expiry are well placed to show increases on renewals or re-letting.

Last modified on Saturday, 10 May 2014 09:58

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