Property loan stock gives investors double benefit - immediate and long-term

The listed property sector, specifically property loan stock companies (PLS), is becoming an increasingly popular asset class as a result of its continually escalating regular distributions to its unitholders.

So explains Norbert Sasse, Chairman of the Property Loan Stock Association (PLSA) and Executive Director of Growthpoint Properties Limited.

During 2003 the property sector produced rewarding returns in the region of 35 percent, far exceeding the JSE's average of 16 percent.

PLSs perform best as long-term income funds. However, immediate benefits include distributing almost all income to unitholders pre-tax. Distributions are paid as often as quarterly by several PLS companies, and at the very least twice during each fund's financial year.

These regular distributions provide a steady cash stream and enforce the immediate real value extended by PLS. Invariably, investors also enjoy the increase in the value of their units over the long-term.

"Furthermore, a PLS represents a relatively low risk and stable investment as a result of being underpinned by the physical asset of property," said Sasse.

As a result, PLSs offer investors an attractive balance between risk and return, with the biggest threat to the sector being sudden increases in interest rates. Most PLSs fix the interest rates on their borrowings a few years ahead to reduce risk and counteract this threat. In addition, in terms of the current economic climate, it is unlikely that interest rates will make any dramatic rises in the near future.

Of further benefit is the greater liquidity of PLSs over fixed property investments and the fact that they are tax transparent.

The growing popularity of listed property as a mechanism to deliver real results, both to individual investors and within an investment portfolio, can be seen in the growth of the JSE Securities Exchange South Africa Real Estate Sector.

The listed property sector has seen market capitalisation increase from R5 billion in the early 1990s to R15 billion in 2003 and it currently stands at approximately R24 billion, of which PLSs account for over R17 billion. This is expected to continue to grow substantially over the next decade.

In addition, volume traded in the Real Estate Sector has risen from about R600 million in 1995 to about R6 billion currently.

"Investment in PLSs has proven to provide individuals and asset managers with a low-risk investment that delivers both regular cash flow contributions and long-term real returns," concluded Sasse.

Ends/

Issued by: Marketing Concepts

Sandy Davey

Tel. 011 880 2213

Cel 083 453 6668

On behalf on: Property Loan Stock Association

Norbert Sasse - Chairman

Tel. 011 286 7306

Cel 083 632 1599

Publisher: Property Loan Stock Association
Source: Marketing Concepts