Property performance

Posted On Sunday, 18 March 2001 03:01 Published by eProp Commercial Property News
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Real estate has a bad name amongst most portfolio investors. Yet few realise that listed property trusts performed on a par with equity over the past ten years (14,5% p.a.) and outperformed financial & industrial shares by a wide margin over the past three years (27% p.a. vs 5%), says Erwin Rode of Rode & Associates, property economists and valuers.

Erwin RodeAnd with value-oriented asset managers such as Allan Gray and Foord & Meintjes now winning on the back of their faith in property, the sector has begun to spark the imagination of the investing public, reports Business Times.
Jeremy Thomas writes in this publication that the combined market capitalisation of the property sectors, at just R9.5 billion, seemed to cement property's reputation as unworthy of more than a speculative dabble.
Property makes up just 0,5% of the JSE's market capitalisation. Part of the problem previously has been the perception that property is illiquid, says Angelique de Rauville, general manager of property administrators Provest. However, with the swing towards investment in securitised property, which locks in relatively predictable earnings, the sector has shown signs of life.
Added to this, a much more aggressive approach by fund managers such as the R356 million Paramount Property Fund has helped the bouyancy of the industry. Executive chairman Rodney Squire-Howe says each building in this portfolio is treated as a separate business with a view to maximising income in the long term.
'This function depends on performance analysis and modelling, and the recognition that value can be added to a property investment through management strategies at different stages of the property's life cycle.'
This has helped overturn negative perceptions about poor quality properties, passive management, lack of shareholder representation and lack of liquidity. It also played very much into the hands of investors disillusioned with the poor returns and volatility inherent in the traditional equity market.
The facts speak for themselves: in the three years to December 2000, property unit trusts and property loan stocks doubled the returns achieved by the JSE's All Share Index. Income on listed property can be projected with some accuracy.
In a volatile equity market environment, property therefore provides jittery investors with some welcome stability. And, with prime lending rates down from their historic highs, the sector is looking attractive.
This, coupled with the demand from investors for diversified investment opportunities, has fuelled the need for new property stock funds on the JSE. Coronation Property Equity Fund is the latest addition to the sector, aiming to provide investors with both a high-income yield and long-term capital growth.
One of the biggest successes on the JSE Securities Exchange last year was Rand Leases Properties, which delivered a 163% return on investment. It did so by developing land for uses where market demand was strongest.

Last modified on Wednesday, 23 April 2014 13:21

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