Real Choice

Posted On Friday, 21 September 2001 03:01 Published by eProp Commercial Property News
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Flurry of new listings boasting high-risk yields of more than 18% The JSE's property loan stock (PLS) sector is expanding fast and, for the first time, investors have a real choice between quality yields of 11% or high risk at more than 18%. They can also choose between office, retail and industrial subsectors.

James TempletonThere has been a flurry of new listings this year, all in the PLS sector. Paraprop, Growthpoint and Apexhi have already listed, and a new Marriott fund, Shops for Africa, a Nedcor fund and an Iprop/JHI fund are still to come.
Barnard Jacobs Mellet property analyst James Templeton predicts the sector will outperform the rest of the JSE with total returns at around 20%. He believes prices will continue to rise. Investors will be lured to the  by its steady income streams, attractive in a volatile market. 'Property has the qualities of long bonds but with higher yields and the chance of capital growth,' he says.
Liquidity is improving, too. There are now five funds in the property sector with market caps of more than R1bn - property unit trusts Greyprop, Martprop and Sycom, and recently re-formed Growthpoint and Apexhi. They are more broadly held, which means higher share turnover and less opportunity for manipulation.
The market is likely to be underpinned by buying from three funds listed in the general unit trust sector - Marriott, Coronation and Oasis. Templeton says Old Mutual and Redefine, too, will be buyers. Corovest chief Mike Watters says Coronation has inflows of R1m/day, and 'if funds continue to flow', about R250m in the year. Templeton believes the five between them could spend close on R1bn.
Both Watters and Templeton advise investors to stick with quality - Hyprop, for instance. Templeton also likes Metprop: 'It recently expanded its portfolio and gets good gearing from Investec.' Watters warns investors not to chase prices but to buy on weakness.
Coronation will put 10% of its funds into Apexhi, Primegro, Redefine and other, more risky, yield sweeteners, says Watters
Perhaps the most interesting fund is Apexhi, which Corpcapital's property dealmaker, Marc Wainer, has converted from a small Johannesburg fund into a R1,4bn national portfolio aimed at giving investors the highest possible income. 'We dropped location as a prime criterion in favour of high yields from good tenants who are likely to renew their leases,' he says.
Properties include government tenants in Pietersburg, retailers in Queenstown and the Ferreira's chain of large out-of-town retailers. They were bought at average yields of around 18% - against prime office yields of around 13% - and 32%-geared to give a yield of 22%.

Last modified on Friday, 25 April 2014 19:31

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