Listed property’s investor returns among the best

South Africa’s largest unit trust in the general real estate sector, Stanlib Property Income Fund, headed by Keillen Ndlovu, gives an average person access to the commercial property market for as little as R500 a month or for a lump sum of R5,000.

The fund, launched in 2002, gives an investor an alternative to actually owning physical commercial property. It gives an investor the opportunity to diversify away from equities, bonds and cash.

The R6.6bn fund invests in listed property companies, which in turn invest in commercial properties such as offices, shopping centres and warehouses, and all these companies are listed on the JSE. This means that investors are indirect owners of the various commercial properties.

South African listed property once again ranked well among the country’s companies earning the most for shareholders.

The sector featured strongly overall, with 16% of all companies performing in the top 50 over five years being listed property companies, based on share-price growth and investor returns.

An impressive 14 of the top 100 companies over the past five years are listed property companies.

The sector’s top player in this category was Resilient Property Income Fund, which earned 30th place on the list with compound growth of 21.2%.

Of the top 100 companies over the last 10 years, listed property companies represent about 10% of peak performers. Premium Properties achieved 12th position on this list, with compound growth of 39.17%.

Growthpoint, SA’s largest listed property company and the sector’s only ALSI-40 representative, ranked 14th in performance of the Top-40 index companies over five years, delivering compound five-year growth of 17.82%.

Sector newcomer Investec Property Fund ranked 15th in the top 25 companies over one year, notching up compound growth of 85.88%. Redefine Properties was 12th in the top 50 companies for growth in turnover, achieving five-year compound turnover growth of 45.95%.

Over the last 10 years, from October 2002 to 2012, the South African listed property sector has outperformed all other local asset classes, according to the Property Loan Stock Association’s research by Grindrod Asset Management. The sector’s market capitalisation has increased considerably over the period from less than R20bn to nearly R200bn.

According to Catalyst Fund Managers, the best-performing South African asset class over the 12 months to the end of October last year was listed property, which delivered total returns of 28.3% compared with cash at 5.61%, bonds at 13.22% and equities at 18.59%.

The Stanlib Property Income Fund pays investors profits declared by property companies every quarter. Mr Ndlovu says despite its size, Stanlib Property Income Fund has delivered top-quartile performance over the years and has also won several awards for top performance over the last 10 years.

Asked what the fund’s investment philosophy is, Mr Ndlovu says: "To generate superior long-term, risk-adjusted returns based on thorough fundamental research. Our primary aim is to generate a source of income for our investors and capital growth over time."

He says listed property is a long-term investment and the fund invests "with high conviction in property companies that display quality long-term earnings prospects and (which) have defensive portfolios".

"We invest in listed companies that have a portfolio of assets with potential to generate above-average growth in their rental streams and have proactive management of acquisitions, disposals, extensions, refurbishments, developments and redevelopments," Mr Ndlovu says.

Stanlib also scrutinises listed companies’ tenant profiles, leases and debt profiles. He says the companies that are trading at reasonable values relative to their quality and income growth prospects remain a key criterion in the fund’s decisions.

Investing in a fund such as Stanlib Property Income Fund gives investors an alternative to owning physical property. "It takes away the stress of doing rental collections, negotiating leases and maintenance work such as fixing air-conditioners, lifts, gardens and gates," Mr Ndlovu says.

However, he says the only disadvantage in investing in listed property "is the share price volatility, which means "an investors’ unit value can go up or down in the short-term, led by changes in the local and global equity markets".

The fund is priced daily: that is, investors are able to know on a daily basis how much their investment is worth.

But the advantage is that investors can terminate their investments in a day and they can access the cash in their bank accounts a few days later.

Article: Thabang Mokopanele -

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