Publications
Partners
ACUCAP CHAIRMAN Brian Kantor – who’s also an investment strategist for Investec and widely known for his detailed statistical analyses – makes a compelling case for a re-rating of listed property in the company’s 2010 annual report. Kantor says it remains something of a puzzle why property stocks are still underrated by investors, despite the high returns offered by the sector over a number of years.
Retail-focused Acucap, whose R6,65bn property portfolio includes a number of dominant shopping centres – such as Festival Mall (Kempton Park), Key West (Krugersdorp), Bayside Centre (Tableview) and the East Rand Value Mall (Boksburg) – delivered a total average return of 29%/year to shareholders over the seven years to end-March 2010.
Kantor notes R100 invested in the property loan stock (PLS) index 10 years ago, with income distributions reinvested, would currently be worth around R1 000. In stark contrast, R100 invested in the JSE’s All Share Index (Alsi) over the same period – from early January 2000 to early June 2010 – would have have grown to only R380. And R100 invested in bonds (Albi) over the same 10-year period (with interest reinvested) would now be worth around R360.
Over the 10-year period, the PLS index delivered an average annual total return – calculated monthly in the form of capital gains plus distributions – of as much as 24,5%/year compared to the Alsi’s 15,6%/year and the Albi and money market’s 12,24% and 9,3%/year respectively.
The average inflation rate came to 6%/year, which Kantor maintains indicates while all those asset classes gave highly satisfactory real returns over the past decade, listed property provided “truly extraordinary” benefits to its shareholders. Kantor says listed property investors have suffered just one period of negative returns over the past decade: in 2008//2009, on the back of the global financial crisis. Even so, listed property held up much better than the share market and recovered sooner from the crisis. Interestingly, the PLS index (like bonds) escaped the bear market of 2002/2003 completely.
Kantor says that helps to make a very important point about South Africa’s property market. “That’s that the influence of interest rates on property valuations has been much more important than that of the share market, including those of listed banks and insurance companies, which are themselves directly affected by interest rates.”
During the recession between 2008 and 2010, the average internal rate of return calculated monthly for the PLS index has been a healthy 18,36%/year. However, Kantor says it appears the good underlying performance of PLS companies came as something of a surprise to the market place. “The sector has proved its ability to generate good long-term growth in distributions and its resilience to harsh economic conditions. Yet the market place has consistently failed to fully appreciate the achievements and prospects of property loan stocks, hence the exceptional, well above what might be regarded as expected or normal risk-adjusted internal returns realised.”
Retail-focused Acucap, whose R6,65bn property portfolio includes a number of dominant shopping centres – such as Festival Mall (Kempton Park), Key West (Krugersdorp), Bayside Centre (Tableview) and the East Rand Value Mall (Boksburg) – delivered a total average return of 29%/year to shareholders over the seven years to end-March 2010.
Kantor notes R100 invested in the property loan stock (PLS) index 10 years ago, with income distributions reinvested, would currently be worth around R1 000. In stark contrast, R100 invested in the JSE’s All Share Index (Alsi) over the same period – from early January 2000 to early June 2010 – would have have grown to only R380. And R100 invested in bonds (Albi) over the same 10-year period (with interest reinvested) would now be worth around R360.
Over the 10-year period, the PLS index delivered an average annual total return – calculated monthly in the form of capital gains plus distributions – of as much as 24,5%/year compared to the Alsi’s 15,6%/year and the Albi and money market’s 12,24% and 9,3%/year respectively.
The average inflation rate came to 6%/year, which Kantor maintains indicates while all those asset classes gave highly satisfactory real returns over the past decade, listed property provided “truly extraordinary” benefits to its shareholders. Kantor says listed property investors have suffered just one period of negative returns over the past decade: in 2008//2009, on the back of the global financial crisis. Even so, listed property held up much better than the share market and recovered sooner from the crisis. Interestingly, the PLS index (like bonds) escaped the bear market of 2002/2003 completely.
Kantor says that helps to make a very important point about South Africa’s property market. “That’s that the influence of interest rates on property valuations has been much more important than that of the share market, including those of listed banks and insurance companies, which are themselves directly affected by interest rates.”
During the recession between 2008 and 2010, the average internal rate of return calculated monthly for the PLS index has been a healthy 18,36%/year. However, Kantor says it appears the good underlying performance of PLS companies came as something of a surprise to the market place. “The sector has proved its ability to generate good long-term growth in distributions and its resilience to harsh economic conditions. Yet the market place has consistently failed to fully appreciate the achievements and prospects of property loan stocks, hence the exceptional, well above what might be regarded as expected or normal risk-adjusted internal returns realised.”
