Johannesburg – The JSE's property index returned 28.89% in the last year against 11.66% from general equities and a mere 7.36% investors could have earned from cash.
That's impressive, but analysis warn investors should guard against applying a blanket trust in the property sector. For instance, how do property investment firms make use of their debt, do investors have a handle on management track record and what's the wealth distribution like?
Against this background, Fin24.com identified the "top of the props" for investors interested in getting in on the double-digit action.
Emira Property [JSE:EMI]:The group's portfolio is balanced across the retail, office and industrial sectors with properties that include the Park Boulevard Retail Centre in Durban, Market Square in Plettenberg Bay and Northcliff Corner in Johannesburg.
Despite battling high vacancy levels in a very diverse portfolio, the group’s share price growth combined with its income growth delivered a total return of 29% over the last 12 months.
If you’re worried you’ve missed the bandwagon, relax. As the economy picks up, Emira has impressive growth potential as vacancies are bound to fall. The group also recently internalised its asset management which should boost earnings slightly. According to a Standard Bank research note, the group’s forward yield is 10%.
Hospitality Property Fund [JSE:HPA]:Hospitality invests exclusively in hotels and leisure properties including a number of Protea and Holiday Inn hotels as well as the Radisson at the V&A Waterfront, Mount Grace in the Magaliesberg and Champagne Sports Resort in the Drakensberg.
Analysts said the group has turned a corner after a dismal year of rock-bottom occupancies and an oversupply of hotel rooms following the building frenzy before the 2010 FIFA World Cup. Its two-year forward yield combined is 11.1%, and Hospitality B’s yield is 13.5%, according to Standard Bank.
Said Naeem Tilly of Avior Research: “We like this share not because its fundamentals will be changing, but because occupancy rates have to increase even in a moderately growing economy; they can’t stay at rock bottom.” Hospitality's attractiveness increased when it bought the Westin Grand and Arabella hotels in the Western Cape - a yield-enhancing move, said Tilly.
Redefine Income Fund [JSE:RDF]:A mover and shaker on the property counter, the R21.5bn group has recently increased its stake in retail-focused Hyprop to 47.5% and listed its international fund, Redefine International with a portfolio of properties located mainly in Germany and England.
According to I-Net Bridge, and analyst calculations, the group’s two-year forward yield is around 10%. Even though the share’s appreciation in the last year was 9%, including the distributions Redefine served up a total return of 15%.
SA Corporate Real Estate Fund [JSE:SAC]:
There’s nothing like an underdog to give a portfolio an edge. Analysts believe the group has turned a corner, and its high vacancies (6.8%) and relatively poor quality portfolio means there's a lot of scope to grow. There were a few managerial changes, but MD Len van Niekerk seems keen to make a few positive changes, according to analysts.
The group’s portfolio includes small retail centres like Coachman's Crossing in Johannesburg, Davenport Square Shopping Centre in Durban, and St Georges Square in Knysna. Its industrial portfolio includes quality units near Durban harbour. With a two year-forward yield of 10.9% the group is offering substantial return for a little loyalty.
The low growth and low risk companies include Hyprop (with a two-year forward yield of 8.2%) and Resilient (with a two-year forward yield of 8.3%).
- Fin24.com