Sir­ius a star for SA hedg­ing

Off­shore prop­erty stocks are back in favour, ac­count­ing for most of the JSE’S top 10 best per­form­ers

Financial Mail - - MONEY&INVESTING - Joan Muller

The share price per­for­mance gap be­tween the 50-odd in­di­vid­ual stocks that com­prise the JSE’S R500bn real es­tate sec­tor has widened to nearly 50% in the year to date.

Top-per­form­ing counter Sir­ius Real Es­tate is up 27%, and worst per­former Ac­cel­er­ate Prop­erty Fund is down 21%.

Be­sides Ger­man­fo­cused Sir­ius, the top 10 best-per­form­ing stocks in the year to date in­clude mostly rand hedges, ac­cord­ing to Absa As­set Man­age­ment. Th­ese shares in­clude Green­bay Prop­er­ties, which has ex­po­sure to Por­tu­gal and Slove­nia, and has risen 21%; Pol­ish-fo­cused Globe Trade Cen­tre (15%); Schroder Euro­pean Real Es­tate In­vest­ment Trust (11.5%); Cen­tral and East­ern Europe-fo­cused New Europe Prop­erty In­vest­ments (Nepi) (11%); and Rock­cas­tle (9%).

This fol­lows last year’s un­der­per­for­mance of for­eign stocks, when the share prices of a num­ber of coun­ters dipped into the red on the back of a stronger rand and con­cerns about how Bri­tain’s de­ci­sion to exit the EU would play out.

About 20 of the sec­tor’s 50 coun­ters are pure off­shore plays, up from only one a decade ago (Lib­erty In­ter­na­tional, now known as Intu Prop­er­ties).

To­day al­most 50% of the SA listed prop­erty sec­tor’s mar­ket cap of about R500bn rep­re­sents off­shore real es­tate port­fo­lios. Keillen Ndlovu, Stan­lib head of listed prop­erty funds, says th­ese are spread among no fewer than 25 coun­tries — the US, UK, France, Aus­tralia, Ro­ma­nia, Poland, Spain, Slo­vakia, Slove­nia, Ger­many, Por­tu­gal, Croa­tia, Ser­bia, Mace­do­nia, Cyprus, Mon­tene­gro, Morocco, Switzer­land, the Czech Repub­lic, Bul­garia, Mau­ri­tius, Nige­ria, Zam­bia, Namibia and Ghana.

Ndlovu notes that the sec­tor’s big­gest ex­po­sure in terms of mar­ket cap weight­ing is to Cen­tral and East­ern Europe (CEE) at 15.9%, fol­lowed by the UK at 14.8%, other West­ern Euro­pean coun­tries at 4.7%, the US at 4.4% and Aus­tralia at 4.3%. Ex­po­sure to African coun­tries other than SA sits at only 1.5%.

While the rapid growth in the JSE’S bevy of prop­erty stocks that gen­er­ate 100% of their earn­ings off­shore is pos­i­tive, as it cre­ates more choice for South Africans look­ing to spread their risk out­side the coun­try, it also re­quires in­vestors to be­come far more dis­cern­ing in their stock se­lec­tion choices.

Craig Smith, head of re­search at An­chor Stock­bro­kers, says in­vest­ing in rand hedge stocks is no longer purely about cur­rency di­ver­si­fi­ca­tion. “In­vestors need to do their home­work to un­der­stand the growth prospects and fun­da­men­tals rel­e­vant to each in­di­vid­ual com­pany and coun­try,” he says.

The fac­tors af­fect­ing rental and cap­i­tal val­ues can vary sig­nif­i­cantly, not only for dif­fer­ent sub­sec­tors of the real es­tate mar­ket such as of­fices, re­tail, ware­hous­ing and stu­dent hous­ing, but also for dif­fer­ent coun­tries, Smith says. “UK prospects, for in­stance, are very dif­fer­ent now from those of West­ern Europe, the CEE re­gion, Spain or Por­tu­gal.”

With share prices of

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