Asleep at the wheel
Looking at the returns of several top funds, you wouldn’t say the JSE is off to a good start in 2019
two asset portfolios to Vukile, which offer the company different ways to grow its earnings.
“The investment offers two opportunities. The first portfolio includes retail parks, which tend to be older and which need better asset management than their previous owners gave them. This will lead to strong letting [income], which can greatly improve the net operating income growth from the portfolio,” he says.
“The second acquisition of a portfolio of high-quality shopping centres adds a defensive quality,” he adds.
Chetty says Castellana’s team has a deep understanding of commercial property in Spain and it has selected various attractive shopping centres it wants to buy in the future.
Vukile’s shopping centres include a number of very strong anchor tenants. This includes El Faro, its flagship centre in Badajoz. The centre includes retail and leisure facilities as well as a dining hub of more than 66,300m².
As much as 43,423m² is owned by Castellana Properties. The centre is conservatively valued and is experiencing good trading density growth and footfall,
Chetty says.
The main tenants at the centre include giants such as Irish fashion retailer
Primark. It’s the only
Primark store in the southwest Badajoz region.
The mall also has the Inditex Group
(the Zara owner), along with other high-end brands as tenants.
Castellana is also interested in UK shopping centre group Intu’s Spanish portfolio. The company has been under pressure amid uncertainty around the Brexit process.
It promoted its FD, Matthew Roberts, to the position of CEO last week. He says Intu needs to increase its cash on hand, and as a result it will need to sell some of its malls.
The company is most likely to have success selling its Spanish mall portfolio. Many fund managers say UK commercial property may include some very high-quality assets, but undoing the devaluation of assets that has followed the Brexit vote will be a long process.
Intu owns a development called Intu Costa del Sol, in the south coast resort town Torremolinos, in the province of Málaga in the Andalusia region.
Juan Palomo Marín, senior asset manager at Castellana, says Spanish shopping centre landlords are eager to see whether this asset will succeed and will fit snugly into Castellana’s portfolio alongside its other malls in Andalusia.
Over the next five years, it is expected that Vukile will sell its stake in Atlantic Leaf and spend most of its new capital in Spain.
Locally it will redevelop its SA assets, but Rapp says he is cautious about buying new local assets while economic conditions are poor and business and consumer confidence remains in the gutter.
There has been a recovery in the year to date on the JSE, and if you had opted for a Satrix all share index (Alsi) tracker the return would have been a healthy 11.6%.
But if you had invested in the passive fund that tracks the index favoured by most investment consultants, the capped shareholder weighted index (capped Swix), your return would have fallen to 7.8%.
But you could have asked for your money back if you had invested in the Satrix “Quality” Index Fund, which gave a return of barely 5%.
And while many active funds took the view that banks offered the best value for money, the sector had a muted return of less than 6%: ironically, it was “overpriced” Capitec that gave a return of more than 20%. It was cyclical shares such as Anglo Platinum that were up close to 40%. Naspers and British American Tobacco (BAT) made up most of the ground they lost last year, up more than 25% from their lows. It was not a good time to be in high dividend strategies. The passive Coreshares Dividend Aristocrats gave a dismal 4.3% and the active Marriott Dividend Growth just 2.5%.
Fund managers can’t afford to miss these recoveries. The Marriott fund has no resources shares, and owned some weaker performers such as Shoprite and Tiger Brands as well as banks and property shares such as Growthpoint, which has been moving sideways.
The best-performing mainstream fund was Absa Prime Equity, with a 14.1% return year to date. Co-fund manager Dale Hutcheson says the fund has a predominantly large-cap mandate,
While many active funds took the view that banks offered the best value for money, the sector had a muted return