Winners and losers
Market darlings not necessarily best performing portfolios
PROPERTY STOCKS HAVE STAGED a remarkable comeback over the past six weeks, with the index up 26% between 3 July and last Wednesday (13 August). Figures released by Catalyst Fund Managers last week show that in July alone the listed property index regained 18% of its losses. That brings the total average return for the year-to-date (January to July) to -15,42%.
In terms of the performance of individual counters, Catalyst figures show the top five property stocks for the January to July period are: Ambit Properties, with a total return of -2,96%, followed by Vukile Property Fund (-7,62%), Capital property Fund (-7,97%) and ApexHi A and B (both at -9,7%). The five worst performing stocks over the same period are: Madison Property Fund Managers (-34,67%), Monyetla Property Fund (-30,55%), Octodec Investments (-24,85%), SA Corporate Real Estate Fund (-24,16%) and Premium Properties (-22,13%).
However, industry players say it’s becoming increasingly important for investors to focus on the quality of underlying property portfolios and not only on stock market performance. For example, investors need to look at how much time and money management spends on maintaining its shopping centres, offices and factories to protect future income streams. In other words, is management sweating assets to ensure sustainable growth or are they only chasing short-term performance?
The issue was recently raised by Frank Berkeley, head of Nedbank Corporate Property Finance, who says investment analysts have become too focused on how quickly funds can grow income payouts (distributions). The market needs to start paying more attention to the longer-term growth potential of individual building portfolios, says Berkeley.
The Investment Property Databank (IPD) direct property investment awards provide a useful benchmark of listed property funds.
The 2008 results, announced last week, show the top three funds are Hyprop Investments (retail), Emira Property Fund (industrial) and Fountainhead Property Trust (office). The awards are presented for the highest three-year annualised total return in each of the retail, office and industrial sectors. Total return is the overall return (income and capital growth) achieved on capital employed. Hyprop’s retail portfolio delivered a total return of 40,6% (compared with the listed fund benchmark of 31,3%), Emira’s industrial portfolio delivered total returns of 43,2% (compared with the benchmark of 33,6%) and Fountainhead’s office portfolio delivered total returns of 42,3% (compared with a benchmark of 27,9%).