Bricks/mor­tar de­liver the goods

Finweek English Edition - - COVERSTORY -

Listed prop­erty proved its met­tle as a strong de­fen­sive play, with my five 2010 stock picks de­liv­er­ing a to­tal re­turn of a not too shabby 32%. Fortress In­come Fund (B units), the rel­a­tively new kid on the Re­silient group’s real es­tate block, was the star per­former in my port­fo­lio with a to­tal re­turn of 56,29%. The mar­ket clearly likes the fact Fortress is an op­por­tunis­tic player with an ag­gres­sive growth man­date. Last year’s share price rally ap­pears to have been largely driven by faith in its man­age­ment’s abil­ity to un­lock value for share­hold­ers: the Re­silient sta­ble of funds – in­clud­ing Re­silient Prop­erty In­come Fund, Cap­i­tal Prop­erty Fund and Pang­bourne Prop­er­ties – has a track record of sweat­ing their as­sets.

Re­tail-fo­cused Hyprop In­vest­ments, which owns mega-mall Canal Walk (Cape Town), Hyde Park and the Mall of Rose­bank (Jo­han­nes­burg) – was an­other solid per­former, de­liv­er­ing a to­tal re­turn of 39,82%. Hyprop’s per­for­mance was no doubt un­der­pinned by the pro­posed buy­out of un­listed At­t­fund’s R9bn shop­ping cen­tre port­fo­lio an­nounced in Novem­ber last year. Re­silient, with a large ex­po­sure to re­gional malls on the plat­te­land, re­turned a re­spectable 34,07%, while Re­de­fine Prop­er­ties fol­lowed with 22,09%.

My 2010 port­fo­lio per­for­mance was di­luted by Bri­tish shop­ping cen­tre owner Lib­erty In­ter­na­tional, which had a tu­mul­tuous year on the back of its split in May into Cap­i­tal Shop­ping Cen­tres and London-fo­cused Cap­i­tal & Coun­ties. Both coun­ters didn’t quite live up to ex­pec­ta­tions, with a to­tal com­bined re­turn of just 6,48%.

Look­ing ahead, this year is prob­a­bly not one for liv­ing dan­ger­ously so I’m mak­ing only mi­nor changes to my ex­ist­ing port­fo­lio. It’s un­likely SA’s listed prop­erty sec­tor as a whole will again de­liver 20% plus cap­i­tal growth but, even so, prop­erty stocks still of­fer the prospect of steady and in­fla­tion-beat­ing in­come growth (an­a­lysts ex­pect dis­tri­bu­tion growth of 7% to 8% this year).

From a sec­toral per­spec­tive, I think re­tail will out­per­form of­fices and in­dus­tri­als, so my port­fo­lio will re­main bi­ased to­wards shop­ping cen­tres. I’m keep­ing blue chip in my port­fo­lio for 2011 for the third year run­ning, as the counter will no doubt con­tinue to de­liver the goods, par­tic­u­larly in light of the At­t­fund ac­qui­si­tion that will add highly prized shop­ping cen­tres, such as Clear­wa­ter Mall (Rood­e­poort) and Cen­tu­rion Mall (Pre­to­ria) to the port­fo­lio. I’m stick­ing to

I reckon there’s still plenty of value to be un­locked fol­low­ing last year’s de­merger. If the ac­qui­si­tion of the

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