Property funds: spoilt for choice

NICHE FUNDS: MORE AND MORE ARE COMING TO MARKET

Of the three dozen Reits, a handful offer niche exposure.

Getting exposure to property is no longer only about picking any number of the more traditional, or vanilla diversified funds listed on the JSE. With portfolios spanning retail, office, and industrial assets, your choices can be as niched as you prefer.

This trend towards specialisation was inevitable; especially given the make-up of more mature markets elsewhere.

However, “scale and liquidity have been key setbacks of the SA listed property sector and we believe management teams and investors prefer size and liquidity to specialisation”, says Kundayi Munzara, director and portfolio manager at property-focused Sesfikile Capital. “There has been a limited push from investors for greater levels of specialisation.”

Munzara, however, believes “the South African real estate market is large and deep enough to require specialisation and with a sizable asset base, sufficient asset and tenant specific diversification can be achieved”.

Local investors are increasingly able to get specific exposure to specialised property through a variety of counters on the JSE. Of the three dozen Reits on the market, a handful offer niche exposure and a further handful offer exposure to overseas markets.

In the real estate holding and development sector, most of the companies offer offshore exposure.

Stor-Age Property Reit, which listed in 2015, is arguably the first highly specialised fund to come to the market. Stor-Age is South Africa’s largest self-storage property fund and in its roadshow to investors ahead of listing, it argued that it offers a “niche asset class uncorrelated to traditional drivers of property”.

Indluplace, listed by Arrowhead Properties in 2015, was the first listed fund to focus exclusively on residential property assets. As at the end of March 2018, it had a portfolio of nearly 10 000 units across 171 properties, mainly in Gauteng.

The smaller Transcend Residential Property Fund listed in late 2016 and has 2 500 units in its portfolio. Diversified funds, SA Corporate and Octodec Investments, both have sizeable residential portfolios in Gauteng. Balwin Properties also plays in the residential space. However, it recently announced plans to list a residential Reit on the JSE.

Exemplar Reit is the most recent specialised listing. But bringing specialised assets to the market is not as simple as it would seem. Inkunzi Student Housing aborted its anticipated listing earlier this year because conditions were no longer favourable.

Scale and liquidity have been key setbacks.