Less Money Chasing The Listed Property Sector?

Economic and sector shocks bring subdued growth and a change in investor focus.

- Glenda Williams

The listed property sector has enjoyed historic high returns over the last five to ten years, with high valuations on some companies helping to drive the sector. But high valuation comes with perfection priced in – and thus little tolerance for shocks within the sector. Accounting policy and cross-holding controversies in the Resilient stable therefore came as a significant blow to the sector.

“Sentiment on the sector has changed and we are all getting tarred with the same brush,” says Norbert Sasse, group CEO of Growthpoint Properties, South Africa’s largest and most liquid real estate investment trust (REIT).

Keillen Ndlovu, head of listed property funds at Stanlib, confirms that there is currently investor hesitation in listed property “given recent volatility mainly driven by events surrounding the Resilient stable”. Added to this, there are weak fundamentals across all sectors, but more so in the office and retail space.

Wilhelm Nauta, investment director at Hyprop Investments, explains that “there is a lot less money going into the listed property sector and a lot more withdrawals”.

Investor focus has also changed. Once predominantly income and distribution focused, net asset value (NAV) measure is now being given equal attention, says Ndlovu. “The market is focusing more on cleaner, sustainable core property fundamentals, so quality of earnings are important as well as where companies are trading versus NAV,” he says.

“Investors were looking at annuity income funds to beat inflation. Now I think it’s shifted and they are also starting to look more closely at the underlying value of companies,” says outgoing Hyprop CEO Pieter Prinsloo*.