Listed prop CEOs expect returns of 10%-18% in 2013

Listed property CEOs expect the property sector to provide healthy returns once again this year — albeit well below those seen last year.

The sector achieved total returns of 36% last year‚ helped by the low interest rate environment and the positive performance of retail and industrial properties‚ although CEOs are forecasting total returns of between 10% and 18% this year.

Growthpoint Properties (GRT) CEO Norbert Sasse said on Monday investors could expect distribution growth from the sector to average between 5% and 8%‚ with total returns from the sector of between 10% and 16%.

“With tougher market conditions overall‚ companies that can manage vacancies and costs are better positioned to deliver performance for investors.

“Sectoral portfolio composition will also influence performance. Weak demand will continue in the office sector — however‚ retail and industrial property will perform well off a base of low vacancies that should remain stable‚” he said.

Redefine Properties (RDF) CEO Marc Wainer expected total returns between 14% and 18%.

The introduction of the real estate investment trust (Reit) structure in SA in April would be a positive catalyst for the sector‚ Wainer said.

Wainer said the many benefits of the new Reit legislation‚ including tax certainty‚ should result in more international investors in the sector.

“Interest from international investors remains high and this is where growth will come from‚” he said.

However‚ a further downgrade of SA’s credit rating would hurt the sector‚ resulting in a sell-off of South African bonds‚ and negatively affecting the price of listed property securities‚ he said.

Wainer said while acquiring prime properties was increasingly difficult‚ “smaller funds should enjoy high levels of acquisitions though”.

Offshore investments‚ including in the rest of Africa‚ “will continue to play a greater role for some of the larger players”‚ Wainer said.

Dipula Income Fund CEO Izak Petersen said he expected total returns of between 10% and 15% for the sector.

Petersen said pressure on commercial property owners and occupants would continue this year through administered prices and municipal charges.

“Slow economic growth will continue and‚ as a result‚ rental growth will be modest.”

However‚ the sector “should still hold its own” and most funds should report positive income growth‚ he said.

Stanlib property funds head Keillen Ndlovu said the sector should deliver decent growth numbers matching or above inflation.

“Listed property income should grow by over 6% this year and improve to 7% in 2014‚” Ndlovu said.

“Our base case for listed property total returns in 2013 is 9%. Our bull case forecasts 16% total returns and our bear case only forecasts 2.2%‚” he said.