The listed property sector’s looming results season could show the weakening economy and increasing competition finally making their effects felt.
Listed property outshone equity investments in 2016 with a total return of 10.2% compared with the JSE all share’s 2.6%.
But commentators believe that weaknesses in the economy and increased competition could start to show in this results season.
Real estate investment trusts (Reits) are legislated to pay the majority of their income as dividends or distributions, however, some of the counters that have mustered double-digit growth in the teens and beyond are set for significant moderation in these payouts.
"I expect sector growth will moderate somewhat but still be above 8%. The stronger rand will mean that offshore earnings will be a lot lower, while domestic growth is not supportive of strong property fundamentals," Bridge Fund Managers chief investment officer Ian Anderson said.
Meago Asset Managers executive director Jay Padayatchi said income returns were expected to remain stable for SA’s listed property funds, given the sector’s forward yield of more than 7%.
Western Cape-based Tower Property Fund starts the season on Tuesday with the release of its interim financial results for the six months to November.
The company enjoyed strong results in the year to May 2016 but they were boosted by the company’s early acquisitions
Resilient Reit releases results for the six months to December 2016 on Thursday. In the six months to December 2015, the company boosted its interim dividend 25.2%, thanks to strong performances from its domestic and offshore property investments, as well as capital raises and a weak rand. Resilient is expected to deliver double-digit distribution growth again.
Fortress Income Fund, which releases results a week later, is expected to report market beating returns. The company more than doubled its B-share dividend to shareholders in the six months to December 2015. This was off the back of the largest merger in South African listed property history, when it took over Capital Property Fund.
Emira Property Fund, whose interim results to December 2016 are due on February 15, warned in 2016 that the growth in its distribution pay-outs would turn negative for the year to June 2017. Emira said it also faced additional vacancies in its office portfolio.
The largest SA-based Reit, Growthpoint Properties, will release its interim results on March 2. It achieved dividend growth of 6% for the year to June, which was within its market guidance. The company is expected to report similar distribution growth for the six months to December 2016.