Real-estate investment trusts (Reits) with a purely nonSouth African portfolio and logistics exposure, produced stellar results in 2017, while some offshore counters struggled.

The FTSE South African listed property index has attained double-digit returns for two years in a row, according to Peter Clark, a portfolio manager at Investec Asset Management. "Over the last 14 years it has only delivered negative returns once."

The index managed a total return of 17.2% in 2017, 10.2% in 2016, 8% in 2015, 26.6% in 2014, 8.4% in 2013 and 35.9% in 2012. Its negative return came in 2008 when the global financial crisis happened.

Garreth Elston, a portfolio manager at Golden Section Capital, said the best-performing stock was Greenbay Properties, which invests only abroad, achieving a total return of 64.91%.

Even though the South African listed property index provided a healthy total return in 2017, it underperformed the JSE top 40, which returned a total of 23.07%, Elston said.

"Unsurprisingly, considering the general negativity towards South African assets and economic risks, 60% of the top-10 listed property performers have no assets in SA. These include Greenbay Properties, Sirius Real Estate, MAS Real Estate, Globe Trade Centre, Nepi Rockcastle and Atlantic Leaf Properties, while the remaining 40% have substantial and increasing offshore exposure, namely Equites Property Fund, Resilient REIT, Fortress Income Fund B and Stor-Age Property REIT," he said.

The Resilient group of companies comprised almost half the top 10 performing property counters last year. These were Greenbay Properties, Resilient REIT, Fortress Income Fund B and NEPI Rockcastle.

The top nonprimary offshore counter, Equites, benefited from a solid local and UK industrial logistics portfolio, which was currently the most in-favour sector internationally, said Elston.

"The majority of purely South African companies ended the year negatively, with only Fairvest outperforming the South African listed property index," he said.

Being purely internationally focused, however, was no guarantee of performance, with more of such counters underperforming the index than outperforming it. Six ended the year negatively, including Schroder Euro Reit, RDI Reit, Hammerson, Grit Real Estate, Intu Properties and Echo Polska Properties.

An interesting inclusion in the top-10 performers was Globe Trade Centre, a relatively small player on the JSE.

"The company has a portfolio of 37 commercial buildings in Poland, Belgrade, Budapest, Bucharest and Zagreb, plus a development pipeline of 341,000² of retail and office properties in Central and Eastern Europe. The caveat, though, is that the company has extremely low liquidity, and barely trades," said Elston.

A key event during the year was the completion of the Nepi and Rockcastle merger, resulting in the largest JSE-listed Reit in terms of market capitalisation. The merged company returned a total 22.92% for the year from July, but anyone who was invested in Nepi and Rockcastle from the start of the year, and then the merged entity, would have achieved a return of 31.52%, according to Elston.

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