South African REITs have emerged as the top-performing asset class in 2024, boasting a year-to-date return of 32.3%, significantly outpacing equities at 14.8% and bonds at 14.2%, according to the latest SA REIT Chart Book.
The SA REIT sector, represented by the SA Property Index (Sapy), surpassed R400 billion in market capitalisation in September for the first time in over four years, a milestone last achieved in February 2020.
Since the formation of the Government of National Unity (GNU), SA REITs have outperformed other South African asset classes.
Attacq Limited and Hyprop Investments successfully sold their Sub-Saharan Africa portfolios, with both companies reporting results that exceeded market expectations, highlighting improved operating metrics in South Africa.
Vukile Property Fund raised R1.5 billion in new equity through a well-supported accelerated bookbuild, while Spear REIT secured R458 million through a vendor consideration placement.
These transactions reflect the growing interest in SA REITs among institutional investors and the expansion ambitions of both companies.
“Lower interest rates benefit listed property companies, as they typically lead to reduced bond yields and discount rates, increased property values, and, given that the average gearing level among South African REITs is around 38% – higher future profits due to declining debt costs,” said Ian Anderson, head of Listed Property and portfolio manager at Merchant West Investments, and who compiles the monthly SA REIT Chart Book.
“The impact on profitability will unfold over time, as most REITs hedge their interest rate risk by fixing rates for periods averaging two to three years,” he said.
The South African Real Estate Investment Trust Association (SA REIT) and Nedbank Corporate and Investment Banking (CIB) meanwhile, have introduced the SAREIT Sustainability Disclosure Guide.
This guide aims to establish sustainability standards and best practices for the real estate sector in South Africa.
It serves as a valuable resource for SA REIT members and property organisations beginning their sustainability reporting, providing key information to enhance their reports and outlining a framework for sustainability and climate-related disclosures that align with international standards.
The property sector plays a crucial role in addressing environmental, social, and governance (ESG) challenges. The goal is to guide the industry toward integrating sustainable practices into business strategies, enhancing both resilience and value.
Sustainability has become a key priority for businesses, with capital markets increasingly evaluating performance based on ESG metrics in their investment decisions. This trend is supported by evidence linking strong ESG performance to an organization’s ability to secure long-term competitive and financial advantages.
Furthermore, sustainability reporting offers investors insights into a company’s long-term viability, risk management, and growth potential. This transparency empowers investors to make informed decisions that align with their values and financial goals.
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