Capital Property Fund strategy to increase exposure continues to pay off

Posted On Thursday, 31 July 2014 13:12 Published by
Rate this item
(0 votes)

Capital Property Fund's strategy to increase its exposure to rand hedge sister companies New Europe Property Investments and Rockcastle Global Real Estate Company continues to pay off.

Barry Stuhler

The fund delivered a better than expected 10.23% increase in income payouts for the six months ending June‚ comfortably exceeding the 9% forecast and the 7%-8% market average. It is the first time in three years that Capital has achieved double digit distribution growth.

Capital has underperformed the sector slightly in terms of share price growth over the past year‚ no doubt due to lingering concern around its exposure to the struggling office market. But analysts believe that Capital's management team is making impressive headway to offload underperforming offices. Says Stanlib head of listed property funds Keillen Ndlovu: "We are currently overweight on Capital.

The stock offers good value and we are seeing the share price starting to come back.'' Capital is the largest owner of A-grade warehouse and distribution space in SA and the sixth largest property stock on the JSE with a market capitalisation of R17.2bn. The fund has over the past two years steadily increased its exposure to offshore real estate through Romanian-focused Nepi and Rockcastle‚ whose earnings are denominated in euro and US dollar respectively. Capital's offshore interests have increased from 4.5% of total assets in December 2012 to 19% in June.

Capital CEO Barry Stuhler says he would like to further increase the fund's offshore exposure to around 30% of total assets. "We are constantly looking for other avenues for offshore growth but currently we believe Nepi and Rockcastle still offer the best value."

Apart from the rand weakness benefit that flowed from the Nepi and Rockcastle investments‚ Capital's improved distribution growth performance was driven by the sale of non-core buildings and lower vacancies‚ which decreased from 5.1% in December to 4.2% in June. Mr Stuhler said tenant retentions were also better than anticipated‚ which results in lower costs of occupation.

"It is far more expensive to sign up new tenants than to retain existing ones as new tenant installations and letting commissions pushes up a landlord's costs."

Most Popular

Growthpoint begins construction of the Kent residential apartments in KZN

Aug 26, 2021
Marius Els, Development Project Manager at Growthpoint Properties
Growthpoint Properties (JSE: GRT) has commenced the development of Kent, its first…

On Auction: Iconic Redevelopment Opportunity in Oranjezicht Cape Town

Aug 26, 2021
The_Lenox
Currently operating as a 43 room guesthouse / backpackers.

On Auction: Spacious offices with multiple amenities in Norwood

Aug 26, 2021
Default Image
Spacious offices with multiple amenities on Auction in Norwood.

On Auction: Retail & Offices Property with unutilised bulk in Rivonia Johannesburg

Aug 26, 2021
KTM_Building
The anchor tenant is Road Adventure Dirt (Pty) Ltd (RAD) which is the premier KTM…

On Auction: Commercial Historical Building in Cape Town

Aug 25, 2021
Cape Town Commercial Property for Sale - 3 Church Street
436sqm Commercial building comprising of retail and office space.

Please publish modules in offcanvas position.