Bricks, mortar put funds on top

Posted On Wednesday, 02 November 2005 02:00 Published by eProp Commercial Property News
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Strong capital growth in their underlying portfolios was the main driver of Growthpoint Properties and Sycom Property Fund's out performance of other listed property funds at the Financial Mail/Investment Property Databank (IPD) awards last week.

Gerald NelsonGrowthpoint won in both the office and industrial categories with three year annualised total returns of 20,4% and 34,8% respectively. That compares with the IPD benchmarks of 13% and 18,2% respectively.

Sycom won in the retail category, recording an average annualised return over three years of 30,7%, against an IPD benchmark of 24%.

The IPD has 14 listed funds in its database.

Colin Young, head of asset management at Old Mutual Properties, says Growthpoint's returns were due primarily to the revaluation of properties.

Growthpoint has been spending a lot of money on its properties, he says, and its higher total returns are "due reward" for the value it has added to its properties.

He says that on the office side in general, capitalisation rates fell. When capitalisation rates fall, prices rise.

Young says Growthpoint bought offices in good nodes where there had been reratings.

Rudolf Pienaar, fund manager of commercial and industrial properties for Growthpoint, attributed the performance to its good property team.

Growthpoint turns its properties around by reducing vacancies and improving buildings to maximise rental income, he says. It has an "intensive care" focus, giving properties attention as soon as they need it.

In terms of asset management, Growthpoint ensures it buys properties that can outperform the benchmark, he says.

Sycom also spent a lot redeveloping its properties, says Young.

Sycom MD Gerald Nelson says its performance can largely be attributed to capital growth of the retail portfolio in the year to last December, which in turn is due in part to "a constant programme of redevelopment and refurbishment". This is reflected in property valuations.

Nelson says Sycom's retail portfolio had vacancies of less than 0,5%.


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