By Xolile Bhengu

OLD Mutual yesterday said for the third year running its property fund returns for 2007 exceeded benchmarks from the Investment Property Databank.

Old Mutual Investment Group Property Investments had an overall 40.9 percent return on investments, which was more than 13 percent higher than the IPD’s industry standard of 27.7 percent total returns.

OMIGPI said a major contributor to its outperfomance came from the funds’ industrial properties 50.6 percent return compared to IPD’s 33.6 percent benchmark.

Gary Hardisty, OMIGPI joint fund manager for the Triangle Core Fund, said the group’s retail portfolio had the best returns in two years, and over a 13-year projected annualised period.

Hardisty said the fund was heavily weighted towards retail, which made up more than 70 percent of investments.

He said: “We believe that the office and industrial property — coming from a low base — should for the next three years be the best performers, and we are looking at developments and acquisitions in both sectors,” said Hardisty.

Craig Ewin, the CEO of SA Corporate and head of listed real estate at OMIGPI, said supply and demand constraints would see the growth of its commercial and industrial returns.

Ewin said rental growth was particularly evident in the industrial sector that had the biggest relative increase in value in the SA Corporate portfolio last year with a capital growth of 22.8 percent compared to the IPD’s 21.3 percent.

He said the division continued to see a strong performance in the industrial sector with the shrinking supply of rental and rising market rentals impact on property earnings.

“There is little stock available and developments should be limited further because of increased costs of development and Eskom’s limitations of new developments, and this should contribute to rental growth returns and increased property valuations.

“The increased global concern of the type of investments should also make property attractive, because there are high income yields for investors in property that do not go away,” Ewin said.

OMIGPI said institutional and listed funds had taken advantage of conditions supporting industrial properties in the IPD results, with industrial investments under way totalling R600-million in Johannesburg and Cape Town.

Source: I-Net Bridge