SPECIALISTS IN MANAGING
Source: Bloomberg & Catalyst Fund Managers
Data is as at 31 December 2020
The SAPY and ALPI delivered total returns of -34.5% and -35.5% respectively for the year ended 31 December 2020 relative to bonds (8.7%), equities (7.0%) and cash (5.4%). Property returns for the year were significantly impacted by the initial sell off that occurred during March 2020 as a “hard” lockdown was imposed across the country. The lockdown had significant ramifications for all landlords with the hardest hit being retail and hospitality exposed companies, who had diminished trading during the lockdown period. Property ended the year with a strong rally in the last quarter (22% for SAPY and 24% for ALPI); however, this late flourish was not enough to offset the sell-off experienced earlier in the year with the SAPY and ALPI delivering a more modest total return of 4.9% and 4.6% respectively for the 6 months ended December 2020.
The best performing companies for the year were Sirius, Safari, Stenprop and Fairvest.
Sirius is a dual listed property company focused on business parks by providing conventional and flexible workspace in Germany. During the year, Sirius was still able to report strong growth in rent and valuation with high collection rates during the lockdown period. Safari is a REIT which focuses on food-anchored shopping centres in peri-urban locations. Safari has been the subject of potential corporate action over the last 2 years, including a cash offer from Comprop, a potential merger with Fairvest and more recently discussions with Heriot REIT. Stenprop is a dual listed property company with a focus on UK multi-let industrial. The UK industrial sector has tailwinds as supply chains are reconfigured to fulfil e-commerce aspirations. Fairvest is a retail focused REIT specialising in grocery anchored centres catering to the lower LSM market.
Some of the worst performing companies in 2020 were Intu, Hammerson, Capital & Regional, Hospitality B and Accelerate. Intu, Hammerson and Capital & Regional are all exposed to retail in the United Kingdom. The advent of Covid-19 has accelerated structural changes that were already evident in the UK including the diminished relevance of the department store model, increase in online sales, lower brick and mortar sales and valuation write-downs. During the year, Intu’s shares were suspended following the appointment of administrators while Hammerson successfully raised GBP550m of new equity to shore up their balance sheet. Hospitality B is the only specialist hotel REIT and because of low occupancies, deactivation of certain hotels and reduced room rates required covenant waivers due to a breach for the period ended September 2020. Tsogo Sun has made an offer to acquire all the shares of HPB (that it did not already own). As of the 5th of January 2021, Tsogo Sun owned c. 95.8% of Hospitality B shares.
Refer to Annexure 1 for the full list of Individual Stock Performance for the year ended 31 December 2020.
Source: Bloomberg & Catalyst Fund Managers
Data is as at 31 December 2020
Historically, the income return from property has been relatively stable with volatility in total returns emanating from the capital component. Due to lockdown restrictions, tenant relief, bad debt increases and general uncertainty the income return from property has come under pressure as available earnings have diminished and companies endeavour to retain cash through dividend deferrals and the implementation of pay-out ratios. Despite the diminished income return for the year at 4.1%, it remains above the latest inflation figure which was recorded at 3.2% for November 2020. In this regard real estate’s income component remains an effective inflation hedge.
