Some township and CBD-focused real estate investment trusts (Reits) are proving size is not everything, with their shares up more than 20% over the past year.
Resilient, Fairvest and Dipula are property stocks with exposure to retail assets in townships and rural areas. Over the past year, their shares have recorded impressive gains, while the sector has outperformed other asset classes.
Resilient’s share price rose 30.52% over the past year, driven by strong performance in its dominant retail centres. The group, which focuses on properties with at least three anchor tenants and national retailers, owns assets including Tzaneen Crossing, Circus Triangle and Mahikeng Mall. Retail sales for its properties grew 2.9% for the 10 months ending in October and 3.6% on a rolling 12-month basis.
The company, which has a market cap of R20bn, raised its dividend guidance for the 2024 financial year after reporting a 2.9% increase in retail sales for the 10 months ending October. The owner of Mahikeng Mall said it would pay 428c-433c per share.
Evan Robins, who manages Old Mutual’s SA Quoted Property Fund, said township and rural retail assets were seen as an attractive investment due to their resilience against online shopping disruptions. He highlighted that these areas benefit from lower rents and rely on more defensive consumption, with spending being less discretionary compared with other retail sectors.
“They are often in underserviced areas with a lot of demand (less competition) and can benefit from stable social grant disbursements. Retail, post Covid, has rebased and is beginning to show growth in line with trading density growth. It is no longer under great pressure,” Robins said.
Fairvest, owner of assets including Sebokeng Plaza and Bara Precinct, saw a 35.67% increase in its share price over the past year. The company, which counts Shoprite and Checkers as major tenants, raised its stake in Dipula Income Fund from 5% to 26.3% with a R1bn investment. With a market cap of R1.1bn, Fairvest reported a 5% rise in distributable income to R707m.
Dipula, which owns the Alberton Crossing and Fairways on Main malls, enjoyed a 33.17% increase in its shares. The group, which also owns several industrial, and residential assets, reported a 7% increase in revenue to R1.5bn despite negative reversions in the government-tenanted office portfolio and revenue losses from property disposals in the previous year. Dipula has a market cap of R5bn.
Larger Reits, such as Growthpoint and Redefine, typically experience steadier share price growth compared with their smaller counterparts. Over the past year, Growthpoint saw a 9.54% increase, while Redefine’s share price rose 9.11%. Growthpoint had a revenue increase of 5.3% and Redefine was up 7.5% to R10.6bn.
“Growthpoint and Redefine have substantially more office assets. Offices, while not as bad as they were in the past, remain the most challenged sector, especially in Gauteng, which puts pressure on Growthpoint and Redefine that is not shared by the others,” said Robins.
Independent property analyst Keillen Ndlovu told Business Day most Reits had been doing well particularly in the retail space in Central and Eastern Europe and, more recently, in the Iberian region (Spain and Portugal).
“However, offices have not done well since the pandemic across the regions where local [SA] Reits have offshore exposure, including [Central and Eastern Europe] and Australia. SA Reits have been venturing into the industrial and logistics space as well as storage in Central and Eastern Europe,” he said.
The UK retail sector has faced challenges in recent years, even before the pandemic, largely due to the rapid growth of online shopping. This has led to volatility and substantial writedowns in asset values. In contrast, the self-storage sector has performed well, showing resilience amid the retail downturn, Ndlovu said.
Growthpoint conditionally agreed to sell its 69% stake in Capital & Regional in the UK as part of its business simplification strategy in September.
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