Attacq, Emira buck SA REIT underperformance in January, February

South Africa’s Real Estate Investment Trusts (REITs) – Attacq and Emira Property Fund – bucked the trend with excellent performance in January and February, says the South African Real Investment Trust (SAREIT) Association.

The statement follows the publishing of its February Chart Book, which provides an in-depth analysis of the SAREIT sector.

The association says that Attacq’s announcement that the company had concluded a non-binding term sheet with the Government Employees Pension Fund, represented by the Public Investment Corporation (PIC), helped to buoy the sector.

Earlier this month, Attacq announced the proposed acquisition of 30% of the ordinary shares and shareholder loans in Attacq Waterfall Investment Company (AWIC) for R2.5 billion and the injection of a further R300m into AWIC as a shareholder loan.

The market responded positively to the announcement, and Attacq’s share price gained around 19% in February.

In the case of Emira, its share price rallied over 10% following a strong set of results for the six months that ended 31 December 2022. Both distributable earnings and distribution per share comfortably beat analyst expectations.

However, Accelerate Property Fund’s share price fell more than 25% after the company announced an R50 million renounceable rights issue at 70c per share to provide the company with the short-term liquidity needed to enable the repositioning of Fourways Mall.

Merchant West Investments portfolio manager Ian Anderson said persistent load-shedding between stages 3 and 6 is weighing heavily on investor sentiment towards South Africa.

“It is difficult to quantify the full impact of load-shedding across the sector since different property types and tenants have different power needs.

“However, most companies in the sector have already done significant work to protect their tenants from load-shedding. This represents a significant commitment to tenants in an effort to address the crisis,” he said.

Anderson says that REIT activity should increase in March and April as some REITs release their first-quarter results.

Despite these challenges, the ALPI and SAPY delivered respective total returns of -1.9% and 0.5%, which places the SA-listed property sector amongst the best-performing markets globally for the calendar year.

“We attribute SA property’s relative outperformance to its lower starting valuations in comparison and the milder adjustment to discount rates as domestic bonds rose by a smaller margin than global bonds,” according to Sesfikile Capital.

SA listed property capped 2022 with an outstanding fourth quarter as the ALPI and SAPY gained 18.2% and 19.3%, respectively.

The chart book is a monthly publication and can be downloaded from the SAREIT Association’s website here

Bi-annual SA REIT conference set for February 2024

South Africa’s Real Estate Investment Trust (SA REIT) Association says its popular bi-annual conference has been set for 15 February 2024 in Johannesburg, where industry leaders, investors, experts and bankers will bring insights on the current state and future of the REIT sector and property industry.

The sector’s conference, solely sponsored by Nedbank Corporate and Investment Banking’s Property Finance Division, comes as the country’s REITs celebrate their 10th anniversary.

The macro-economic environment, the impact of government economic policies and future trends affecting the sector, and investment opportunities are among the topics that will attract heated debates at the conference.

“The conference is always rich in content, and we are accustomed to strong representation from the REITs, investors, financiers and other property-focused professionals,” says Gary Garrett, Managing Executive Property Finance at Nedbank CIB.

“The crux of the conference is based on high-quality content, strong speakers and panellists and opportunities to network with industry leaders,” he adds.

Garrett says Nedbank is a proud sponsor as it strives to build on its strategic relationships in the property sector and the REITs.

“As a sponsor, Nedbank sees the conference as an opportunity to propel the sector forward and play a role in its future. It is a special year as the SA REITs celebrate their first decade of operation. They have endured challenges through that period, but overall, the sector is as robust as ever and continues to deliver value,” says Garrett.

Geoff Jennett, Chief Executive Officer of the Emira Property Fund and SA REIT Conference Committee Chairperson, says delegates can expect to hear engaging and enlightening debate on pertinent issues faced by the REITs sector and property industry.

He says REIT CEOs will attend and participate in panel and plenary discussions, ensuring delegates hear industry leader views and opinions first-hand.

“Another key aspect of the conference is the networking that takes place amongst this particular group of participants – the opportunity to meet, engage and discuss matters with fellow delegates is a highly valued part of the conference,” adds Jennett.

He also says the 10th anniversary of the REITs is an important milestone for a sector that has made huge strides despite the country’s economic challenges.

Jennett is optimistic about the sector’s future and says the industry is poised for more growth over the next 10 years.

The SAREIT Association’s role is to promote the country’s REITs as an investment class locally and internationally while addressing issues and meeting challenges within the sector.

The conference master of ceremonies is Michael Avery, a well-known columnist and radio host.

Registration will open in July 2023. For further information on the conference, contact Joanne Solomon, Chief Executive Officer, SA REIT Association at

Liberty Two Degrees’ enhanced customer experience strategy drives demand for retail space, resulting in positive momentum in performance

Highlights in the period

  1. 100% distribution pay-out of 36.47 cents per share with distribution growth of 6.95%. Distribution impacted by c. 2c on unsuccessful Sandton City Municipal Valuation appeal
  2. Strong balance sheet maintained with loan-to-value of 24.42%
  3. Strong performance in retail operations
    1. Portfolio foot count up 24.9% on FY21 (9.9% vs FY19)
    2. Retail turnover up 21.9% on FY21 (18.3% vs FY19)
    3. Retail occupancy increased to 97.9%
    4. Portfolio reversions improved considerably to -10.4% from -25.9% while retail reversions improved to -9.7% (FY21: -26.0%)
  4. Notable recovery in average hotel occupancies
  5. Continued progress across all pillars to attain targets of Net-Zero status by 2030
  6. All L2D malls achieved Gold ratings for 2022 in the annual SHORE assessment, with  Sandton City, Nelson Mandela Square and Eastgate achieving Platinum status

Reporting its annual results for the 2022 financial year which illustrated continued positive momentum in operational and financial metrics, Liberty Two Degrees (L2D) announced a 100% pay-out of the full-year distributable earnings of 36.47c per share (FY21: 34.1c), representing a 6.95% growth on the 2021 payout. The L2D Board is satisfied with the company’s capital management efforts and that the core business remains sustainable.

Despite the unsuccessful outcome of the Sandton City rates appeal, which has resulted in a reduced distribution by circa 2 cents per share, L2D’s performance in the period remains strong. Supported by its quality assets, L2D’s performance in the period was buoyed by improved consumer confidence, an uptick in travel and tourism and improved general sentiment despite a difficult and uncertain economic environment.

L2D Chief Executive, Amelia Beattie comments: “Despite consumer inflation slowing for the third consecutive month in January, reaching its lowest level since May 2022, we continue to see a significant shift in consumer behaviour driving activity back into our physical shopping environments.

“Looking at the good performance achieved in our key financial and operational metrics in the period, it is clear that customers are coming back to our environments and in so doing supporting our outlook for 2023. We are, however, not underestimating the current economic realities of increasing costs which are fuelled by economic pressures related to the power crises, above inflationary municipal charges and the pressure on reversions. We remain focused and invested in the right things for our business and its longevity.”

L2D strives to elevate its physical spaces to create a euphoric experience for customers, which has led to customers continuing to choose L2D’s retail environments to spend their hard-earned disposable income. This can be seen in both the significant foot count and turnover growth over the year for 2022.  In particular, the portfolio has generated R21.3bn in turnover for the year, with Sandton City and Eastgate Shopping Centre contributing a combined 64.7% to the total turnover. This is 21.9% ahead of 2021 and 18.3% ahead of 2019.

“Luxury remains one of our best-performing categories within the portfolio and still plays a large part in differentiating our assets and more specifically Sandton City from competitors. Luxury brands play a key role in supporting our performance. We see that excluding the extraordinary impact of the luxury category, the portfolio is still up by 21.1% year-on-year and 13.1% vs. 2019,” adds Beattie.

The portfolio saw a foot count growth of 24.9% in 2021 and 9.9% in 2019. In the period, L2D won a total of 29 awards at the 2022 Footprint Marketing Awards for excellence in shopping centre marketing, innovation and creativity as well as financial success. The activations across L2D malls over the festive period were well attended.

The portfolio occupancy level improved to 93.5% in December 2022 with demand for both retail and office space increasing. The higher demand for retail space resulted in improved retail occupancy rates of 97.9% (June 2022: 97.2%, December 2021: 96.8%). 344 leases (renewals and new deals) were concluded over the full year of 2022, equating to 84 443m2. L2D’s office portfolio represents only 26.2% of the total portfolio GLA and therefore carries less weighting on the overall vacancy.

The decline in the office occupancy to 80% in December 2022 (vs. June 2022 83.3%), was due to the sale of the fully let Standard Bank building. The occupancy level in the office portfolio, on a like-for-like basis, has improved since June 2022 due to increased leasing in Sandton Office Tower, Atrium on 5th and Nelson Mandela Square offices. L2D remains focused on office leasing with various strategic measures in place.

The portfolio has made positive strides, improving the reversion trend over the 2022 financial year. Rental reversions across the portfolio were -10.4%, with retail renewals -9.7% and offices -25.5% which is a significant improvement to the negative reversions achieved in December 2021: portfolio -25.9%, retail -26.0%, office -24.8%.

Commenting on L2D’s financial overview Financial Director, José Snyders says: “In the period, Net Property Income, excluding lease straight-lining increased by 7.27% to R568.6 million. This is supported by healthy lease income escalations and improved activity in the retail portfolio and the hospitality assets.

“Included herein, utility costs increased due to higher consumption which was compounded by the increased cost associated with load shedding. Municipal rates and above inflationary increases in tariffs for utility costs had a negative impact on the portfolio cost base. These costs and the consequential impact thereof on the cost of occupation for tenants is growing at an unsustainable rate.”

Aided by the spike in tourism and economic activity, Snyders says the hospitality sector has continued to show signs of recovery with increased occupancies at the Sandton Sun, Sandton Towers and Garden Court hotels.  

Snyders adds that L2D remains conservative in its capital management.

“This is done to protect value during the current uncertainty and create a platform to deliver sustainable operations and position the portfolio for growth over the medium term. A sizeable amount of our capacity is now earmarked for investment in renewable energy and initiatives that create further efficiency in the portfolio – the yields on these initiatives are accretive to the portfolio as we aim to implement them over the next two years. With a loan-to-value (LTV) of 24.42% at 31 December 2022 (31 December 2021: 23.87%) and a healthy interest cover ratio at 2.95 times, we have sufficient liquidity to meet our operational needs and remain well within our banking covenants.”

L2D’s property portfolio was valued at R8.2 billion as at 31 December 2022, a marginal 0.33% increase on the June 2022 valuation and a 0.39% decrease on the December 2021 valuation (on a like-for-like basis).

Our focused ESG strategy

The L2D ESG strategy is focused on driving its sustainability targets with continued progress across all pillars to attain its bold targets of Net-Zero status by 2030. “We’ve seen continued progress across all pillars to attain our bold targets of Net-Zero status by 2030. Overall water and energy consumption in Q2 2022 has surpassed the same period in 2021 yet remains well below the 2019 baseline and MSCI Industry averages. The waste journey is on track for 2022 with the portfolio diversion from landfill continuing to improve. The waste diversion from landfill has reached 89% for the portfolio at 31 December 2022.”


“While 2023 will present another tough operating environment, we aim to keep our portfolio the sought-after retail destination for customers and tenants, as well as an attractive investment proposition for stakeholders; delivering on the sustainability project milestones that will start to significantly alleviate cost pressures, and focus on extracting value in our operational activities,” concludes Beattie.

SA REITS returns likely to outperform cash, bonds in the long-term

South Africa’s real estate investment trusts (SAREITs) are likely to outperform cash and government bonds in the long term with COVID-19 in the rear-view mirror, the increased interest rate cycle nearing its end, and landlords finding power generation solutions, according to SA REIT Association Chairman and Growthpoint Properties CEO (SA), Estienne de Klerk.

De Klerk says that while returns for the SA real estate investment trusts (REITs) listed on the JSE have been negative for the past five years, the performance of the SAREITs was not unique, as global real estate faced the same challenges.

“We need to contextualise the performance of SAREITs because, unlike other sectors of the economy, the sector faced headwinds in the form of floods, COVID-19, riots, inflation, and higher interest rates, negatively impacting the sector,” he says.

He explains that the good news is that the increasing interest rate cycle is nearing its end, and this will improve investment in real estate. This will further be supported by the improved property fundamentals as evidenced by improved industrial and retail property’s stronger returns.

“We are noticing a strong demand for industrial real estate and growth in this sector, and strong letting in Cape Town and Durban where vacancies are falling, and retail, office and industrial sectors performance have come back strongly.”

“The Gauteng economy remains under pressure, but supply and demand dynamics are expected to improve as businesses start to return to their office spaces as most corporates preference of their place of work.”

“The irony is that load shedding has resulted in more people returning to their offices. Therefore, it is reasonable to expect improved demand over time which could result in positive rental growth over the long run, particularly in offices with high green credentials.

“Indeed, the inflationary pressure on the development cost has raised the required rentals of new developments substantially, which will support increased rentals on existing properties. Therefore, landlords will have room to raise rents and actual returns.”

According to De Klerk, there is a 40% differential between the rentals required on new industrial properties compared to the in-force rentals on existing properties.

“They always say you make money when you buy, not sell. SA REITs are beneficial to investors in that they have an effective tax structure, low transaction costs at acquisition, liquidity, transparent reporting, and diversified portfolios, often with exposure to the offshore real estate markets.

“In every challenge, there’s an opportunity. Landlords are rolling out solar power in their properties, and there’s an increase in environmental, social, and governance (ESG) reporting and green-building portfolios. Real estate companies can take advantage of this opportunity, and in the future, the deregulation of the electricity industry will create more avenues to improve returns,” De Klerk says.

He says the sector has faced unusual headwinds in the last five years, like COVID-19, which is hopefully behind the sector.

“Most landlords have been proactive in supplying generators and looking into other generation solutions like gas and solar. All will contribute to an improvement in electricity supply in the long run.”

De Klerk remains optimistic about the asset class.

“No doubt real estate property remains an attractive asset class with cash, bonds and equities. It is because property investment is more of a long-term game, and investors such as pension funds favour the asset in their allocation of investable funds.”

The past five years have been a mixed bag for the SAREIT industry, not least because of their investment strategies but because of the macro environment where the sector has been at the mercy of the low growth economy, load shedding and high-interest rates, which have affected the appetite for the asset class.

During the period under review, the sector has also had to contend with the COVID-19 pandemic. The pandemic, in particular, resulted in softer demand for commercial and industrial property as companies issued work-from-home mandates.

Counterpoint Asset Management Portfolio Manager Ian Anderson, who has collaborated with the SA REIT Association on its sector analysis, says that when one looks at the structure of the SAREIT market, it is mainly characterised by above-average exposure to large malls and offices. It is why returns were affected, especially during the pandemic.

“There is a silver lining in the next two to three years, but the performance of the sector and returns will largely depend on the resolution of the power crisis and uptick in economic growth. It will improve investor confidence and, over time, demand in commercial and industrial property,” Anderson explains.

“Undoubtedly, load shedding poses a significant challenge for all South African businesses, but the property sector is likely to be the most negatively impacted, especially in the short-term, given the need to spend large amounts of capital when the cost of capital has risen sharply in the last 12 months.”

However, he points out that many REITs are already ahead of the curve and have done a lot already. Still, the market is concerned about the need for significantly increased capex spend at a time when the demand for space is still weak in several markets.

High-interest rates and economic growth may not improve property fundamentals. However, most bad news has been priced into many SAREITs, which are trading at a deep discount to net asset value (not too dissimilar to 20 years ago).

Anderson says most REIT management teams have spent a considerable amount of time and energy improving the quality and relevance of their property portfolios while at the same time strengthening the balance sheets.

Therefore, the industry should be able to cope relatively well with higher interest rates and produce moderate growth in profits and dividends over the medium term. However, they are unlikely to exceed inflation which is expected to remain between 4% and 6% over the forecast period.

Investors should expect the income yield plus 3% to 5% per annum as a total return (between 9% and 12% per annum).

Anderson ends by explaining that if sentiment towards the sector improves due to reduced load shedding or interest rates or an improvement in the economic outlook, then the large discounts to net asset value will unwind, adding a further 10% to 20% to returns over a three-year period.

Fairvest completes renewal of Pretoria office building, 2Twenty Madiba

Fairvest Limited (FTA & FTB – listed on the JSE and A2X), which is a diversified REIT, has completed an aesthetic refurbishment of the landmark offices at 220 Madiba Street in central Pretoria. The upgrade of this asset secures its future relevance, appeal and competitiveness in an up-and-coming city node.

The updated 2Twenty Madiba, as the building has been renamed, combines heritage with modernity.

The 12,000 sqm building was formerly advocates’ chambers and remains an ideal position for attorneys, advocates, legal firms and paralegal professionals as tenants, with its prime location opposite the Gauteng High Court.

n addition, 2Twenty Madiba is in a well-established government node that is central to all national and municipal government offices and is proximate to the many colleges in the area.

The refurbished property features a secure, striking triple-volume reception area that welcomes tenants and guests to the 15-storey building.

Each floor spans 730sqm with cellular offices with spectacular views across the city. 2Twenty Madiba also offers a ground-floor coffee shop which includes social alfresco seating around a soothing water feature.

Alon Kirkel, FairvestChief Operating Officer, comments: “2Twenty Madiba is a great address in a well-established neighbourhood and boasting over 400 parking bays making it ideal for a government tenant.

“We’ve overhauled the asset to meet the future needs of businesses in the area, and Fairvest is excited about its new chapter. Post-refurbishment, the offices are attracting good levels of interest and enquiries from potential tenants.

“It already enjoys a sizeable tenancy with Liberty and houses a co-working and shared office tenant. We expect it to continue to draw new tenants.”

The appeal of the well-managed and -maintained building is enhanced by very competitive rentals and unusually generous parking ratios, making it ideal for people-intensive businesses, such as business process outsourcing (BPO) call centres and government enterprise

2Twenty Madiba is in a neighbourhood that is rich in amenities. The building is opposite a Pick n Pay grocery store, close to affordable accommodation, superbly served by public transport – Gautrain and SANRAL at Pretoria Station, Tshwane Bus and Gautrain Bus, minibus taxis – and nearby hotels that are geared for business travellers.

Added to this, the surrounding neighbourhood is seeing an upsurge in development and popularity, with investments and improvements rejuvenating the area and making it a safe and increasingly attractive node.

Fairvest is focused on creating long-term shareholder value with its well-managed diversified portfolio of 140-plus retail, office and industrial properties valued at R12.1 billion and indirectly-held SA REIT investments of R3.4bn.

Offices account for 38 of its properties, around a quarter of Fairvest’s directly held portfolio by both value and area. In line with market trends in a challenging business environment, its office vacancies decreased to 13% at its 30 September 2022 financial year-end.

“When Fairvest merged with Arrowhead, we took the opportunity presented by the vacancy to refresh the property because we are confident in the future of this asset and the area. The investment in 2Twenty Madiba will help to close the vacancy gap and contribute to buoying central Pretoria” adds Kirkel.