Local and Offshore Local Listed Property. Update. Keillen Ndlovu Head of Listed Property. October 2018

Transcription

1 Local and Offshore Local Listed Property Update Keillen Ndlovu Head of Listed Property October 2018

2 Local Listed Property

3 Jan 2018 Jan 2018 Jan 2018 Jan 2018 Jan 2018 Feb 2018 Feb 2018 Feb 2018 Feb 2018 Mar 2018 Mar 2018 Mar 2018 Mar 2018 Apr 2018 Apr 2018 Apr 2018 Apr 2018 Apr 2018 May 2018 May 2018 May 2018 May 2018 Jun 2018 Jun 2018 Jun 2018 Jun 2018 Jul 2018 Jul 2018 Jul 2018 Jul 2018 Jul 2018 Aug 2018 Aug 2018 Aug 2018 Aug 2018 Sep 2018 Sep 2018 Sep 2018 Sep 2018 Oct 2018 Oct 2018 Year-to-date asset class performance SA Cash : 5.6% SA Bonds : 3.0% SA Equities : -6.3% SA Listed Property: -22.9% SA Bonds SA Listed Property SA Listed Equity SA Cash Source: STANLIB Research 9 October

4 SA Listed Property monthly returns so far in % Dec 17 TR Jan 18 TR Feb 18 TR Mar 18 TR Apr 18 TR May 18 TR Jun 18 TR Jul 18 TR Aug 18 TR Sep 18 TR Oct 18 TR SAPY TR % Source: STANLIB Research 9 October

5 STANLIB Property Income Fund Returns 1 Month 3 Months 6 Months Year to date 1 Year 3 Years* 5 Year* 10 Year* Since Inception * 2002 Stanlib Property Income Fund SA Listed Property Index Relative Return Source: STANLIB Performance Gross Returns to 30 September 2018 * Annualised returns 5

6 Top 10 Holdings in the Fund % Nepi Rockcastle Plc Redefine Growthpoint Hyprop Resilient Fortress-A Fortress-B SA Corporate Vukile Investec Property Fund Source: STANLIB Data as at 30 September

7 Resilient group : key concerns and resolutions Siyakha Trust Resolved through restructuring of the trust to eliminate margin on loans to the trust Key question on fronting still remains Cross-holding Resolved through the distribution of Fortress B shares to Resilient shareholders Fortress leg of the cross holding may not be eliminated due to the A and B capital structure and elevated LTV s in Fortress Cash flow hole Latest reported cashflows (December 2017) reconciles to a positive movement when adjusted for scrip dividend etc Inflated Property values Current cap rates and historic growth don t seem to suggest inflated property asset values. New valuer appointed and property values were up and better than expected Manipulation of share price and other issues Fakie Report complete but FSCA Report still outstanding. Engagement with shareholders on-going after a letter signed by 10 asset managers 7

8 STANLIB Property Income Fund returns to 31 August Month 3 Months 6 Months Year to date 1 Year 3 Years* 5 Year* 10 Year* Since Inception * 2002 Stanlib Property Income Fund 3.27 (0.57) (0.23) (22.17) (14.99) (0.30) SA Listed Property Index 2.15 (1.88) (1.55) (20.08) (12.40) (0.27) Relative Return (2.09) (2.59) (0.02) Source: STANLIB Performance Gross Returns to 31 August 2018 * Annualised returns 8

9 South African listed property exposure by sector Other 8% Industrial 15% Retail 53% Office 24% Source: Anchor Stockbrokers September

10 Offices - Lots of TO LET signs in Johannesburg Rosebank - Redefine Properties Johannesburg CBD - Octodec Source: STANLIB Research July

11 New office buildings in Sandton, Johannesburg have vacancies Source: STANLIB Research August

12 Industrial - Tenants moving from older to new buildings 333,000m² development, Durban Midrand, Johannesburg Source: STANLIB Research November 2017 and August 2018 Fortress Income Fund Site Visits 12

13 Latest retail sales and trading density growth numbers 9% 8% 7% 8.1% 7.7% 6% 5% 4% 3% 2% 5.3% 4.8% 4.1% 4.0% 3.5% 3.4% 2.8% 2.6% 2.2% 1.3% 1% 0% 0.0% Source: STANLIB Research, September 2018

14 New malls coming up despite a weak environment Cornubia Mall, Durban ~100,000m² Fourways Mall extension, Joburg Source: STANLIB Research, July and August 2018 Site Visits 14

15 2017 experienced store closures and more to come Source: STANLIB Research 2017 Site Visits 15

16 South African listed property exposure by geography Offshore 38% SA 62% Source: Company Data, Anchor Stockbrokers September

17 South African investment into Central and Eastern Europe as a % of total investments Source: JLL

18 Bulgaria s top 3 malls owned by South Africans The Mall, Sofia Hyprop Investments Serdika Center, Sofia NEPI Rockcastle Paradise Center, Sofia NEPI Rockcastle Source: STANLIB October 2017 and June 2018 Site Visits 18

19 Romanian retail dominated by South Africans Mega Mall, Bucharest Promenada Mall, Bucharest City Park Mall, Constanta Source: STANLIB June 2018 Site Visits 19

20 More South African exposure in Croatia, Hungary & Poland Arena Centar, Zagreb Arena Plaza, Budapest Serenada Mall, Krakow Source: STANLIB June 2018 Site Visits 20

21 Eastern Europe Real GDP growth forecasts from 2017 to 2022 % Real GDP growth Romania Slovakia Serbia Czech Republic Croatia Poland Bulgaria Hungary EU28 Source: NEPI, December 2017

22 Eastern Europe - Unemployment forecasts from 2017 to 2022 % 15 Unemployment Romania Slovakia Serbia Czech Republic Croatia Poland Bulgaria Hungary EU28 Source: NEPI, December 2017

23 Expected dividend growth over 3 years (CAGR) SA Listed Property Yield versus Dividend Growth Listed property offering yield of 9.5%, in excess of bonds but with 5% to 6% income growth outlook 15% 13% 11% 9% 7% 5% 3% CCO 1% ING NRP GRP ATT EQU SSS MSP FVT FFB HYP VKE IPF EPP TPF DIB BWN HPB GPB L2D GRT AWA RES EMI RDF ILU REA CRP ALP OCT APF HMN FFA SAC TWR SAR GPA SRE RPL IAP GTR NFP DIA ITU STP DLT REB TDH 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% -1% 12 month expected dividend yield *SAPY OFFSHORE IS NRP, MSP, EPP, GRP, SRE SAPY offshore (7.56%) GROWTH SA 10-year bond yield (9.3%) SAPY forward yield (9.5%) SAPY ex-offshore (10.0%) YIELD + GROWTH YIELD RISK TEX Source: STANLIB 9 October

24 Dec 2005 Mar 2006 Jun 2006 Sep 2006 Dec 2006 Mar 2007 Jun 2007 Sep 2007 Dec 2007 Mar 2008 Jun 2008 Sep 2008 Dec 2008 Mar 2009 Jun 2009 Sep 2009 Dec 2009 Mar 2010 Jun 2010 Sep 2010 Dec 2010 Mar 2011 Jun 2011 Sep 2011 Dec 2011 Mar 2012 Jun 2012 Sep 2012 Dec 2012 Mar 2013 Jun 2013 Sep 2013 Dec 2013 Mar 2014 Jun 2014 Sep 2014 Dec 2014 Mar 2015 Jun 2015 Sep 2015 Dec 2015 Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017 Dec 2017 Mar 2018 Jun 2018 Sep 2018 SA listed property is trading below Net Asset Value EXPENSIVE Historic average CHEAP Current Source: STANLIB Research

25 30 Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr 18 SA listed property returns are driven by income 700 ZAR Total return 402% Income return: 296% Capital return : 106% Source: STANLIB Research, Bloomberg Data

26 South Africa listed property conclusion Downside risk Upside risk Better than expected economic growth ZAR weakness versus EUR Higher than expected increase in global bond yields and interest rates Continued tenant consolidation Lower than expected economic growth Investor hesitation to invest in the sector given recent events Potential failure of Edcon Corporate action given valuation divergence Positive outcome on Resilient stable investigation Interest rate cuts Source: STANLIB Research, January

27 Global Listed Property

28 STANLIB Global Property Fund Returns ZAR Year to Date 1 Year 3 Years (Ann.) 5 Years (Ann.) STANLIB GLOBAL PROPERTY FUND S&P Developed REIT Index Return( Ann) Out/Under Performance Source: STANLIB Research, Bloomberg Data September

29 STANLIB Global Property Fund Returns USD 1 Year (ann.) 3 Year (ann.) 5 Year (ann.) Since Inception (ann.) STANLIB Global Property Fund 4.98% 4.26% 5.60% 9.35% S&P Developed REIT TR NET 3.26% 6.17% 6.61% 10.11% Out/Under Performance 1.71% -1.91% -1.01% -0.77% Source: STANLIB Research, Bloomberg Data September

30 Fund holdings by country and versus benchmark Portfolio Benchmark Active Weight USA AUSTRALIA JAPAN CANADA Belgium GREAT BRITAIN Spain FRANCE EUROPE HONG KONG IRELAND Israel Italy NETHERLAND SINGAPORE New Zealand GERMANY Cash Total Fund Source: STANLIB Research, Bloomberg Data September

31 Top 10 holdings versus benchmark Security Name Country Portfolio Benchmark Active Weight Simon Property Group USA Prologis USA Public Storage USA Avalonbay Communities Inc USA Boston Properties Inc USA Equity Residential USA Extra Space Storage Inc USA Essex Property Trust USA Unibail-Rodamco-Westfield EUROPE Deutsche Wohnen Ag Reit GERMANY Source: STANLIB Research, Bloomberg Data

32 Global REITs sector allocation Specialized Retail Residential Real Estate Operating Companies Office Internet Software & Services Industrial Hotel & Resort Health Care Diversified Diversified Real Estate Activities Cash Sector (%) Benchmark Source: STANLIB Performance June

33 Global retail rental cycle - US lagging Chicago Beijing Shanghai Tokyo London Boston, Los Angeles San Francisco, Washington DC Milan Madrid Rental Growth Slowing Rental Values Falling New York Mumbai Rental Growth Accelerating Rental Values Bottoming Out Dubai Dehli Berlin Paris, Moscow Sydney Singapore Hong Kong Americas EMEA Asia Pacific Source: JLL, April 2018 (refers to prime space)

34 Why have the US malls been the hardest hit? US retail space versus other major markets Shopping Centre GLA (sqm) per capita Department Store % of total GLA USA 2.19 USA 46% Canada 1.56 Australia 1.03 UK 27% Austria UK Australia 23% European Union 0.31 Asia 17% China 0.26 Germany 0.22 Middle East 15% Source: International Council of Shopping Centres

35 Roosevelt Field Mall Site Visit Simon Property Group - Anchor tenants Department stores Source: STANLIB Site Visit, Company Data, September

36 Westfield World Trade Centre New York City, USA Unibail Rodamco Westfield Source: STANLIB Site Visit September

37 The importance of food in malls They drive footfall, dwell time and spend FOOTFALL DWELL SPEND 40% 35 mins 12% Visitors base their choice of shopping centre primarily on the dining options available How much longer foodservice customers spend in the mall, than the average How much more sales revenue is generated by those who stop to eat vs those who do not Source: JLL, FC & Coniq Study, 2017; ECE Study of German Shopping Visitors

38 Digital innovation connecting with mall visitors PREPARING THE VISIT DURING THE VISIT FOSTERING COMMUNITIES DIRECT ENGAGEMENT Website: 50 Mn visits p.a Online Product Catalogue Click and Services Partnership Facebook + Instagram 10 Mn Fans Building the largest visitor community in the industry Restaurant Menu Opening Hours Smart Map Smart Parking Loyalty Cards 4 Mn Direct Activation Source: Unibail-Rodamco-Westfield December

39 Global industrial rental cycle - Positive growth outlook San Francisco Amsterdam New York, Dallas Tokyo Philadelphia Chicago, Atlanta Los Angeles Houston Rental Growth Slowing Rental Values Falling Boston, Sydney Milan, Stockholm Rental Growth Accelerating Rental Values Bottoming Out Istanbul Paris, Frankfurt Shanghai London, Madrid, Hong Kong Beijing Singapore Moscow Americas EMEA Asia Pacific Source: JLL, April 2018 (refers to prime space)

40 Global e-commerce sales to continue to grow E-Commerce Sales, Global Dollars, Trillions E 2019F 2020F % E-Commerce Sales (L) E-Commerce as a % of Total Retail Sales (R) Source: e-marketer, Goldman Sachs, Prologis June

41 Prologis Inc. logistics site visits, New York, USA Source: STANLIB Research September

42 Food and beverage are Amazon s fastest growing category.. 40% US sales growth by category, 2018 (%) 35% 30% 25% 20% 15% Food & Beverage Apparel & accessories Health, personal care & beauty Furniture & home furnishings Toys & hobby Auto & parts Office Computer & equipment & consumer supplies electronics Books, music & video Other but online grocery sales accounted for about 2% of the $800bn market last year Source: Financial Times, Coresight Research and emarketer August

43 Amazon is buying into bricks and mortar Recently purchased Whole Foods Market 270 Greenwich St, New York Source: STANLIB Site Visit September

44 Global office rental cycle - holding up Source: JLL, April 2018, based on Grade A space in CBD or equivalent

45 Co-working and flexible space transforming offices A designer office, killer coffee, lovely lunches, smiling receptionists and meeting rooms on demand Source: STANLIB Research, Oslo and Geneva, March and April

46 WeWork continues to expand in the flexible workspace Source: STANLIB Site Visit September

47 Focus on growing your business, we take care of the rest 47

48 Self Storage Almost 10% of Americans make use of it Source: STANLIB Site Visit September

49 Times Square, Manhattan New York City, USA Source: STANLIB Site Visit September

50 Interest rates are going to go up because employment is going to go up. If employment goes up, then our apartments get filled. And if employment goes up, our office buildings get filled. The reality is that increased economic activity combined with increased interest rates is basically bullish for real estate. Sam Zell 50 PHOTO: THE WALL STREET JOURNAL

51 Global listed property prices tend to go up when interest rates rise Source: Datastream, FTSE EPRA NAREIT, US Federal Reserve, UBS Estimate s October

52 Global listed property earnings track global GDP growth Long term average property earnings growth = 7.8% Source: Datastream, UBS Estimates

53 Sep-91 Sep-92 Sep-93 Sep-94 Sep-95 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Global listed property trading 8% below net asset value 30% Global Investors 20% 10% 0% -10% -20% -30% -40% Global Investors Source: Datastream, UBS Estimates September

54 30 Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec 17 USD Global listed property returns being driven by income Total return: 110% Income return: 91% Capital return : 19% 50 0 Total return Capital return Source: STANLIB Research, Bloomberg Data

55 Conclusion Upside Risk Better than expected economic growth Mergers and acquisitions in the retail space Reasonable gap between property yields and bond yields Downside Risk Higher than expected bond yields & interest rates Lower than expected economic growth Impact of online shopping to retail centres Brexit uncertainty Global trade wars Source: STANLIB Research January

56 Thank You

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