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Nov 19, 2008:
Johannesburg - SA listed property is expected to start appearing more regularly on offshore fund managers' buying lists now that sector heavyweight, Growthpoint Properties, has bagged an inclusion in the widely followed MSCI Emerging Markets stock index. The company will be added to the index on November 25, MSCI said in a statement released on Friday. Growthpoint, SA's biggest listed property fund with a portfolio worth R27bn and a market cap of R17bn, is the only SA property fund that has been included in the New York-based emerging market benchmark.
Growthpoint's appearance in the MSCI index is expected to trigger the long-awaited inflow of foreign investment into SA's listed real estate sector.
Although wealthy offshore property investors have in recent years started to pour big money into some of SA's directly held property jewels including the likes of the V&A Waterfront and a number of luxury game and golf resorts, overseas investors have shied away from JSE-listed property funds.
Less than 3% of the R82bn sector is believed to be in foreign hands. But that could increase noticeably, if offshore fund managers start to include Growthpoint in their emerging market asset allocation.
As Macquarie Securities property analyst Leon Allison puts it: "By implication, managers benchmarking their performance to the MSCI index will need to look at Growthpoint which they may not have previously had to do."
Coronation Fund Managers property analyst Anton de Goede says the inclusion in the MSCI index is significant as many investors utilise index tracker funds against this index to gain exposure to emerging markets.
De Goede says not withstanding global stock market volatility, emerging markets remain a popular risk/return diversifier in multi-asset class portfolios.
He says it is particularly positive that a listed property fund such as Growthpoint has been included in an equity-based index, as opposed to a property-based index. "This means that international fund managers need not amend their investment universe guidelines to specifically include property in their asset mix."
Analysts say offshore income chasers should find SA listed property attractive compared to developed real estate markets, as SA offers much higher income yields than the UK and US for instance.
Catalyst Fund Managers figures show an average yield of 9.9% for SA listed property while the UK sits at 4% to 6%. That's despite UK listed property prices falling 25% over the past year.
The MSCI inclusion is good news for local property investors, as it provides potential share price upside if more international investors start chasing SA property scrip. Growthpoint was trading at 1 335c earlier on Monday, up 23% from July 3 when the counter hit an 18-month low of 1 090c.
