The fund delivered a total return of 10.15% for the third quarter of 2017. This equates to an outperformance of 4.42% above the listed property index for the quarter. On a year to date basis, the fund has generated 18.16% total return, outperforming both the median manager and the index by over 10%.

In terms of relative asset class performance, the SA Listed Property sector delivered positive growth in the third quarter of 2017 with a 5.7% total return performance, underperforming Equities (8.9%) but outperforming Bonds (3.7%) and Cash (1.8%). However, over the longer period, listed property has continued to be one of the best performing asset classes, returning 13.9% p.a. over the last 10 years, beating the returns on Equities (9.5%), Bonds (8.4%) and Cash (7.2%).

As at the end of the third quarter of 2017, the listed property sector traded on a historical yield of 6.75% and a projected forward yield of 7.35%. The sector is expected to deliver between 8% and 9% distribution growth over the next twelve months. This growth outlook against a subdued economic backdrop, political instability and market uncertainty results in the SA listed property sector remaining as an attractive investment choice.

The fund delivered a total return of 4.09% for the second quarter of 2017. This equates to an outperformance of 3.27% above the median manager and 3.18% above the listed property index for the quarter. On a year to date basis, the fund has generated 7.28% total return, outperforming the median manager by 4.8%.

In terms of relative asset class performance, the SA Listed Property sector delivered positive growth in the second quarter of 2017 with a 0.91% total return performance, underperforming Bonds (1.49%) and Cash (1.85%) but outperforming Equities (-0.39%). However, over the longer period, listed property has continued to be one of the best performing asset classes, returning 14.3% p.a. over the last 10 years, beating the returns on Equities (10.37%), Bonds (8.4%) and Cash (7.26%).

Market commentary
The quarter saw a number of mid and small cap property companies release results. Overall, results met expectations with counters such as Equites and Investec Property Fund posting sound results while Accelerate disappointed the market with guidance of flat growth over the next two years mostly driven by internal own goals. The largest counter that released results was Redefine who posted growth of 7.5% and guided to similar growth for the full year. The best performing property counter for the quarter from a total return perspective was Greenbay Properties while the worst performer was Accelerate Property Fund.

In other property news, Attacq announced its intention to re-position itself as a REIT by the end of FY18. Emira announced a R364 million BEE transaction that will result in 5% of its shares being owned by BEE partners. Redefine concluded a deal to dispose of its 22.8% stake in Delta Property Fund to a women-led empowerment consortium in a R1.45 billion vendor financed transaction. Lastly, Vukile released a cautionary announcement at the end of June, to inform shareholders that it was considering a potential transaction. The fund has subsequently announced the purchase of nine retail parks across Spain for EUR 193 million. In terms of continuing M&A activity, the swap ratio for the NEPI Rockcastle merger was increased to 4.7 from 4.5. The voting results by NEPI and Rockcastle shareholders have been released and both groups have voted in favour of the merger. The merged entity is scheduled to begin trading as NEPI Rockcastle on 12 July 2017.

Political uncertainty and economic fears led S&P and Fitch to downgrade SA’s credit rating to junk status during the quarter while Moody’s downgraded SA to one notch above investment grade. South Africa has also entered a technical recession with two quarters of negative GDP growth being posted. While some counters are seeing a moderation in growth against this backdrop, others continue to post good growth given the favourable positioning of their quality portfolios and balance sheets. The high yielding nature of listed property underpinned by a stable, long term income stream, continues to attract capital to the sector. Over R4.5 billion of equity was raised through book builds and private placements during the period, the largest of which was R2.2 billion raised by Echo Polska Property and R1.1 billion raised by Greenbay Properties.

As at the end of the second quarter of 2017, the listed property sector traded on a historical yield of 6.3% and a forward yield of 7.4%. The sector is expected to deliver between 8% and 9% distribution growth over the next twelve months. This growth outlook against a subdued economic backdrop, political instability and market uncertainty results in the SA listed property sector remaining as an attractive investment choice.

The fund delivered a total return of 3.06% for the first quarter of 2017, outperforming the median manager by 1.71% and the listed property sector by 1.69%. Relative to the other asset classes, SA Listed property delivered a 1.37% total return, underperforming both Equities 3.78% and Bonds 2.46%, but outperforming cash 1.84%. However, over the longer term it has proven to be one of the best asset classes, returning 14.24% p.a. over the last 10 years, beating the returns on Equities (9.82%), Bonds (8.06%) and Cash (7.29%). Market commentary It was a busy quarter in the listed property space with a number of counters releasing final and interim results. Growthpoint, South Africa’s largest local listed property company released interim results with distribution growth of 6.1% for the six months to December 2016. Higher distribution growth was achieved by the likes of Fortress B and NEPI who posted 25.1% and 14.6% for the full year and interim period respectively. Management teams of the reporting companies remain anxious regarding the local property space on the back of softer economic conditions and political uncertainty. Negative sentiment towards the office sector continues coupled with a surprising uptick in concern around poorer retail sales. However, listed property companies with quality retail portfolios such as Hyprop and Resilient continue to outperform the market with each company delivering 16.6% and 16.2% distribution growth respectively for the six months to 31 December 2016. The sector continues to attract capital with over R4 billion of equity raised through book builds during the period, the largest of which was R2 billion raised by Greenbay and R1.75 billion raised by MAS Real Estate. The geographic diversification trend continues with local listed property players expanding their offshore footprint. Resilient and Greenbay announced their foray into Portugal with the purchase of two shopping centres for c.EUR219.25 million. As at the end of the first quarter of 2017, the listed property sector traded on a historical yield of 6.3% and a forward yield of 7.3%. The sector is expected to deliver between 8% and 9% distribution growth over the next year. This growth outlook against a subdued economic backdrop, political instability and market uncertainty results in the SA listed property sector remaining as an attractive investment choice.

The fund delivered a total return of 9.81% for 2016, outperforming the median manager by 1.36%.

The SA Listed property sector returned to positive growth in the fourth quarter with a 1.28% total return performance. On a year to date basis, listed property has delivered a 10.2% total return outperforming Equities (2.6%) and Cash (7.4%) but underperforming Bonds (15.4%). Over the longer period, listed property has also proven to be one of the best asset classes, returning 15.8% p.a. over the last 10 years, beating the returns on Equities (10.5%), Bonds (8%) and Cash (7.3%).

Although domestic economic fundamentals remained weak over 2016 the SA focused funds outperformed their offshore focused counterparts due to the rand strengthening over the period.

Best performing stocks for the year included SAC, HPB, EQU, DIB and REB while the worst performing stocks were dominated by those exposed to the UK including CCO, CRP, RPL and ITU as the Brexit decision in June and the strengthening of the rand relative to the pound negatively impacted counters.

Market commentary
The fourth quarter saw the listing of Liberty Two Degrees, which holds a 22% stake in the Liberty Property Portfolio. The portfolio includes flagship assets such as Sandton City, Nelson Mandela Square and Eastgate Shopping Centre.

Consolidation within the sector continued with NEPI and Rockcastle announcing the details of their proposed merger. The enlarged entity will have a market capitalisation of c.R83bn and is anticipated to be the largest listed player in the CEE property market.
A notable transaction was Growthpoint's foray into the CEE region with an initial c.27% stake in Globalworth, a leading investor and developer in the Romanian office sector.
Bond yields were volatile during the period with the 10 year bond ending the quarter at 8.91%, 25bps higher than three months prior.

Volatility remains, even though South Africa missed a downgrade in December, driven by uncertainty regarding the Fed's next move, global growth remaining under question and continued domestic political instability. This volatility however provides us with opportunities to build up holdings in quality counters with strong distribution growth expectations.
As at the end of the fourth quarter of 2016, the listed property sector traded on a historic yield of 6% and a forward yield of 7%. The sector is expected to deliver between 8% and 9% distribution growth over the next year. This growth against a poor economic backdrop, political instability and low bond yields results in listed property remaining as an attractive investment choice.