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Reasonable Outlook for Distribution Growth in 2013

The UBS Global Investors Index recorded a net total USD return of 0.94% in July. The best performing listed real estate market was Europe which recorded a net total USD return of 6.57%. The SA Listed Property Index recorded a total return of – 4.15% (in Rand) for the month.

In the last SA monthly report Catalyst cautioned that the size of the spread between the SA Listed Property historic yield (6.44% – 30th June 2013) and the yield to maturity (YTM) on the Long Term Government Bond Index (7.69% – 30th June 2013) was larger at 1.25% than what is (arguably) justified based on the income distribution growth outlook. At the end of July this spread had narrowed to 0.97%. This is still larger than the 3 year and 5 year average premium spreads of 0.20% and 0.43% respectively. Please see Catalyst’s SA Monthly Report   for more local information.

In the Global listed real estate sector, approximately three quarters of the market have reported for the full year or interim period ended 30th June 2013. Catalyst has included some of these report highlights in their Global Monthly Report .

As at the 30th July 2013 the historic rolled income yield of SA listed property was 6.88%. The outlook for distribution growth in 2013 remains reasonable and the sector is likely to deliver distribution growth above inflation. The global listed real estate sector is currently trading at an estimated forward FAD (funds available for distribution) yield of 5.21%, which represents an attractive positive yield spread versus global 10 year government bond yields, with real earnings growth forecast over the next few years.

 

Source: Catalyst

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