Futuregrowth Asset Management’s Community Property Fund (CPF) performed extremely well for the second year running, delivering 24.3% for the 12-month period ending December 2016, compared to SA’s listed property sector’s return of 10.20% for the same period.
The CPF, which has been running for over 20 years, acquires shopping centres in townships and rural areas on behalf of investors.
Portfolio manager, Smital Rambhai, said there are a number of key drivers behind the improved returns: “The main factors are strong rental income growth, a reduction in vacancies, better control of expenses and additional sources of income from promotions and advertising”.
“We’ve also seen an improvement in the quality of the tenants which reduces risk for the investor. Demand for rental space in our centres is strong, and we are planning to expand some of our centres due to this strong demand from tenants.”
The unlisted fund has a low correlation to financial markets and experiences less volatility than the listed sector. This makes the fund suitable for pension funds seeking consistent, long-term, risk adjusted returns for their members.
“People will always need to buy food, clothing and household items and have access to key services,” said Rambhai. “Our shopping centres cater for these basic needs, and because they are conveniently located close to transport nodes, consumers are likely to continue spending their time and money here.”
New property managers were appointed in 2015 and have been able to extract better value from the properties, which is demonstrated by the fund’s outstanding performance over the last two years.
The fund currently owns 18 shopping centres across South Africa and has delivered significant social benefits to the surrounding communities.
“We’ve come a long way in the last 20 years,” said Rambhai. “In 1996, when the fund was launched, no one was interested in financing township shopping centres and they were a no-go zone for developers. Things have changed since then, and Futuregrowth continues to reap the benefits of being among the first to invest in the township and rural sector on behalf of its clients.
(See the latest Fund report here.)