Construction World March 2019

PROPERTY

RE-RATING ON THE CARDS FOR SA REIT SECTOR South Africa’s real estate investment trust (SA REIT) sector is heading for a re-rating; the question is whether the sector will rally this year or next? A lready, the FTSE/JSE SA Listed Property Index (SAPY) is out of 2019’s starting

Design-focused hotel TO OPEN IN DOWNTOWN CAPE TOWN

Andrea Taverna-Turisan, SA REIT Association Marketing Committee Chairman.

blocks with its strongest January performance in 10 – plus years since 2007, outperforming all other asset classes. At the end of January, the SAPY was up 9,17%, well ahead of the FTSE/JSE All Share Index (ALSI) at 2.69%, bonds at 1,7%, and cash at 0,6%. Wynand Smit, real estate analyst at Anchor Stockbrokers explains that most SA REITs de-rated during 2018. “Should growth expectations start to improve during 2019, the valuations of the SA REITs are compelling,” he says. A re-rate in the sector would be a big gain for it in 2019 points out Mvula Seroto of Catalyst Fund Managers. “However, this will only be possible if the economic outlook improves, there are positive results from the 2019 general elections, and a reprieve from credit rating agency downgrades.” Mohamed Kalla, Director and Portfolio Manager at Sesfikile Capital, says, “Being quite conservative in our relative rating and growth expectations, we arrive at a 2019 total return expectation of circa 12% for the FTSE/JSE All Property Index (ALPI). The main driver is the attractive – on a relative and absolute basis – initial forward yield and does not factor in a significant re-rating relative to bonds in 2019. However, our forecasts point to a more stable 2020 growth outlook, which should result in better re – rating potential a year from now.” Stanlib Analyst and Portfolio Manager Ahmed Motara believes it is too early to call for a material REIT sector rally in 2019 given South African elections, Edcon concerns and possibly lower retailer rentals are issues to be absorbed by the sector this year. For 2019, Motara anticipates the income return to dominate the total return picture in the REIT sector with 2020 expected to see a return to higher total returns as capital return becomes more evident. According to Capricorn Fund Managers SA’s Howard Penny, who expects 2019 to be a better year overall for SA REIT returns after a disappointing 2018, the jury is out as to whether the sector could re-rate on a relative valuation level this year. “Given worries surrounding rising global interest rates, perhaps the bounce back may have to wait for 2020.” Andrea Taverna-Turisan, SA REIT Association Marketing Committee Chairman, notes, “With the cost of equity having increased substantially in South Africa, management teams of local property counters will need to focus on the pure property fundamentals of their organisations to ensure the property sector will become more robust and better positioned to deliver shareholder value over time.” The SA REIT Association represents South Africa’s R330-billion listed REIT sector. Its members comprise all the country’s listed REITs, which play an essential role in the economy and the lives of South Africans. 

Contemporary South African meets heritage design Originally built by the United Building Society, the hotel’s entrance is Art Deco, while the conjoined building boasts traits of the New Edwardian style of the 1940s. The uniting design embraces each building’s architectural features, while at the same time allowing for different moods depending on the viewer’s perspective, for instance, one façade has window frames of steel while another has the original oak surrounds. Interesting concrete and steel structures are incorporated throughout the hotel. The biggest challenge in marrying the two buildings was their different heights, and the solution gave rise to the tower that hosts the rooftop pool, and allowed for the bar and restaurant to be on the same level as the pool. There’s also a first floor eventing space that can accommodate up to 150 people seated banquet style. “We wanted to take this fantastic conjoined building that has a rich history of Cape Town and create a modern, timeless hotel using South African designers as part of the design DNA,” says international award- winning interior designer Tristan du Plessis, who was responsible for the hotel’s interior. Each of the 32 rooms expresses South African contemporary style, interlaced with a vintage edge. Du Plessis has used carefully chosen South African art pieces and furniture that capture the chic look and feel of downtown Cape Town. Lighting and furniture were sourced from David Krynauw, Gregor Jenkin, Studio 19, Douglas&Co, and Dokter and Misses, with a feature crocodile swing chair from Porky Hefer, while murals from artist David Brits are featured throughout. The foyer is home to an intricate mural created by Cape Town artist Lucie De Moyencourt. The Delft inspired masterpiece is made of 1 800 hand painted tiles depicting a map of Cape Town. Joining the Design Hotels TM stable Design Hotels TM was established in Germany in 1993 and spans the globe in over 50 countries, from mountain tops to world capitals. Member hotels reflect innovative design and architecture, with a strong cultural rooting in hospitality. “Hotels have to create a truly unique and inspiring locally driven experience for travellers staying at them,” explains Tolmay. Being part of the group will expose Gorgeous George to a large community of travellers looking for an inventive and novel experience that will make their stay special, with an original downtown Cape Town feel.  Gorgeous George, a new downtown hotel in the heart of Cape Town, will officially open in March this year. Created out of two beautifully restored heritage buildings, it’s the first hotel in Cape Town to join the Design Hotels TM stable, a hand-selected worldwide collection of privately owned and operated hotels. More than a hotel, Gorgeous George is where refined design and quality meet, an inner-city gathering place for locals and the well-travelled.

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CONSTRUCTION WORLD MARCH 2019