April proved to be a very volatile month for most South African asset classes and the SA REIT sector was no exception. At first glance it appeared a quiet and uneventful month for the sector, which posted a small gain of 0.2%. However, just a week before the end of the month, the sector was down more than 4%. The catalyst for the recovery was the results of the latest Ipsos poll, which showed support for the ruling ANC party dipping to just above 40% at the upcoming national elections. The rand strengthened, bond yields drifted lower and the domestic component of our stock market rallied strongly, including many SA REITs.  There was very little company-specific news to provide the sector with any momentum and so it was left to market sentiment and politics to give it direction.

Texton’s share price rallied more than 27% in April. The company had reported results at the end of February and completed a small rights issue in January, neither of which had any impact on the company’s share price, so the April share price action is somewhat surprising. Despite the large price movement during the month, the company continues to trade at a very steep discount to net asset value (more than 50%), a situation that most smaller SA REITs find themselves in right now.

The recovery in SA Corporate’s share price continued in April. The company’s shareholders enjoyed returns of 9.1% in April and have enjoyed returns of more than 50% over the past 12 months. The share price did fall quite sharply at the beginning of 2023 following the company’s announcement that it would be acquiring Indluplace for R3.40 per share, but it has now recovered and is trading at levels similar to those in February 2020.

At the beginning of the month, Emira and Spear announced the disposal of Emira’s Western Cape portfolio to Spear for R1.146 billion. The deal makes sense for both companies – Spear is a Western Cape focused REIT while Emira’s Western Cape presence is relatively small and the company is looking to recycle capital to further their investment objectives. Emira will initially use the proceeds of the sale to settle debt. The transaction is subject to the approval of Spear shareholders and is expected to become effective on or about 31 December 2024.

The SA REIT sector has outperformed the broader equity market and the bond market so far in 2024 and that outperformance is expected to continue if central banks start cutting interest rates in the second half of the year. Political developments in South Africa and the rest of the world will mean increased volatility but declining interest rates have always been good for the relative performance of listed property in South Africa.