May proved to be another difficult month for South African REITs, as they underperformed both the South African equity and bond markets. Hyprop (-5.6%), Redefine (-4.4%) and Resilient (-3.6%) were responsible for the bulk of the sector’s -0.6% return during the month, while Growthpoint was up just 0.5%. Delta Property Fund was the best performing SA REIT in May, gaining more than 56% after the company published a trading statement that significantly exceeded market expectations.

It was a busy month as several companies reported results or provided the market with trading statements and updates. Accelerate Property Fund announced that all necessary shareholder and board approvals had been received and that the rights offer and underwriting agreement, announced in April, had become unconditional. Accelerate was the worst performing SA REIT in May, as the share price declined by 10.7%. Attacq announced that the company had acquired the remaining 20% of the Mall of Africa. The mall is now eight years old and is benefiting from the densification of Waterfall City. For the three years to the end of 2023, the compound annual trading density growth at the mall was 16.1%. Growthpoint announced that it had received a preliminary expression of interest from NewRiver REIT plc for its 68.1% interest in Capital & Regional plc, while Capital & Regional had received a non-binding indicative proposal from Vukile Property Fund. Vukile subsequently announced that it no longer intends bidding for Capital & Regional and that the cautionary announcement had been withdrawn after the company was unable to reach agreement with Growthpoint as to the terms and structure of any possible offer.

Redefine reported results that fell short of analyst expectations, contributing to the drop in the company’s share price during the month. The company’s results announcement at the beginning of the month highlighted the impact of higher funding costs in Europe, despite good progress in growing net rental income in both South Africa and Poland. Burstone (+6.4%), Equites (+4.6%) and Spear (+6.7%) reported results that exceeded analyst expectations, leading to solid share price gains, while Dipula, Emira and Octodec reported results in line with market expectations which had little to no impact on their share prices. The results all highlighted the gradual improvement in property fundamentals but also highlighted the higher operating expenses and funding costs both domestically and offshore. The sector is therefore likely to benefit significantly when official interest rates start falling.