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Send  Share  RSS  Twitter  03 Jun 2010

PROPERTY: High Net Worth Investors Now Being Wooed


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The JSE PE ratio rerated by 82% last year, which certainly supports the view that the easy money in equities has been made.

What options does this leave the SA investor with? Two recently published surveys, by Deutsche Bank in SA and ACSIS, have confirmed that listed commercial property has outperformed listed equities over the last 3, 5 and 10 year periods with the survey by ACSIS showing 10 year average property returns at 23.9%, followed by equities at 20.85% and bonds at 15.4%. Clearly, timing is important in these returns. Equities, which is a lead indicator, has had its run.

Property, which lags the economic cycle by around 9 months is now about to take off. All the indicators are there: low real interest rates, great opportunities caused by the downturn and a banking sector keen to start lending again where low risk deals are starting to appear, believes John Witter of Horizon Capital.

Waiting in the wings is an industry of professional property people who have been biding their time for this exact moment. Net yields averaged 9% last year, per Auction Alliance’s survey, and deals are still being done at the 10% net income level. Encouragingly, vacant space is being re-absorbed into the market. There is a growing sense of optimism, the unique opportunity to enter into the best deals we are likely to see in the next decade presents itself,” Witter says.

He says listed property has already had its run. The high net worth investor can get into commercial property through Horizon Capital, a boutique commercial property house in Cape Town, which offers the facility to build directly owned, diversified portfolios for high net worth investors, taking advantage of fixed rate gearing to magnify returns.

Witter points out that Horizon Capital receives details of commercial property for sale from its 135 brokers on a daily basis, selecting the best properties for further review, yield analysis and due diligence. Once 10 year cash flow forecasts are completed, it presents these properties to its clients for purchase. It then arranges the funding from the top private banks and manages the properties for these clients, handling everything down to producing bi-monthly management accounts, VAT returns and annual audit packs for the independent auditors.

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