1nvest Property ETF at discount

Simon BrownETF Blog, Latest

Listed property the world over has had a tough pandemic but locally the property index (SAPY) actually peaked in December 2017 losing almost 40% before the pandemic started. It then halved again in the sell-off of March 2020 effectively making the index down over 70% from the 2017 highs to the 2020 lows.

Since then we have seen a recovery of around 65% but still 50% off the highs from 2017.

SAPY weekly chart

SAPY weekly chart

A bleak picture, but property is special and listed property in the form of Real Estate Investment Trusts REITs) deserves a place in your portfolio as a different asset class.

REITs are underpinned by actual psychical buildings and pay 75% of their distributable earnings as dividends making them good dividend payers under normal conditions.

At the 2017 peak one was buying REITs at steep premiums to their net asset value (NAV). Whereas right now you’re getting many quality REITs at discounts of around 30% to NAV. Dividends are recovering and we should see yields of around 8%-10% in the years ahead.

The 1nvest SA Property ETF tracks the SA Listed Property Index (SAPY) which is the twenty largest REITs listed on the JSE.

This includes heavyweights such as; GrowthPoint (who own half the V&A Waterfront), NEPI Rockcastle, Redefine and Resilient.

Top ten holdings (as of 30 September 2021)

  • Growthpoint Properties Ltd ~ 18.91%
  • NEPI Rockcastle PLC ~ 17.59%
  • Redefine Properties Ltd ~ 9.75%
  • Resilient REIT Ltd ~ 7.23%
  • Fortress REIT Ltd A ~ 6.40%
  • Equities Property Fund Ltd ~ 5.32%
  • Vukile Property Fund Ltd ~ 4.25%
  • Hyprop Investments Ltd ~ 3.88%
  • MAS Real Estate Inc ~ 3.10%
  • Sirius Real Estate Ltd ~ 2.94%

Importantly while listed on the JSE many of the top ten actually do business outside of South Africa; NEPI, MAS, Sirius and Redefine (via its stake in EPP) all do business in Central and Eastern Europe and make up more than a quarter of this ETF. This ensures easy diversification both in terms of geography but also currencies.

Make no mistake property is not out of the pandemic woods yet, but beaten down sectors often offer an infrequent opportunity and while investors spent the better part of a decade buying REITs at a premium to their NAV, we have an opportunity to buy at a discount.

Also important is that while this ETF pays dividends there is no dividend withholding tax (DWT) charged and the dividend is instead added to your income and tax accordingly. This is why many investors put these REIT ETFs into their tax-free accounts in order to reduce the tax rate if your rate is above the 20% DWT rate.

ETF name 1nvest SA Property ETF
ETF issuer 1nvest
Issue date 13 February 2013
Total investment cost 0.29%
ETF Benchmark SA Listed Property Index (SAPY)
Tax-free savings account Yes allowed
ETF major holdings Growthpoint Properties Ltd 18.91
NEPI Rockcastle PLC 17.59
Redefine Properties Ltd 9.75
Market cap R872million
Performance 1 year +41.9%
Performance 3 years -33.0%
Performance 5 years -45.6%
Performance since listing -36.6%
Dividend yield 5.7%

ETF blog

At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.