South African real estate investment trusts (Reits) posted their strongest monthly performance of 2024 in September, climbing 1.6% while the broader equity market dropped 5.8%. This outperformance occurred despite higher interest rates at home and abroad, with trading volumes peaking at R16.2 billion—the highest since March—more than double August’s total.
The All-Share Index fell 5.8% in September, while the All-Bond Index remained unchanged at 0.0%. Over the year to date, SA Reits have risen 4.0%, outperforming bonds (3.5%) and equities (-3.2%). However, the third quarter saw declines across all asset classes, with Reits down 2.1% over three months—the second consecutive quarter of losses for equities, bonds, and Reits.
Income growth remains the sector’s defining strength. The rolling 12-month increase in distributions reached 11.09%, the highest since 2017 when excluding pandemic-era distortions from 2021 and 2022. With headline consumer inflation at 4.4% in September, the real yield spread exceeded 6%.
Ian Anderson, head of listed property at Merchant West Investments, observed that September reversed August’s trends almost exactly. The sector rose while equities fell nearly 6%, supported by the heaviest trading volumes since March. Strong results showing double-digit dividend growth made Reits particularly attractive as investors sought defensive assets.
Gains were widespread, with 12 of the 22 Reits in the sector closing higher. Dipula B led with an 8.2% increase, followed by Attacq (7.8%), Hyprop (6.8%), and Fortress B (5.9%). Several counters that had declined in August rebounded, including Vukile (4.3%) and Resilient. The sector’s forward yield slipped slightly to 7.03% from 7.09%, while the yield gap between Reits and long-term bonds narrowed to -188 basis points, tighter than the long-term average of -14 basis points.
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Top Performers Lead Year-to-Date Gains
Year-to-date, Oasis Crescent tops the performance chart with a 36.4% gain, followed by Octodec (23.6%) and Heriot (20.2%). Twenty-one of the 22 Reits in the report remain positive over 12 months, with returns ranging from 2.6% to 74.0%.
Results for 2026 confirmed robust performance, though 2027 guidance suggests slower growth. Hyprop grew distributable income per share 11.7% and raised its dividend 14.4%, with South African tenant turnover up 4.9%.
The sector’s financial stability now exceeds past tightening cycles. Loan-to-value ratios have fallen, with Fortress at 34.0%, Hyprop at 28.5%, and Heriot at 40.5%.
A key trend is the rise of cross-holdings among mid-cap Reits. Emira now owns 23.9% of Octodec and 6.9% of SA Corporate, while Fairvest holds 20.1% of Dipula. The steady build-up of cross-holdings among the mid-cap companies points to a sector actively reshaping itself rather than waiting for conditions to improve.
Financial Strength Drives 2026 Dividend Surge
September’s results season highlighted deeper financial strength across the sector. Fortress reported a 9.2% rise in net asset value, supported by a R1.35 billion equity raise that cut its LTV ratio to 34.0% from 39.1%. Its 2026 dividend growth of 10.1% and distributable earnings growth of 14.2% exceeded expectations, with like-for-like NOI growth of 6.8% and logistics reversions of 4.2%. For 2027, it guided for roughly 7.5% per-share growth, reflecting cautious optimism amid tighter monetary conditions.
Hyprop delivered 11.7% growth in distributable income per share, lifting its dividend by 14.4% to 351.9 cents, the highest in the sector. Tenant turnover in South Africa rose 4.9%, with retail reversions at 8.7%. Its LTV ratio improved to 28.5% after disposing of Woodlands Boulevard and raising R1.1 billion in equity. For 2027, Hyprop expects 7% to 9% growth, acknowledging higher borrowing costs will squeeze margins.
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Attacq posted 15.5% normalised DIPS growth and a 17.2% dividend increase to 102 cents, with occupancy climbing to 94.9% from 91.6%. Reversions turned positive at 3.4%, reversing a prior 9.1% decline. Its gearing stood at 25.0%, and 2027 guidance of 6% to 9% reflects a shift toward stability over rapid expansion. Vukile’s pre-close update showed 8.5% like-for-like NOI growth in South Africa, with reversions at 4.0% and vacancy at 1.9%. Its Iberian operations secured rents 6.8% above prior levels, with vacancy at 1.1%. Despite currency challenges, Vukile reaffirmed 2027 guidance of 8% to 10% growth in funds from operations and 10% to 12% dividend growth, among the few maintaining double-digit targets.
Heriot recorded its third consecutive year of dividend growth, lifting its payout by 16.7% and NAV by 17.1%. SA Corporate grew its interim dividend 7.0% on 5.5% like-for-like net property income growth, while Growthpoint strengthened its balance sheet with R4.9 billion in disposals, reducing its LTV ratio to 30.2%. Burstone’s restructuring involved transferring R5.4 billion of retail and industrial assets into a new funds platform with Nedbank Property Partners, priced at a 5% discount to book value on an 8.4% yield, while retaining a 50% stake. Its 2027 distributable income guidance remains at 4% to 6%.
Mid-Cap Reits Consolidate Through Cross-Holdings
Cross-holdings among mid-cap Reits expanded further, with Emira increasing its stake in Octodec to 23.9% and in SA Corporate to 6.9%. Fairvest now holds 20.1% of Dipula, while Heriot owns 21.7% of Texton. These connections reflect strategic consolidation.
Fairvest and Emira presented contrasting leasing outlooks. Fairvest expects dividend growth at the top of its 11% to 13% range, with reversions at 5.6% and an LTV ratio projected below 27%. It acquired two Shoprite-anchored malls in KwaZulu-Natal for R702 million at a 10.2% yield, funded by a R900 million equity raise. Emira recycled R657 million from South African disposals and an offshore sale at an 8.1% premium to book value. Office properties remained the weakest segment, with limited demand recovery.
Rate Hikes Test Borrowing Costs
Accelerate sold two assets, Cedar Square for R630 million at an 8.7% exit yield and KPMG Crescent for R385 million, raising approximately R1 billion for debt reduction. The SARB’s 25-basis-point repo rate hike to 7.25% on 23 September marked the first domestic increase since 2023, aligning with global tightening. Long-dated sovereign yields hit near two-decade highs, increasing borrowing pressure for highly leveraged sectors.
