Your presidency of Sapoa begins as the commercial property industry body plans to step up its engagement with municipalities. What’s keeping property owners up at night?
A major pain point is unjustifiably large rates increases and additional tariffs, which effectively amount to stealth expropriation. It’s a double whammy: property owners are continually paying more in rates and taxes while receiving less in terms of services.
The starting point is that rates policies should be determined in a fair and legally compliant manner, which doesn’t always happen. Last year, Sapoa took legal action against the City of Cape Town when it introduced levies and fixed charges linked to property values. These amounted to little more than a disguised property tax that bypassed the Municipal Property Rates Act and contravened section 74 of the Municipal Systems Act. The city repealed the decision after it lost the case in court. Municipalities need to adopt a fairer approach to property, and I believe that would stimulate growth. As things stand, the listed property sector has already invested R150bn–R200bn of capital in offshore real estate markets, money that could have found a home locally. Ultimately, above-inflation rates increases, coupled with service delivery and infrastructure failures, erode property returns and investor confidence.
How dire is the state of South Africa’s municipalities, and how can crumbling cities and towns be turned around?
Only 39 of South Africa’s 257 municipalities achieved clean audits in 2024/2025, according to the auditor-general. Local government really needs to step up and show the political will to tackle municipal failures. A lack of capacity, skills and funding for infrastructure projects remains a major concern. Building and maintaining a professional civil service within municipalities, regardless of which political party is in power, would also help ensure continuity in project delivery. It’s imperative that we get Joburg right. It’s the country’s and the continent’s largest economic hub. As a multigenerational Joburg resident, my connection to the city runs deep. In fact, my great-great-grandfather was mayor of Joburg 100 years ago.
Is real estate still a viable and investable asset class?
Absolutely. Property has been around for thousands of years and will remain relevant for thousands more. As humans, we all need physical spaces in which to live, work and exist. That creates a degree of certainty and predictability in real estate returns, despite the sector’s inevitable up-and-down cycles.
Speaking of cycles, the listed property sector has seen a rebound in earnings and dividends over the past two to three years, driving significant investment flows into real estate stocks. How sustainable is the recovery?
The sector has come off a low base after a few difficult years. First, we were hammered by Covid lockdowns, then came the July 2021 riots and load-shedding, followed by higher interest rates.
But those pressures also encouraged property companies to restructure, sell underperforming assets and strengthen balance sheets. As a result, the sector is in far better shape than it was five years ago.
The industry will, however, need stronger economic growth to support sustainable, inflation-beating earnings over the longer term.
Fortress has been one of the sector’s top performers since collapsing its dual A and B share structure in early 2024, delivering a 93% total return (capital and income growth) to shareholders. How much upside is left, and who should buy your shares?
Fortress continues to trade at a discount to NAV of about 10%, so we believe there is still value to be had. We’re targeting a total return of around 15% a year.
Given that Fortress is not structured as a real estate investment trust, dividends are paid out of after-tax profits, which is attractive for tax-sensitive investors. We’re also one of the few property stocks on the JSE that continues to pay out 100% of distributable earnings to shareholders, creating income certainty. The Fortress investment case is further supported by the fact that our R57bn property portfolio is focused on two of the real estate sector’s best-performing subsectors: logistics; and rural, CBD and commuter shopping centres. We also provide access to a hard currency income stream through a directly held portfolio of logistics properties in Poland and a stake in Eastern Europe-focused mall owner Nepi Rockcastle.
Beyond Fortress, which JSE-listed companies would be on your personal buy list today?
With a market cap exceeding R100bn, Nepi Rockcastle offers unmatched liquidity, along with an after-tax, euro-based dividend yield of about 8%. That’s difficult to beat. I also like South Africa’s listed fashion retailers as a value play. The sector has been sold down aggressively over the past 18 months, yet those are well-run businesses led by strong management teams.
What is the next big real estate theme that smart investors should watch?
Data centres. Globally, and increasingly in South Africa, huge amounts of capital are flowing into these facilities, driven by explosive growth in AI, cloud computing and data storage.
