From Gary Booysen on the top floor...

Dear Money Morning Reader,

Listed property has been playing catch up. In the last year it seriously lagged the recovery on other listed stocks. But now finally it seems to be coming right. In the first month of 2010 the JSE fell 7.54% but the South African Listed Property index has managed to return 3.41%. It’s now outperforming the FTSE/JSE All Share index by a significant margin. “As Albert Arntz, Portfolio Manager of the Prudential Enhanced SA Property Tracker Fund says: “Property has also produced higher returns than cash and bonds. During this period the BESA ALL Bond Index returned 2.3% while cash returned 1.2%.” Listed property might just be the best defensive play in 2010.

We already know the capital value of property is very low in historical, inflation adjusted terms. Anyone getting in will be buying at bargain basement prices but what about the rentals? The bread and butter of property stocks are dividend yields, and with vacancy rates increasing across retail, industrial and commercial sectors it seems the industry is plagued by over capacity.

Arntz points out this is exactly the advantage that listed property has over a regular property investment. It has the ability to weather down turns. In the short-term an increase in vacancies won’t put any downward pressure on rentals. “Property funds are only exposed to market rental declines on the portion of leases that expire annually. For a typical listed
property fund, on average, only around 20% of leases expire annually. The remaining 80% of leases have rentals that escalate contractually by 8-9% per annum.”

It’s this virtue of listed property funds that sets them apart from other property investments. The capacity of the big funds to lock tenants into long-term contracts gives the likes of Growthpoint, Redefine or Hyprop the competitive advantage when operating in a recessionary environment.

Kick your portfolio into gear by investing in a South African player with an international footprint…

“With South African foreign exchange regulations being relaxed further, investors are looking
to take advantage of international equity and property markets,” says Marc Ashton in Finweek. South African property held up well during the credit crunch and as markets return to normal
the big gains are going to come from overseas. But, if you’re thinking of navigating the tangled red tape of foreign markets alone, you’re going to come unstuck.

A better option is Grindrod’s Global Property Income Fund. The fund was launched to give South African investors access to offshore markets. Apart from above average yields and diversification it aims to take advantage of currency as well. The currency status quo has been turned on its head recently. The pound, dollar and euro are all coming off very low bases and you’re going to get a lot more for your rand.

The fund invests in Real Estate Investment Trusts (REIT’s) with exposure across Asia, Australia and North America. You’re also going to benefit from regular monthly distributions and long-term capital appreciation.

For a specialist dividend distribution fund it’s seen a massive amount of capital gains over the last three months. It’s up 10.88% and has so far dolled out a respectable 2.94% in income payments. Fund manager Greg Rawlins currently has R101.6m under management and as Marc Ashton says: “For investors with cash to spare and some appetite for the international property markets, this Grindrod fund looks like a good bet.” To contact them visit www.grindrodbank.co.za or call 0860 378 466.

Turning to the markets...

The JSE all share index traded flat, up 0.04% yesterday. The gold mining index gained 0.6%. Resources traded flat, up 0.02%. Banks and financials grew 0.64% and 0.37% respectively. Industrials traded flat, down  0.1% and the platinum mining index jumped 0.85%.

London's FTSE100 climbed 0.75%. The Dow Jones slipped 0.47% and the Nasdaq fell 0.53%.

Tokyo's Nikkei gained 1.39%. Hong Kong's Hang Seng added 1.4%.

Brent crude is currently trading at $83.29 per barrel.

Spot gold's trading at $1,116.26 and platinum was last quoted at $1,663.00.

And here's how the rand is performing against the major currencies:
R/$ 7.24
R/₤ 11.04
R/€ 9.77