Dear reader,

Welcome back to FarSight AI, by father-and-son team, Rob and Matt Worthington-Smith.
 
This week, we bring you the following six companies in the Property Sector, appraised by our FarSight AI model: NEPI Rockcastle, Resilient, Shaftesbury Capital, Lighthouse Properties, Equites Property Fund and SA Corporate Real Estate.
 
First, some background to the Property Sector, highlighting opportunities and threats:
 
In South Africa, the retail and industrial subsectors benefit from urbanisation and e-commerce growth, driving demand for logistics and retail spaces that offer convenience. SA Corporate Real Estate and Resilient capitalise on high occupancy in urban hubs, while Equites focuses on logistics for blue-chip tenants. However, South Africa’s low GDP growth (1.5–2%) and high unemployment constrain consumer spending, limiting rental escalations. Load-shedding and poor municipal services increase operational costs, requiring investments in backup systems. High interest rates raise borrowing costs, squeezing margins, and B-BBEE compliance adds regulatory expenses.
 
In Western Europe, Lighthouse Properties’ grocer-anchored malls in Spain, Portugal, and France, and Shaftesbury’s West End portfolio in the UK, tap into stable GDP growth (1.5–2%) and recovering consumer spending. Trends towards experiential retail destinations boost footfall, supporting high occupancy. However, e-commerce (15% of EU sales) pressures physical retail, necessitating innovation and enhancements to tenant mix. High interest rates increase debt costs, while stringent net-zero regulations raise compliance expenses.
 
In Central and Eastern Europe, NEPI Rockcastle’s shopping centres across nine CEE countries benefit from robust retail demand, with tenant sales up 13.2% in 2024. Lower competition and growing consumer markets offer expansion potential. However, rising interest rates (3.5%) and e-commerce (10% of retail) challenge margins, while geopolitical risks in Hungary and Serbia add uncertainty. EU environmental mandates to reduce emissions increase costs.   
 
Here are headline summaries for each company appraised:
 
NEPI Rockcastle (NRP): A top choice for its robust portfolio growth and disciplined risk management. Leadership’s transparent expansion and financial strategies offer strong upside, with liquidity mitigating downside risks. 
 
Resilient REIT (RES): Attractive for its stable 7.2% yield and retail resilience. Leadership’s tenant focus drives upside, but weak accountability on debt and infrastructure requires monitoring. 
 
Shaftesbury Capital (SHC): Offers compelling upside with prime UK assets, but debt risks demand caution. Leadership’s leasing and sustainability efforts are strong, though clearer capital plans are needed. 
 
Lighthouse Properties (LTE): Provides stable returns, but governance and debt risks temper upside. Leadership’s tenant strategies are effective, but broader financial plans are needed. 
 
Equites Property Fund (EQU): Shows e-commerce-driven upside, but economic and transparency risks limit appeal. Leadership’s UK exit is strategic, but operational challenges persist. 
 
SA Corporate Real Estate (SAC): Faces significant downside with weak financials and accountability. Leadership’s tenant focus offers some upside, but debt and operational risks dominate. 
 
These six are added to our growing list of appraisals, now including: 
Absa, ADvTech, African Bank, Anglo American, Ascendis Health, Aspen Pharmacare, Astral Foods, Blue Label Telecoms, British American Tobacco, Capitec Bank, Cashbuild, Cell C, Curro, Equites, Famous Brands, Glencore, KAL, Karooooo, Lighthouse Properties, MTN, NEPI Rockcastle, Resilient REIT, Reunert, SA Corporate Real Estate, Shaftesbury Capital, Sun International, Tharisa and Tiger Brands.
 
What should you be looking for in these appraisals? 
 
Companies that both talk and walk a positive value-creation story across a simple narrative arc:
Purpose: Clarity of mission and talent-driven delivery
Foundations: Financial and operational resilience
Relationships: Trust with customers, partners, and society
Leadership: Competence and accountability
 
Matching the talk with the walk requires that we look for Intangible predictors of value - many of them not found in the financials. Finding these ‘tells’ in corporate communications is both an Art and an Intelligent craft, it’s FarSight with AI.   
 
Here are some of the key ‘tells’ we extract from a company’s reporting:
Leadership’s understanding of what impacts on shareholder value
Leadership’s commitment to solutions that drive and defend value
The usefulness and truthfulness of reporting on the most critical value-driving issues 
Coherence of leadership’s response to critical issues
Far-Sightedness of leadership’s strategic thinking and action
 
Curious to see the results?
 
Visit Research
 
Thank you, in anticipation, for engaging with FarSight AI. 
 
Finally, don’t forget to give us feedback so we can improve our offering.
 
Rob and Matt Worthington-Smith