September, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -8.7% for the month ended 30 September 2023, underperforming the Australian equities market (S&P/ASX 300 Total Return Index). A-REITs underperformed as global bond yields rose significantly over the month with fewer 2024 Federal Reserve interest rate cuts now expected in the U.S. The Australian 10-year bond yield is at the highest level in more than a decade.
The Reserve Bank of Australia (RBA) held the cash rate at 4.1% in September in line with expectations but again noted “some further tightening may be required” depending on economic data. August inflation re-accelerated and the unemployment rate held at 3.7%.
Within A-REITs the office and industrial sectors outperformed, whilst retail and property fund managers underperformed.
Outperforming A-REITs included land lease community developer Ingenia Communities (INA) and Centuria Industrial REIT (CIP). Media speculation suggested INA was close to selling some seniors living assets. CIP sold two assets at Jun-23 book values whilst the stock price implies significant property devaluations. The Portfolio’s overweight positions in INA and CIP contributed to relative performance.
Underperforming A-REITs included interest rate sensitive property fund managers Cromwell (CMW), Charter Hall (CHC) and Home Consortium (HMC). High interest rates present headwinds to earnings via downward pressure on asset valuations and therefore management fees, as well as limiting transactional activity and equity inflows. The Portfolio’s underweight positioning in property fund managers contributed to relative performance.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-2-1.pdfAugust, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 2.2% for the month ended 31 August 2023, outperforming the Australian equities market (S&P/ASX 300 Total Return Index).
The Reserve Bank of Australia (RBA) held the cash rate at 4.1% in August but noted “some further tightening may be required” depending on economic data. Inflation pressures remain elevated but are receding and the unemployment rose to 3.7% in July.
The relative strong A-REIT sector performance was largely driven by industrial landlord and developer Goodman Group (GMG).
Consequently, within A-REITs the industrial sector outperformed, specialist and retail sectors trailed slightly whilst the office and diversified sectors underperformed.
August was filled with FY23 earnings results and maiden FY24 earnings guidance. Outperforming A -REITs included industrial REIT Goodman Group and fund manager HMC Capital (HMC). Goodman reported strong operating fundamentals, guided to a near sector-leading 9% FY24 earnings growth and disclosed a large data centre pipeline underpinning future development earnings.
HMC guided to “strong underlying FY24 earnings growth” (no quantification) and reiterated its target for $10bn of funds under management this year and $20bn in the medium term, highlighting growth avenues via global healthcare real estate, energy/infrastructure and private credit.
The Portfolio’s underweight positions in GMG and HMC detracted from relative performance.
Underperforming A-REITs included office and industrial landlord Growthpoint (GOZ) and diversified Charter Hall Long WALE REIT (CLW). Both companies have above sector average financial leverage. Higher debt costs are a key drag as GOZ guided to -15% FY24 earnings growth and CLW -7% for FY24 after -8% in FY23.
The Portfolio’s underweight positions in GOZ and CLW contributed to relative performance. Key A-REIT reporting season themes include:
• Few A-REITs will grow earnings in FY24 owing to higher debt costs overwhelming revenue growth.
• More FY24 earnings guidance misses than beats, generally due to new interest rate hedging crystallising higher FY24 debt costs.
• Office remains challenging. Occupancy was broadly stable though some reported declines. Tenant incentives remain elevated and the tone softened on proposed developments. Several A-REITs are trying to sell assets though buyers remain cautious. Dexus (DXS) sold 1 Margaret St, Sydney for 21% below Jun-22 book value and retained an equity holding given the acquirer could not raise all of the required capital.
• Retail metrics were encouraging. Occupancy is high (>98.5%), leasing spreads improved to flat/positive and retailers are generally in good financial shape heading into a tougher environment. Supply of new centres is low. Sales growth is decelerating into FY24, particularly for discretionary categories, likely impacting occupancy and leasing spreads. Rising property expense s including insurance/utilities/taxes are pressuring net rent growth.
• Industrial conditions remain favourable though there are some signs of demand softening from a high base. Occupancy is high (~99%), supply is delayed due to planning and new deal rents accelerated in 2H23 to >20% above in -place rents. Mirvac (MGR), Stockland (SGP) and GPT continue to prioritise growing industrial exposure, generally via development where returns have improved due to market rent growth.
• Residential sentiment is subdued near-term with more optimism into CY24 if interest rates stabilise . Affordability is constraining demand and first home buyers are absent, hit by lower borrowing capacity. Sales are at historically low le vels though sequentially improving from the 2022 trough. Enquiry has lifted but conversion is slow. Buyer defaults are above cycli cal averages. Positively, A-REIT residential developers are winning market share, production constraints are easing and construction cost inflation is moderating. Medium-term support from undersupply and migration remains intact. Re-stocking acquisition opportunities are increasingly attractive.
• Headwinds for fund managers persist. Transaction volumes are subdued, downward valuation pressure remains and equity inflows have slowed with some funds needing to satisfy redemptions.
• Self-storage FY24 revenue growth is slowing to long-run ~4-5% from elevated levels during the pande mic years. In FY23 occupancy loss was offset by rate growth. For both National Storage REIT (NSR) and Abacus Storage King (ASK) development is a key growth driver with attractive returns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-1-3.pdfJuly, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 3.9% for the month ended 31 July 2023, outperforming the Australian equities market (S&P/ASX 300 Total Return Index).
After two months of consecutive rate rises the Reserve Bank of Australia (RBA) held the cash rate at 4.1% in July.
Sentiment regarding future interest rate rises shifted downward with the consumer price index (CPI) numbers for July coming in below market expectations.
Within A-REITs, the specialist and retail sectors outperformed whilst the industrial and residential sectors underperformed.
It was a relatively quiet month in terms of news flow ahead of the August reporting season. Outperforming A-REITs included agricultural REIT Rural Funds (RFF). RFF rebounded in July after a year of underperformance on the back of balance sheet concerns. Moreover, the REIT declared its final FY23 distribution in-line with guidance. The Portfolio’s underweight position detracted from relative performance.
Underperforming A-REITs included pub landlord Hotel Property Investment (HPI). During the month the Victorian Government announced its intention to implement a number of electronic gambling machine reforms. HPI has limited Victoria exposure, but other states could follow suit. The Portfolio’s overweight position detracted from relative performance.
Property fund manager Charter Hall Group (CHC) announced redemption deferrals for investors in its unlisted Charter Hall Direct PFA Fund (PFA). CHC stated: “we will only sell assets for prices that reflect fair value and given the lower sales volumes in the office investment markets, sales have proved challenging.” Three notable transactions occurred in July, with retail landlord Unibail-Rodamco-Westfield (URW) selling its stake in Westfield Mission Valley Shopping Centre in California for $290m. The deal reflects a 12% discount to the most recent valuation, an 8.5% cap rate and ~$249 per square foot. The deal pricing likely reflects a reasonable discount considering the competitive retail landscape in the area, with the higher quality, upscale Fashion Valley mall within walking distance.
Charter Hall Retail REIT (CQR) announced the sale of its 50% interest in the Brickworks Marketplace shopping centre in South Australia for $85 million. The sale price represents a 6.1% premium to the December 2022 book valuation.
Meanwhile, Stockland Group (SGP) expanded it lend lease communities development pipeline through the purchase of five lend lease community projects for $210m from the Living Gems Group. Three of the projects are currently under construction with the remaining two due to start construction within the next twelve months.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-15.pdfJune, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -0.1% for the month ended 30 June 2023, underperforming the Australian equities market (S&P/ASX 300 Total Return Index).
To curb elevated inflation the Reserve Bank of Australia (RBA) hiked interest rates in June by 0.25% to 4.1%. The RBA has increased rates at 12 of 13 meetings since May 2022 to the highest level since 2012.
Within A-REITs, industrial and diversified sectors outperformed whilst the retail and office sectors underperformed. Outperforming A-REITs included fund manager Home Consortium (HMC) and office/self-storage landlord Abacus (ABP). HMC announced it had raised $350m in institutional capital for a new unlisted retail property fund. The Portfolio’s underweight position detracted from relative performance. ABP raised $225m of equity for its proposed new externally managed self-storage REIT tentatively named Abacus Storage King (ASK). Pricing of the new REIT reflected a 10% discount to Net Tangible Assets and the Portfolio participated in the raising. The Portfolio’s overweight position in ABP contributed to relative performance.
Underperforming A-REITs included retail landlord Region Group (RGN) and diversified landlord Charter Hall Long WALE REIT (CLW). RGN and CLW were amongst several A-REITs to announce preliminary June 2023 appraisal property valuations. RGN’s book value was marked down 1.7% whilst CLW’s was down 5.8%. The Portfolio’s overweight position in RGN detracted from relative performance whilst the underweight position in CLW contributed positively.
Broadly, appraised based property values have started to fall reflecting the pressure of higher interest rates and most importantly actual transactional evidence after a period limited activity. However, in aggregate A-REIT property values only fell ~3% over the six month period as capitalisation rates expanded by ~25 basis points, partially offset by higher income growth.
Appraised devaluations were most pronounced in office (down 4-8%) whilst non-discretionary retail was down 1.5- 4.0%. Industrial, self-storage and childcare values were flat with rent growth offsetting cap rate expansion. Mall landlords have yet to report.
Some notable transactions took place this month. Office landlord Dexus (DXS) sold an A-grade office building at 44 Market St, Sydney for $393m reflecting a 17% discount to book value, 6.6% cap rate and ~$12,800/sqm. The asset has a short 3-year lease expiry and is only 85% occupied. DXS also sold a business park asset in Victoria for $306m at a 7% premium to book value, bringing total FY23 divestments to ~$1.5bn. DXS has a large development pipeline to fund. The Portfolio’s underweight position contributed to relative performance.
We expect further devaluations will eventuate with more transactional evidence over 2023 as the market has had time to absorb and adjust to higher interest rates and more challenging economic conditions. A-REIT stock prices already reflect significant devaluations suggesting ~15%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-14.pdfMay, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -1.8% for the month ended 31 May 2023, outperforming the Australian equities market (S&P/ASX 300 Total Return Index). The portfolio underperformed the index.
After pausing in April, the Reserve Bank of Australia (RBA) unexpectedly hiked interest rates in May by 0.25% to 3.85%. Later in the month the unemployment rate rose from 3.5% to 3.7% but the monthly inflation indicator came in above expectations.
Within A-REITs, office and industrial outperformed while the diversified and retail sectors underperformed. Whilst house prices rose for a third consecutive month, residential developers generally underperformed after recent strong performance amid the renewed prospect of higher interest rates.
Outperforming A-REITs included fund manager Home Consortium (HMC), which announced progress in capital raising efforts for new healthcare and retail funds, and office landlord Dexus (DXS) which provided a quarterly update in which office occupancy increased by 0.1% to 95.4% and tenant incentives moderated. The Portfolio’s underweight positioning in both stocks detracted from relative performance.
Underperforming A-REITs included retail landlords Vicinity Centres (VCX) and Scentre Group (SCG). VCX upgraded FY23 earnings guidance to the top end of the prior range, which represents 11% growth, aided by recovering ancillary income. For the first time since 2018 leasing spreads turned positive. VCX also announced the sale of a 50% stake in its Broadmeadows regional mall at a ~4% premium to book value. Proceeds will fund developments.
Weighing on retail sentiment was likely several discretionary retailers (i.e. tenants) reporting slowing sales. The portfolio’s overweight positioning in both stocks detracted from relative performance.
Operating conditions remain favourable for industrial landlords with market rental growth buoyed by low current vacancy and tenant demand exceeding supply. Rent growth is offsetting capitalisation rate expansion, supporting valuations.
Goodman Group (GMG) upgraded FY23 earnings growth guidance from 13.5% to 15%. Although development work in progress fell 7% the $7bn p.a. production rate remained stable. Development margins are attractive and GMG is doing more development on balance sheet. Higher returning data centres now constitute 30% of the pipeline. Other landlords including GPT (GPT) and Centuria Industrial REIT (CIP) also reported accelerating double digit industrial releasing spreads. Underweight positioning in GMG, predicated on relative valuation, detracted from relative performance, whilst underweight positioning in GPT contributed.
Self-storage and office landlord Abacus (ABP) announced revaluations ahead of its proposed creation of an externally managed storage A-REIT. Self-storage values rose 2.6% whilst office/retail fell 5%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-13.pdfApril, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 5.2% for the month ended 30 April 2023, reversing last month’s losses, and outperformed the Australian equities market by 3.4% (S&P/ASX 300 Total Return Index). The Portfolio underperformed the index. During the month the Reserve Bank of Australia (RBA) kept interest rates on hold. This was the first pause after nine consecutive increases.
Australian housing values appear to have bottomed out. After falling 9.1% between May 2022 and February 2023 CoreLogic’s national Home Value Index increased by half a percent in April, following a 0.6% lift in March.
The RBA interest rate pause, combined with recovering housing prices, made residential exposed A-REITs the top performers within the index, with Mirvac Group (MGR), Stockland (SGP) and Ingenia Communities all producing double digit total returns during the month.
The second-best performing sector was retail, whilst industrial lagged this month. Two residential exposed A-REITs provided quarterly updates. First, MGR reduced its FY23 EPS guidance by 5% due to delays in residential settlements and development profits being pushed into the next year. It also announced progress in capital initiatives by finding two new investors for its Build to Rent segment and partners for new office and industrial development.
File:March, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -6.8% for the month ended 31 March 2023, underperforming the Australian equities market by 6.6% (S&P/ASX 300 Total Return Index). During the month the Reserve Bank of Australia (RBA) raised interest rates by 0.25% to 3.60% but suggested a pause is likely near term. The failure of Silicon Valley Bank in the U.S., and the bail-out of Credit Suisse by UBS in Europe, highlighted the fragility of banks with weak capital structures and concentrated asset exposures. What this means for the broader market including REITs is likely tighter lending conditions and reduced credit availability for sectors with weak operating fundamentals such as office. Within A-REITs, industrial outperformed whilst retail was in line with the benchmark and the diversified, fund managers and office sectors underperformed.
Defensive, lower leveraged A-REITs generally outperformed. The best performing A-REITs included residential developer and diversified landlord Stockland (SGP) and self-storage REIT National Storage (NSR). Stockland likely benefitted from the RBA nearing a pause in hiking interest rates and early signs of a stabilising residential property market.
Potential green shoots include monthly positive price growth and robust auction clearance rates, albeit the supply of listings is low. The Portfolio’s underweight position detracted from relative performance. NSR completed a $325m equity raising constituting ~11% of shares on issue. NSR will use the proceeds to fund acquisitions, developments and de-lever the balance sheet which is well placed. Operationally, revenue growth continues to decelerate as expected from an exceptionally high level. FY23 earnings growth guidance of 8.5% was reaffirmed.
The Portfolio participated in the raising and the overweight position contributed to relative performance. A large and complex deal occurred this month involving property fund manager HMC Capital (HMC) and its externally managed HealthCo Healthcare & Wellness REIT (HCW). HMC and HCW both raised equity to fund the acquisition of a $1.2bn portfolio of 11 hospitals leased to Healthscope. The portfolio was acquired on a 5.1% cap rate.
File:February, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -0.4% for the month ended 28 February 2023, outperforming the Australian equities market by 2.1% (S&P/ASX 300 Total Return Index).
Within A-REITs, office outperformed whilst retail was in line with the benchmark and the diversified and industrial sectors underperformed.
The best performing A-REITs included National Storage REIT (NSR), diversified GPT Group (GPT) and childcare landlord Arena REIT (ARF). A key underperformer was land lease developer Ingenia Communities (INA) which downgraded earnings guidance due to delayed development settlements stemming from wet weather and labour shortages. The Portfolio’s overweight positions in NSR and ARF contributed to relative February was dominated by earnings releases. Key themes to emerge from A-REIT results include:
• Earnings guidance was largely reaffirmed, or previous wide ranges tightened, owing to greater visibility on higher debt costs. Broadly, passive A-REIT earnings growth will be negative in FY23 due to higher debt costs overwhelming rent growth, and many face further headwinds into FY24.
• Comparable rent growth is strongest for industrial, self-storage, childcare and A-REITs with a high proportion of inflationlinked lease escalators. • Balance sheet leverage remains moderate, with some exceptions. Interest rate hedging continues to be lifted, crystallising a higher cost of debt.
• Despite higher interest rates, appraised property devaluations were only modest at Dec-22 (single digit) given limited transactional evidence. Office was worst hit. Rent growth has partially offset mild capitalisation rate expansion, especially in industrial. Many A-REITs expect further devaluations to eventuate. Hence, some are targeting divestments to de-lever or fund developments.
• Capital partnering initiatives remain a focus.
• Retail was robust across malls and grocery-anchored shopping centres. Occupancy is high, leasing spreads are positive (grocery-anchored) or negative but improved (malls), tenant sales above 2019 levels and rent to sales ratios sustainable. Most expect tenant sales to slow over 2023 as higher interest rates cause consumption to slow. Vicinity Centres (VCX) was one of the few A-REITs to upgrade FY23 earnings guidance, which like some other retail landlords, was aided by the reversal of previous provisioning for COVID unpaid rent.
• Office remains challenged and the outlook cautious. Landlords lack pricing power as market vacancy is elevated (~13-15%) and tenant incentives high (~30%). A-REIT occupancy remains at 90-95%, but some like GPT saw this drop. Leasing activity has lifted but smaller tenants remain more active. Bifurcation remains a theme with newer, higher quality buildings with superior amenity outperforming. Physical office attendance remains at only ~60% of pre-COVID levels. Notably, several AREITs, including Dexus (DXS) and Mirvac (MGR), have deferred office developments due to soft market conditions. Both groups also continue to try to sell office buildings.
• Industrial operating conditions remain favourable. Market vacancy is very low (<1%), tenant demand strong and supply moderate. Consequently, A-REIT portfolios are essentially fully occupied with comparable rent growth of ~4% supported by leasing spreads on new lease deals of 10-20% above in place rents. Several A-REITs including Stockland (SGP), GPT and MGR continue to grow industrial exposure via development. • Residential development faces headwinds. Sales in masterplanned communities and apartment developments have fallen 40-50% from recent periods as buyers remain cautious in light of rising interest rates. Land lease volumes have been more resilient. Prices are expected to continue to fall as affordability remains stretched. Wet weather and labour shortages have delayed settlements into FY24 and defaults are expected to rise. Margins remain elevated given previous price growth exceeded construction cost inflation. • Self storage rent growth is decelerating to ~5-7% after an exceptionally strong few years. Rate growth is offsetting occupancy loss. Supply is moderate. NSR and Abacus Property Group (ABP) continue to grow via development. National Storage upgraded earnings growth guidance from at least 5% to at least 8.5%. ABP has proposed to spin off its $3bn storage portfolio to create an externally managed storage REIT. • Fund managers reported slowing transaction activity and equity inflows. This combined with potential property devaluations present headwinds to earnings growth.performance whilst positioning in GPT and INA detracted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-12.pdfJanuary, 2023
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 8.1% for the month ended 31 January 2023, outperforming the Australian equities market by 180 basis points (S&P/ASX 300 Total Return Index). The Portfolio underperformed the index (before fees). Rising confidence that inflationary pressures have peaked led bond yields lower over the month. This buoyed the more interest rate sensitive and higher growth REITs such as fund managers. Within A-REITs industrial, fund managers and diversified were the strongest performing sectors whilst office, retail and self-storage underperformed. Newsflow was light in January in the lead up to profit result announcements in February. Office landlord Dexus (DXS) provided an update on its acquisition of Collimate Capital’s (formerly AMP Capital) real estate and domestic infrastructure equity business.
A delay in conditions being met on AMP’s side has resulted in the parties agreeing that the amount Dexus will need to pay will reduce by ~10% to $225m and the earn out fee potential to AMP will be forfeited. The Portfolio’s underweight position in Dexus contributed to relative performance. Property fund manager Charter Hall (CHC) saw ~20% redemptions for one of its smaller office funds which had a 5 year liquidity event. Funds will be returned to investors progressively over 2023 as assets are sold. There have been increasing signs of equity flows into unlisted real estate funds pausing or reversing as interest rates have risen and listed REITs trade at deep discounts to private market real estate valuations. The Portfolio has a neutral position in CHC. U.S. industrial REIT and portfolio holding Prologis (PLD) released a decent result with a conservative 2023 earnings growth guidance of 5.6%.
Prologis suggested fundamentals remain healthy and expects 8-9% comparable rent growth, though occupancy is assumed to dip owing to rising supply deliveries. Of particular relevance to Australian industrial peer Goodman Group (GMG) which has significant development funds management earnings, Prologis highlighted that 2023 development starts will be 40% lower compared to last year with lower margins, as industrial values in the U.S. and Europe have fallen 7-16%. Interestingly, PLD reported that fund redemption requests have been modest to date.
The Portfolio’s underweight position in Goodman Group detracted from relative performance whilst the Prologis position contributed marginally. With respect to management changes, retail landlord Vicinity Centres (VCX) appointed its former Chief Operating Officer Peter Huddle as CEO. Mr Huddle is well-credentialled and this move was expected. Moving to transactions, childcare and social infrastructure landlord Charter Hall Social Infrastructure REIT (CQE) divested its ~3.5% stake in listed childcare landlord Arena REIT (ARF). CQE recycled the proceeds into a half stake in a Sydney office building located in a healthcare and medical research precinct and therefore tenanted by such tenants. The stake was acquired at a 4.8% cap rate and equates to ~$11,300/sqm.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-11.pdfDecember, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -4.0% for the month ended 31 December 2022, underperforming the Australian equities market by 0.70% (S&P/ASX 300 Total Return Index). The Portfolio outperformed the index (before fees).
The Reserve Bank of Australia (RBA) raised the cash rate for the eighth consecutive month, with a lift of 0.25% to 3.10%, the highest level since 2012. With inflation remaining elevated. the RBA signalled further hikes to come. Australian 3rd quarter GDP slowed by more than expected but the labour market remains resilient with unemployment holding at 3.4%, the equal lowest since 1974. Within A-REITs, retail, self-storage, pubs and childcare were the strongest performing sectors whilst fund managers and industrial underperformed. Several A-REITs released preliminary December 2022 independent appraisal property valuations.
The devaluations reported were relatively modest and fell 1-2% on average. The steepest devaluations were reported by office and petrol station landlords. Some retail, industrial and childcare landlords reported positive property valuation uplifts. Whilst appraisal capitalisation rates widened, pressured by higher interest rates, rent growth provided some offset to support valuations. Transactional activity has also slowed thereby limiting comparable evidence for valuers to utilise for benchmarking. It is likely that further property devaluations will eventuate in CY2023.
Moving to transactions, office landlord Dexus (DXS) progressed its targeted ~$1bn divestment program with the sale of six assets for $483m. Four of the six assets, which included both office and industrial, sold at an aggregated ~10% discount to book value which implies an estimated ~5.5% cap rate. The other two assets sold sit in DXS’ trading business and will therefore contribute to FY23 trading profits. The Portfolio’s underweight position to DXS detracted from relative performance. Whilst most A-REITs re-affirmed FY23 earnings guidance in recent months, office and industrial landlord Growthpoint (GOZ) upgraded its previous earnings guidance to -6% from -8% due to some recent office leasing success. However, earnings continue to reduce due to higher debt costs. Childcare landlord Arena (ARF) re-affirmed FY23 dividend growth guidance of +5%. ARF highlighted that childcare operator tenants were performing well with occupancy the highest in six years and daily fees growing. However, development margins remain under pressure due to higher construction costs.
The Portfolio’s overweight position contributed to relative performance. Turning to merger and acquisition activity, residential and retirement landlord Aspen (APZ) acquired a 13.7% stake in retirement group Eureka (EGH) whilst 360 Capital built a 14% stake in pub landlord Hotel Property Investments (HPI). The Portfolio’s overweight positions in APZ and HPI contributed to relative performance. Negative offshore news weighed on the share prices of local A-REITs which contain substantial third-party property fund management platforms such as Charter Hall (CHC). During the month, in response to elevated investor redemptions, U.S. based private equity behemoth Blackstone restricted investor redemptions in its $145bn U.S. open-ended unlisted property fund, which was soon similarly followed by a number of other U.S. unlisted funds including Starwood’s unlisted property fund. The Portfolio’s underweight position in property fund managers contributed to relative performance.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-10.pdfNovember, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 5.8% for the month ended 30 November 2022, underperforming the Australian equities market by 70bps (S&P/ASX 300 Total Return Index). The Portfolio underperformed the index (before fees). The Reserve Bank of Australia raised the cash rate for the seventh consecutive month, this time by 0.25% to 2.85%, with further hikes expected.
Positively, Australian headline inflation slowed to 6.9%, below expectations. The labour market remains strong with the unemployment rate ticking down to 3.4%, the lowest level in almost 50 years. Within A-REITs, lower bond yields supported fund managers and residential developers to outperform, whilst retail, office and self-storage underperformed.
In November there was a continuation of A-REITs reporting quarterly updates. Key themes include:
• Earnings guidance was re-affirmed.
• Retail metrics impressed with high occupancy, improved, albeit negative, leasing spreads and retailer sales above prepandemic levels.
• Industrial market rent growth remains strong owing to robust tenant demand and low vacancy.
• Office remains challenging with pressure on occupancy eroding landlord pricing power.
October, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 9.9% for the month ended 31 October 2022, outperforming the Australian equities market by 390bps (S&P/ASX 300 Total Return Index). The Reserve Bank of Australia surprised as it raised the cash rate by 0.25% to 2.6%, lower than market expectations for a 0.5% lift. Australian headline inflation of 7.3% is the highest since 1990 and further interest rate hikes are anticipated. Within A-REITs, self-storage, childcare, retail and diversified sectors outperformed whilst industrial and office underperformed.
Key news related to A-REIT quarterly updates and some management changes. Key themes from A-REIT quarterly updates include:
• Earnings guidance was re-affirmed.
• Retail metrics impressed with high occupancy, improved albeit negative leasing spreads and retailer sales above pre-pandemic levels.
• Industrial market rent growth remains strong owing to robust tenant demand and low vacancy.
• Office occupancy held or improved but tenant incentives remain elevated at 30-35%.
• Residential land and apartment sales have fallen dramatically.
Retail landlord Vicinity Centres (VCX) reported higher occupancy and improved quarterly leasing spreads (ie: new vs. old rent) of -0.4% from -4.8% at Jun-22. Footfall remains 12% below pre-pandemic levels but retailer sales are higher. In addition, VCX announced its CEO will retire in June 2023 and a replacement search is underway. The Portfolio’s overweight retail positioning contributed to relative performance.
Residential developers and diversified landlords Mirvac (MGR) and Stockland (SGP) both highlighted falls in residential land lot /apartment sales of 27% and 45% respectively from the previous quarter. For Stockland this was the lowest quarter of sales in more than a decade. Sales are expected to remain below trend until the interest rate outlook stabilises. Mirvac pointed to wet weather and labour shortages as risks to achieving settlement guidance. Mirvac also announced that its Head of Commercial Property would succeed its outgoing CEO.
The Portfolio remains underweight both companies. Office landlord Dexus (DXS) reported stable occupancy at 95.2% and elevated 30% incentives. There was some improvement in leasing activity, mainly with small tenants seeking to upgrade to better quality space. The Portfolio’s underweight position contributed to relative performance. Industrial landlord Centuria Industrial REIT (CIP) reported improved occupancy and strong leasing spreads of 18%. Similarly, Stockland also reported 12% spreads within its industrial portfolio but Mirvac’s were only 5%. The Portfolio’s industrial underweight position contributed to relative performance. Self-storage landlord National Storage REIT (NSR) reported quarterly revenue growth of 1.2% with 2% rental growth offsetting occupancy loss. The Portfolio’s overweight position contributed to relative performance.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-8.pdfSeptember, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -13.6% for the month ended 30 September 2022, underperforming the Australian equities market by 730bps (S&P/ASX 300 Total Return Index). Globally, inflationary pressures persisted and bond yields rose as the U.S. Federal Reserve raised interest rates by 0.75% and its projections implied a higher terminal rate.
Locally, the Reserve Bank of Australia raised the cash rate by 0.5% for the fourth month in a row to 2.35%, the highest level since 2015, with further increases expected. Within A-REITs, diversified, self-storage, office and retail outperformed whilst industrial, fund managers and childcare underperformed. In general terms, A-REITs with lower leverage and stronger inflation protection characteristics outperformed whilst growth-oriented A-REITs trading on higher valuation multiples underperformed. After a busy financial results season in August there was limited stock specific news in September. We have previously written about office landlord Dexus’ (DXS) acquisition of Collimate Capital’s (formerly AMP Capital) domestic real estate and infrastructure funds management platform. In a further blow to DXS, this month the investors in the $2.7bn AMP Retail Trust (ACRT) voted to transfer management of the fund to diversified landlord GPT. This is the third mandate the platform has lost in recent months with Collimate’s funds under management down from ~$28bn to ~$18bn. This loss reduces the price DXS will ultimately pay. Underweight positions in Dexus and GPT detracted from relative performance. Industrial developer and fund manager Goodman Group (GMG) underperformed this month. This may have partially stemmed from global transport behemoth FedEx reporting declining volumes due to worsening macroeconomic conditions and withdrawing 2023 earnings guidance. This bodes negatively for demand for industrial warehouses.
The portfolio’s underweight position in GMG contributed to relative performance. Rising interest rates in recent months has caused real estate transactional activity to fall. Diversified A-REIT Mirvac (MGR) had flagged more than $1bn planned divestments in FY23. This month MGR sold a Perth office building for $223m, equating to ~$7,800/sqm and representing a ~8% premium to headline book value. However, the effective price may be below book value given MGR is providing rental guarantees over vacant space and the 7.25% capitalisation rate is 0.5% wider than the appraisal cap rate.
The portfolio’s overweight position contributed to relative performance. Given the equity market volatility, there have been few A-REIT equity raisings in 2022. One exception this month was diversified A-REIT Aspen Group (APZ) which owns a portfolio of residential, holiday park and retirement assets. APZ raised $36m of equity constituting ~15% of issued capital. The proceeds will initially be used to reduce debt and better position APZ to take advantage of acquisition opportunities. The portfolio’s overweight position contributed to relative performance.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-7.pdfAugust, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -3.6% for the month ended 31 August 2022, underperforming the Australian equities market by 480bps (S&P/ASX 300 Total Return Index). Globally, U.S. central bank commentary caused bond yields to rise. Locally, the Reserve Bank of Australia raised the cash rate again by 0.5% to 1.85%, the highest level since 2016, with further increases expected. Within A-REITs, retail, diversified and self-storage outperformed whilst industrial and office underperformed. August was marked by financial results season. Key A-REIT themes to emerge include:
Earnings outlook negatively impacted by higher finance costs:
• 2023 earnings growth will be negative for several A-REITs largely as a consequence of higher debt finance costs associated with floating interest rate debt.
• Many A-REITs implemented a reactive plan to increase interest rate hedging for coming periods.
July, 2022
Key news included earnings updates and property transactions. With respect to earnings updates, diversified REIT Stockland (SGP) announced the completion of the sale of its retirement business and upgraded its FY22 earnings guidance to the top end of its target range. The divestment of the retirement business will return SGP to a tax paying position as tax losses are utilised, which is expected to be a 5-10% headwind to FY23 earnings. National Storage REIT (NSR) upgraded FY22 earnings guidance by 5% on the back of strong leasing outcomes evidenced by 21% growth in revenue per available metre of space. This growth was driven by a combination of higher occupancy and rental rates. The upgraded earnings guidance reflects 24% growth on FY21.
Land lease community developer Ingenia (INA) announced it would meet the lower end of its previously announced FY22 earnings guidance range being 4-9% below FY21. Home settle ments have been delayed due to bad weather and supply chain disruptions. INA reaffirmed its FY22-24 settlement target of 1,800-2,000 homes
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-5.pdfMay, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -8.6% for the month ended 31 May 2022, underperforming the Australian equities market by 5.8% (S&P/ASX 300 Total Return Index). In response to inflationary pressures the Reserve Bank of Australia raised the cash rate by 0.25% and for the first time since 2010, with further policy tightening expected over 2022. Similarly, the U.S. Federal Reserve continued its tightening with a 0.50% increase, the largest since 2000. The Australian Federal election resulted in a change of Government as the Labour party emerged victorious, though the implications for our sector appear limited, with the exception of childcare which should benefit from a more generous policy.
Within A-REITs, retail and office outperformed, whilst diversified, property fund managers, residential and industrial lagged. Key news included quarterly updates and transactions.
Starting with quarterly updates, industrial developer and fund manager Goodman Group (GMG) upgraded FY22 earnings growth guidance to 23% from 20%. GMG highlighted strong operating fundamentals and continued growth in its development pipeline to $13.4bn at attractive margins.
Weighing on global industrial REIT sentiment was e-commerce giant, and GMG’s largest tenant, Amazon flagging its intention to sublet excess U.S. warehouse capacity, after having doubled its footprint in recent years.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-4.pdfApril, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 0.7% for the month ended 30 April 2022, outperforming the Australian equities market by 1.5% (S&P/ASX 300 Total Return Index). Globally, bond yields rose in April as higher inflationary pressures persisted, with Australia recording +5.1% headline inflation, the highest in more than 20 years. Consequently, the Reserve Bank of Australia (RBA) is expected to raise interest rates multiple times over 2022. Within A-REITs, industrial and office outperformed, whilst retail, self-storage, residential and diversified lagged. Key news included quarterly updates and transactions.
Diversified REITs Stockland (SGP) and Mirvac (MGR) issued quarterly updates in which they reaffirmed FY22 guidance for ~7% earnings growth. Both highlighted residential lot settlement delays because of supply chain disruptions and bad weather. Due to these same issues land lease community developer Ingenia (INA) downgraded its FY22 earnings growth guidance range to -8-4% from +3-6%, but maintained its medium-term settlement guidance to 2024
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-3.pdfMarch, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 1.4% for the month ended 31 March 2022, underperforming the Australian equities market by 5.5% (S&P/ASX 300 Total Return Index). The market continues to look at the implications of Russia’s invasion of the Ukraine, including the impact on various commodities. The U.S. Federal Reserve raised interest rates by 0.25% with rhetoric suggesting a steeper path forward as inflationary pressures persist but the impact to global growth remains unclear. In Australia the 10-year government bond yield increased by 70 basis points.
Within A-REITs, industrial and diversified outperformed, whilst retail and office lagged. It was a quiet month for A-REIT news. Key events included an equity raise and M&A related activity. Office and self-storage landlord Abacus Property Group (ABP) raised $215m of equity, amounting to ~7% of issued capital, to reduce leverage, replenish investment capacity and fund the self-storage development pipeline. Pricing reflected a 5% discount to last close and 9% discount to Net Tangible Assets. Operationally, strong self-storage fundamentals were said to have continued into 1Q22.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-2.pdfFebruary, 2022
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 1.5% for the month ended 28 February 2022, underperforming the Australian equities market by 0.6% (S&P/ASX 300 Total Return Index). Geopolitical tensions between Russia and Ukraine intensified throughout February, raising uncertainty and creating upward pressure on commodity prices such as oil and gold. In Australia bond yields also rose as market expectations for interest rates were brought forward.
Within A-REITs, retail and office outperformed, whilst diversified and industrial lagged. Key themes to emerge from earnings season include: • The December 2021 half was impacted by COVID, most notably in retail via lower rent collections. • Sector themes: more office and industrial development, more capital partnering initiatives, rising maintenance capex and tenant incentives, increased focus on interest rate hedging. • Retail: mall occupancy remains resilient, leasing spreads are less negative, shoppers are more purposeful with visitation down but Christmas sales above 2019 levels. CBD retail is lagging. Grocery anchored retail remains resilient. Scentre Group (SCG) issued maiden 2022 dividend growth guidance of 5%. • Office: vacancy and tenant incentives remain elevated though appear to be stabilising, uncertainty remains over tenant space requirements and higher quality buildings are outperforming. Numerous A-REITs intend to develop more supply. Dexus (DXS) reaffirmed 2% dividend growth guidance.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-1-1.pdfJanuary, 2022
The S&P/ASX 300 AREIT Total Return Index produced a total return of -9.4% for the month ended 31 January 2022, underperforming the Australian equities market by 2.9% (S&P/ASX 300 Total Return Index). Global equity markets came under pressure as the U.S. Federal Reserve messaged it would increase interest rates in response to elevated inflation and favourable economic data. Bond yields rose and higher multiple growth-oriented companies underperformed. Within real estate, property fund managers and industrial REITs underperformed, whilst retail and office outperformed.
Key events during the month included merger and acquisition (M&A) activity, property transactions, management changes and company updates.
Starting with M&A, property fund manager Charter Hall (CHC) partnered with Dutch pension fund PGGM to bid to acquire ASX-listed office and industrial REIT Irongate (IAP). The bid implies a ~5.0% cap rate and represents a 21% premium to the close price and 23% premium to Net Tangible Assets. The partnership has agreed to a call option to acquire major shareholder 360 Capital’s 19.9% stake in IAP. The agreement enables 360 Capital to acquire certain IAP properties.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report-1.pdfDecember, 2021
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 5.2% for the month ended 31 December 2021, outperforming the Australian equities market by 2.6% (S&P/ASX 300 Total Return Index). Industrial, childcare and storage REITs outperformed whilst retail, office, residential and diversified underperformed. Key events for the REIT sector during the month included strong property portfolio revaluations, earnings guidance upgrades and in the broader real estate market, meaningful transactional activity.
Starting with AREIT property valuations: Revaluations announced during the month were particularly strong for childcare, industrial, grocery anchored shopping centres, large format retail and self-storage. In these sectors revaluations ranged from high single digit to low double digit growth. Large malls and office buildings were the notable laggards. With respect to earnings guidance upgrades, the most notable was from property fund manager, Charter Hall Group (CHC). After upgrading 2022 guidance in November, CHC again upgraded in December owing to growth in funds under management and positive revaluations crystallising performance fees. The new guidance represents an extraordinary 72% earnings growth over 2021. Separately, CHC surprised the market by acquiring a 50% interest in Australian based equity fund manager Paradice Investment Management (PIM) for $207m, equating to a P/E multiple of 10x. The acquisition represents a strategic shift outside CHC’s core real estate business. The deal has a positive, but relatively small, financial impact for CHC and the rationale includes cross-selling new and existing products across the platforms.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/Resolution-Capital-Core-Plus-Property-Securities-Fund-Series-II-Monthly-Report.pdfNovember, 2021
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 4.0% for the month ended 30 November 2021, outperforming the Australian equities market by 4.5% (S&P/ASX 300 Total Return Index). Industrial and storage REITs outperformed whilst retail, office, residential and diversified underperformed. Residential exposed REITs were impacted by various banks raising fixed rate home loans and expectations that the Reserve Bank might start tightening monetary policy as soon as next year which might adversely impact house prices. Starting with quarterly updates, retail landlords Scentre Group (SCG) and Vicinity Centres (VCX) noted that occupancy held broadly flat and whilst rent collection had been negatively impacted by lockdowns, visitation rebounded strongly as restrictions lifted. VCX noted that leasing spreads were still -7% but significantly improved from FY21. SCG also reaffirmed its dividend guidance.
In its update diversified group GPT noted that office vacancy remains elevated, but improved over the quarter with leasing success. Industrial occupancy improved and this part of the portfolio continues to grow via acquisitions and developments. Earnings guidance remains withdrawn as uncertainty regarding retail rent collection persists. Diversified group Stockland’s (SGP) strategy day with its new CEO contained few surprises. Key strategic pillars include reshaping capital allocation to reduce retail and retirement exposure whilst upweighting residential, land lease, industrial and office. Further diversification into apartments for sale and potentially multi-family was signalled. Increasing capital partnering to generate recurring management income streams is also a focus.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/2111_PN27-A_UP_Factsheet.pdfOctober, 2021
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 0.6% for the month ended 31 October 2021, outperforming the Australian equities market by 0.5% (S&P/ASX 300 Total Return Index). This was despite a sharp rise in bond yields due to building inflationary pressures.
Retail and industrial REITs outperformed whilst office and diversified underperformed. Starting with September quarterly updates, most A-REITs re-affirmed earnings guidance, while grocery-anchored retail landlords displayed resilience and issued maiden guidance given greater clarity on the resumption of trading subsequent to lockdowns in VIC and NSW.
Key quarterly takeaways included residential sales momentum remaining positive, retail rent collection falling due to lockdowns, office occupancy was flat to down whilst self-storage occupancy rose. Notably, property fund manager Charter Hall (CHC) upgraded FY22 earnings growth guidance by 11% to 36%. Key drivers included transactional activity, growth in funds under management and positive revaluations crystallising performance fees.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/2110_PN27-A_UP_Factsheet.pdfSeptember, 2021
The S&P/ASX 300 A-REIT Total Return Index produced a total return of -1.9% for the month ended 30 September 2021, performing in line with the Australian equities market (S&P/ASX 300 Total Return Index). Rising bond yields and a rotation out of “growth” stocks into “value” names saw retail and office REITs outperform diversified and industrial during the month.
This month was dominated by M&A activity, equity raisings and Initial Public Offerings (IPO). Rebalancing of the globally relevant FTSE EPRA NAREIT real estate index saw eleven smaller A-REITs being added to the index. This led to some A-REITs capitalising on share price strength and raising equity to fund acquisitions.
Starting with M&A, pub landlord ALE Property Group (LEP) received a joint takeover bid from Charter Hall Long WALE REIT (CLW) and another Charter Hall (CHC) managed fund valuing the enterprise value at $1.68bn. The deal implied a price of $5.88 per share comprised of cash and CLW scrip. The price represented a 25% premium to last close, 43% premium to Net Tangible Assets, a 3.5% initial yield and 4.8% reversionary yield given the portfolio is 37% under-rented. The under-renting can only be crystallised in 2028 via an open market rent review.
Shifting to equity raisings, over $1bn was issued by five A-REITs, the bulk of which was for industrial acquisitions but also office, non-discretionary retail, and pubs.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/2109_PN27-A_UP_Factsheet.pdfAugust, 2021
The S&P/ASX 300 A-REIT Total Return Index produced a total return of 6.4% for the month ended 31 August 2021, outperforming the Australian equities market (S&P/ASX 300 Accumulation Index) by 3.8%. Retail and diversified REITs outperformed office and industrial during the month.
This month was dominated by earnings results. Overall earnings results were positive, contributing to the A-REIT index outperformance over the month. The majority of A-REITs provided FY22 earnings guidance, barring most retail exposed landlords for whom the near-term outlook is uncertain given lockdown-induced tenant rent relief.
Property fund managers have the strongest outlook for earnings growth, driven by transactional activity, development completions and performance fees. Charter Hall (CHC) has grown assets under management ~30% p.a. over the last three years and is guiding to FY22 earnings growth of 23%.
Industrial operating fundamentals remain strong, particularly in in-fill markets, and many A-REITs are increasing industrial exposure. COVID-19 has accelerated secular tailwinds with strong e-commerce activity driving tenant demand. Goodman Group (GMG) reported FY21 EPS growth of 14%, boosted by development profits, and provided FY22 earnings growth guidance of 10%. The development workbook has expanded by ~60% y/y to $10.6bn.
Office operating metrics are deteriorating with lower occupancy and elevated incentives resulting in negative effective rental growth. Few tenants are taking more space and obsolescence risk is rising. Despite this, pricing in the capital markets remains strong. Whilst several A-REITs, such as Dexus (DXS), are marketing older assets for sale many A-REITs, including GPT, Mirvac (MGR) and Stockland (SGP), intend to increase development. DXS reported FY21 underlying FFO growth of -4.1% but is guiding to FY22 dividend growth of 2%.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/2108_PN27-A_UP_Factsheet.pdfJuly, 2021
The S&P/ASX 300 A-REIT Accumulation Index produced a total return of 0.5% for the month ended 31 July 2021, underperforming the Australian equities market (S&P/ASX 300 Accumulation Index) by 0.6%. A-REIT sub-sector performance saw storage, industrial and fund managers outperform whilst diversified, retail and office landlords underperformed in the midst of renewed lockdowns.Monthly A-REIT news spanned transactions, revaluations, equity issuance, management changes and both guidance upgrades and withdrawals due to extended COVID restrictions.
Starting with the latter, diversified landlord GPT withdrew FFO and dividend guidance given uncertainty stemming from extended lockdowns. GPT previously guided to 8% FY21 FFO per share growth for calendar year 2021. Positively, land lease community developer and owner Ingenia (INA) upgraded FY21 EBIT growth guidance to 30% from 15-20% and underlying EPS to 5% from being negative. The upgrade was driven by strong operational performance with more development settlements and expanding margins.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/2107_PN25-A_UP_Factsheet-1.pdfJune, 2021
The S&P/ASX 300 A-REIT Accumulation Index produced a total return of 5.6% for the month ended 30 June 2021, outperforming the Australian equities market (S&P/ASX 300 Accumulation Index) by 3.3%. A-REIT sub-sector performance saw industrial and diversified companies outperform, whilst office, retail and selfstorage companies underperformed. Monthly A-REIT news spanned revaluations, operational updates, transactions and equity issuance. Starting with revaluations, a raft of REITs announced Jun-21 draft revaluations. Broadly speaking, revaluations rose mid-single digits across the sector over the half year. Industrial values rose the strongest, followed by long WALE assets including service stations, pubs and social infrastructure. Retail revaluations were mixed with large malls and CBD assets falling, whilst more resilient convenience-oriented neighbourhood malls and large format retail posted 5- 10% gains. Office values rose low single digits, with longer WALE and suburban/fringe location offices outperforming.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/2106_PN27-A_UP_Factsheet.pdfMay, 2021
The S&P/ASX 300 A-REIT Accumulation Index produced a total return of 1.8% for the month ended 31May 2021, underperforming the Australian equities market (S&P/ASX 300 Accumulation Index) by 0.5%. A-REIT sub-sector performance saw industrial and office names outperform, whilst retail landlords, such as Vicinity Centres (VCX), underperformed.
Monthly news spanned quarterly updates, earnings upgrades, equity issuance and transactional activity. Starting with quarterly updates, industrial landlord Goodman Group (GMG) reaffirmed FY21 earnings growth guidance of 12% and continues to point to solid operating conditions, strong investor demand and land intensification opportunities in its urban infill markets. Consequently, the development pipeline has expanded to $9.6bn and will likely exceed $10bn by mid-2021.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/2105_PN27-A_UP_Factsheet_May-2021.pdfJanuary, 2021
The S&P/ASX 300 A-REIT Accumulation Index produced a total return of -4.1% for the month ended 31 January 2021, underperforming the Australian equities market (S&P/ASX 300 Accumulation Index) by 4.4%. Within the A-REIT sector this month industrial landlords underperformed, followed by office, while retail was more resilient. During the month diversified REIT Stockland (SGP) performed strongly, reversing the underperformance of the previous month. The Housing Industry Association (HIA) reported that December was the second strongest month of new home sales in the 20 years of their survey, only exceeded by March 2001.
In December new home sales nearly doubled compared to the number of sales recorded in November. Sales during the December 2020 quarter were 48.7% higher than the September 2020 quarter. In addition to strong residential sales volumes, house price appreciation forecasts by commentators continue to increase. Both factors are positive for Stockland’s residential development segment. For the remainder of the A-REITs, there was relatively little company specific news in January, ahead of results in February.
Shopping centre REIT Vicinity Centres (VCX) announced a net valuation decline of 4% or AU$570m for the six-month period ending 31 December 2020 for its 60 directly owned retail properties. This follows an 11% devaluation in the previous six-month period. Income degradation and assumptions including probable higher incentives drove the bulk of the devaluation, along with minimal tourism and low office occupancy. Centuria Office REIT (COF) completed external valuations on half its investment portfolio, reporting a slight 0.8% reduction in valuations over the six months to 31 December. During the month Dexus (DXS) continued its on market share buyback. The company is currently the only A-REIT actively buying back shares. European listed retail REIT Unibail-Rodamco-Westfield (URW) completed the disposal of the SHiFT office building in Paris for €620m. The proceeds will be used to reduce leverage. The stock performed relatively strongly during the month, largely driven by short covering at the end of the month, following news of retail investors targeting heavily shorted stocks.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/RERCPP_factsheet_January-2021.pdfasset_class: Property and Infrastructure
asset_category: Australian Listed Property
peer_benchmark: Property - Australian Listed Property Index
broad_market_index: ASX Index 200 A-REIT Index
manager_contact_details: Array
ticker: IOF0044AU
release_schedule: Monthly
commentary_block: Array
factsheet_url:
https://rescap.com/coreplusfund/seriesii
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fund_features:
The Core Plus Fund II will invest in a diversified portfolio of Australian Real Estate Investment Trusts (‘A-REITs), in addition it may invest up to 20% of the Fund in real estate securities listed offshore. The offshore component draws off our highest conviction ideas from our team of highly experienced global portfolio managers. Domestic and global stocks are evaluated on a consistent basis, with the decision to allocate to global stocks based on the assessment of the relative risk and return of the stocks in each market. The Core Plus Fund II’s investment objective is to exceed the total returns of the Benchmark after fees on a rolling 3 year basis. In doing so, the Core Plus Fund II aims to provide Investors with a level of distributable income combined with the potential for long term capital growth sourced from real estate based revenue streams. Resolution Capital intends to hedge the capital component of the Fund.
structure: Managed Fund