September, 2023
The Fund provided a total return of negative 1.84% (after fees) for the September 2023 quarter. Performance was impacted by a decline in the listed A-REIT investments held, which account for c. 33% of the Fund's total assets as of 30 September 2023. Additionally, the updated independent valuation of the Fund's direct property asset known as 91-97 Woodlands Drive, Braeside, VIC resulted in a write down from the prior book value which also contributed to this return. Positively, the Fund's investment in alternative real estate sectors, more specifically social infrastructure, continue to provide robust performance with Healthcare Property, Specialist Disability Accommodation and Student Housing all performing well. These markets remain well supported by structural tailwinds be it demographic changes, ongoing government support or continuing international student demand for tertiary education in Australia.
Ongoing uncertainty surrounding the extent and length of current interest rate levels, culminating in a substantial rise in the Australian 10-Year government bond yield, weighed heavily on the A-REIT market over the quarter. Listed property investors remain cautious with sentiment highly sensitive to negative news headlines, although value appears to be emerging. As of 30 September 2023, the A-REIT sector (A-REIT Index) is trading at a c.5.0% FY24 estimated dividend per share yield and a substantial c.-25% discount to last stated Net Tangible Assets (NTA) which excludes Charter Hall Group, Centuria Capital Group, HMC Capital and Goodman Group from the equation as these have a large portion of non-rental earnings/assets (i.e. development and funds management businesses) and their market pricing can deviate substantially from NTA backing.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-2-1.pdfJune, 2023
The Fund provided a total return of positive 0.21% (after fees) for the June 2023 quarter. Performance was driven by returns from the Fund's investment in the Australian Unity Student Accommodation Fund which experienced a sizeable valuation uplift. Positive returns from the Fund's Australian Real Estate Investment Trust (A-REIT) holdings have also supported investor returns this quarter. These gains were offset by negative valuation movements from a number of the Fund's direct property assets following the June 2023, revaluation cycle.
As of 30 June 2023, the A-REIT sector is trading at a c.4.5% FY23 estimated dividend per share yield and a substantial c.-18% discount to last stated Net Tangible Assets (NTA) which excludes Charter Hall Group, Centuria Capital Group, HMC Capital and Goodman Group from the equation as these have a large portion of non-rental earnings/assets (i.e. development and funds management businesses) and their market pricing can deviate substantially from NTA backing.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-7.pdfMarch, 2023
The Fund provided a total return of positive 0.19% (after fees) for the March 2023 quarter. Performance was driven by returns from the Fund's alternative property sector unlisted investment holdings, which reported an average performance for the quarter of 1.14%. These gains were partially offset by movements in listed property investments.
Despite widespread challenges in real estate markets, alternative property sectors such as healthcare, disability accommodation, student accommodation and childcare have continued to perform well. These markets are less correlated to wider macro-economic uncertainty than more traditional property sectors, supported by overarching megatrends such as an aging population and increasing incidence of chronic disease while also benefiting from growing levels of government financial support. Additionally, the student accommodation sector in Australia continues to benefit from a substantial rebound in international student numbers with 2022 representing the biggest annual uplift in student visa holders.
This strong tenant demand has led to high occupancy levels and increasing revenue rates which have been seen at the Fund's student accommodation investment in Herston, Queensland which experienced a valuation uplift of c. 28% over the last 12 months.
Notwithstanding a strong start to the year, the Australian Real Estate Investment Trust (A-REIT) sector remains sensitive to both sector-specific and broader financial market conditions. After a strong return in January 2023, the A-REIT sector fell over February and March to finish effectively flat over the quarter. As of 31 March 2023, the A-REIT sector is trading at a c.4.6% FY23 estimated dividend per share yield and a substantial c.-16% discount to last stated Net Tangible Assets (NTA) which excludes Charter Hall Group, Centuria Capital Group, HomeCo (HMC Capital) and Goodman Group from the equation as these have a large portion of non-rental earnings/assets (i.e. development and funds management businesses) and their market pricing can deviate substantially from NTA backing.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-1-2.pdfDecember, 2022
The Fund provided a total return of positive 3.74% (after fees) for the December 2022 quarter. Performance was driven by increases in the value of the Fund's underlying Australian Real Estate Investment Trust (A-REIT) holdings as well as the strong revaluation gain made by the Unlisted Managed Fund Elanor Warrawong Plaza Fund. These gains were partially offset by a minor valuation decrease of the directly held asset known as 70 Light Square, Adelaide following receipt of an updated annual independent valuation. Following a significant sell-down over the calendar year, the AREIT market rebounded over the final quarter of 2022, where the sector as measured S&P/ASX 200 Property Accumulation index comfortably outperformed the broader S&P/ASX 200 Index. During 2022, A-REITs have suffered as substantial increases in interest rates have weighed on investor sentiment. Uncertainty remains prevalent, however, with December seeing some of the early gains for the quarter given back following more hawkish commentary on further rate rises from the Reserve Bank of Australia (RBA). As of 31 December 2022, the A-REIT sector is trading at a c.4.5% Fiscal Year 2023 (FY23) estimated dividend per share yield and a substantial c.-17% discount to last stated Net Tangible Assets (NTA) which excludes Charter Hall Group, Centuria Capital Group, HomeCo (HMC Capital) and Goodman Group from the equation as these have a large portion of non-rental earnings/assets (i.e. development and funds management businesses) and their market pricing can deviate substantially from NTA backing.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-6.pdfSeptember, 2022
The Fund provided a total return of negative 1.48% (after fees) for the September 2022 quarter. While returns from both the direct property and unlisted investment segments continue to remain as a whole positive, the overall performance of the Fund has been impacted by a decline in the listed A-REIT investments held, which account for c. 33% of the Fund's total assets as of 30 September 2022. Against a backdrop of monthly interest rate rises, this calendar year the A-REIT sector has sold off approximately 28%. Listed market confidence is low as a result of recent interest rate moves which have roiled financial markets. The A-REIT sector is trading at a 5% FY23 estimated dividend per share yield and 10% premium to NTA. Or stated another way, a 27% discount to NTA if we focus on the more traditional A-REITs by excluding larger fund managers, Goodman Group and Charter Hall from the equation, whose revenues are driven by performance fees, funds management fees and development fees. The impact from rising interest rates has been well-documented and should be less of a surprise to listed property investors going forward. In response, this financial year the Fund's exposure to A-REITs has been upweighted.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-5.pdfJune, 2022
For the quarter ending 30 June 2022, the Australian listed property sector, as measured by the S&P/ASX 200 A-REIT Accumulation Index (A-REIT Index), returned negative 17.7% underperforming the broader equities market as measured by the S&P/ASX 200 Accumulation Index which returned negative 11.9%, as listed markets reacted to the changing economic back drop.
Over the year to 30 June 2022, A-REITs returned negative 12.3% compared to the broader market return of negative 6.5%. Despite recording a negative return over the quarter, Retail AREITs were the most resilient stocks, achieving a positive 3.0% return over the year. Alternative sectors such as Healthcare / Childcare (ASX: ARF) and Self-Storage (ASX: NSR) also performed positively over the last 12 months but like all sectors, A-REITs returns have been impacted. During the June quarter office AREITs were down negative 15.8%, followed by Diversified A-REITs which fell negative 20.4% while Industrial stocks (heavily influenced by global developer and fund manager, Goodman Group - GMG) were down negative 21.6%. The best performing property stocks for the quarter were BWP Trust (BWP) and Vicinity Centres (VCX) returning negative 1.2% and negative 1.6% respectively. The laggards for the period were fund managers, Centuria Capital (CNI) returning a negative 35.3% return and Home Consortium (HMC) which returned negative 34.6% for the quarter, continuing the prior falls of several fund manager focused stock falls within the A-REIT Index.
Five of the Fund's directly held property assets were independently valued as at 30 June 2022, with a total net increase of $2.79 million or 5.63% from the properties' book value immediately prior to valuation.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-4.pdfMarch, 2022
For the quarter ending 31 March 2022, the Australian listed property sector, as measured by the S&PASX 200 A-REIT Accumulation Index (A-REIT Index), returned negative 7.1% underperforming the broader equities market as measured by the S&P/ASX 200 Accumulation Index which returned 2.2%. Over the past twelve months, the A-REITs returned 17.7% outperforming the broader equities market which returned 15.0%.
Over the March 2022 quarter, Retail A-REITs led the market (AREIT Index) with returns of 1.3%, albeit this was somewhat skewed by the strong performance of Vicinity Centres (VCX), the only positively performing retail stock within the A-REIT Index for the quarter. Commercial office stocks were marginally down over the quarter (negative 1.6%), while Diversified A-REITs fell negative 8.3% and Industrial stocks were down negative 13.3% for the period (UBS, 2022). Individually, the best performing stocks were Vicinity Centres (VCX) and Charter Hall Long WALE REIT returning of 13.1% and 6.9% respectively over the quarter. The laggard for the period was Charter Hall Group (CHC) returning a negative 19.8% return for the quarter, reflective of wider fund manager focused stock falls within the A-REIT Index as bond yield rise.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-3.pdfDecember, 2021
Direct Property Transactions
70 Light Square, Adelaide, SA - The Property Income Fund (Fund) settled the acquisition of 70 Light Square, Adelaide SA for $18.25 million on 5 November 2021. Located in the core of the Adelaide CBD, the property is a 4-star NABERS commercial office building with a net lettable area of 3,269m comprising four floors of office accommodation and ground floor retail. It is a multi-tenanted building prominently overlooking Light Square, one of the five parkland squares in the city and enjoys three sides of natural light. There is a mix of tenant sectors within the building including State Government, a patents company, information technology, flexible working, claims management and a café. At the time of acquisition, the property was 91% leased and expected to deliver an initial yield of 5.4% while targeting 6.2% when fully leased. The property was acquired reflecting a weighted average lease expiry of 3.1 years.
134 King Street, Newcastle, NSW - On 21 December 2021 the Property Income Fund (Fund) settled the acquisition of 134 King Street, Newcastle, NSW for $7.55 million. Located in the heart of the Newcastle, the property has enormous repositioning protentional. It comprises retail/office accommodation over the ground floor and office over the three upper levels, with an additional enclosed rooftop meeting/function area and alfresco terrace. Overall, the property provides a total of c.1,880 sqm of lettable area and 19 basement car spaces. The building benefits from recent plant and equipment upgrades in 2016 including a new passenger lift and air-conditioning plant, installed at the time the rooftop extension was constructed. The property has a 3.5- star NABERS energy rating and a short-term lease, expiring in February 2022, which is over approximately 20% of the available leased area. The strategy is to upgrade and reposition the property to maximise its value and earnings potential
In general, we continue to retain a supportive view of the Australian commercial property as the market transitions through current pandemic inspired headwinds. Through its well diversified, actively managed portfolio, we believe the Fund is well positioned to provide investors with a consistent, sustainable level of distribution income over the medium to longer term.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-1-1.pdfJune, 2021
The final quarter of the 2021 financial year ended with a resurgence of COVID-19 cases across Australia resulting in short lockdowns across much of the country. Compared to other developed countries, the vaccine rollout in Australia continues at a sluggish pace with 5.8% of the population fully vaccinated whilst a quarter of Australians have received a first dose. In comparison, in the United Kingdom and the United States those who have received a first dose sits much higher 67% and 55% respectively, with life in those regions seemingly returning to normal.
On the Australian economic front, retail sales growth was up a strong 25.0% for the 12 months to April 2021. In May, the Australian unemployment rate continued its rapid decline to 5.1% whilst job advertisements continue to grow. A pleasing result considering many economists were assuming a fiscal cliff to accompany the end of Government support measures. NAB Business Conditions and Consumer Confidence surveys continue to rise indicating a more positive outlook from the business community, although these results may be somewhat tempered once lockdowns are factored into the June release.
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-2.pdfMarch, 2021
The first quarter of 2021 saw the commencement of numerous global mass vaccination programs. Israel leads the world with just over 60% of their population having received one dose of the vaccine whilst the United Kingdom stood at 46% and United States at 31%, Herculean efforts by their respective health systems in just three months. Australia's vaccine rollout recently hit a speed hump, although a plan to rely more on the Pfizer vaccine for people under age 50 is now in play. These developments both domestically and overseas are welcomed, forming the next phase in overcoming the global health crisis.
In Australia, equity market reporting season saw numerous companies announce bumper profits, particularly retailers which showed that with a little assistance from government stimulus, Australian's can spend their way out of a (short) recession. As company profits bounced back, the resulting reporting season lead to some companies (corporate citizens with a conscience) electing to hand back JobKeeper payments that they had received during the depths of the pandemic. For the 12 months to February 2021, retail sales growth was up a strong 9.1%. In February, the unemployment rate was down to 5.8% after peaking as high as 7.5% in July 2020. Although the headline figures continue to be masked by various Government support measures, the underemployment rate in March of 8.8% has since roughly returned to a pre-pandemic level.
All eyes are now on the second quarter of 2021, as the big test for the Australian economy will be the rollback of Government support measures such as JobKeeper. This will determine how well the economy can stand on its own
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update-1.pdfDecember, 2020
Markets in the final quarter of 2020 were buoyed by hope, optimism and increased confidence, spurred on by the announcement of several newly created Covid-19 vaccines and anticipation of the associated rollout of mass vaccinations, a precursor to a return to normal life. Hope of an economic recovery, hope that 2021 will be better than 2020 and hope that the pandemic is nearing its end are feelings many of us universally ascribe too. Central banks around the world have resorted to combating the economic fallout created by the pandemic by fashioning in an era of low interest rates to reduce the debt burden for those in need while doubling up as a stimulant for those willing to borrow to fund growth initiatives. Whether it be from cash deposits, equities, property or bonds, the realisation that yield relative to history has become harder to come by in today's environment has set in for many investors seeking to supplement their incomes. The yield dynamic is leading investors to re-assess their investment strategies and investment allocations accordingly, with property yields relative to other asset classes faring well.
Having rapidly entered an official recession in the June quarter, the Australian economy exited the recession just as swiftly following the removal of pandemic restrictions coupled with the stimulatory response of the Government and Reserve Bank of Australia. In November, the unemployment rate was 6.8% flat compared to September, although the headline figures continue to be masked by various Government support measures. The Reserve Bank of Australia (RBA) cut interest rates to 0.10% in November. The RBA board has stated it does not intend to increase interest rates until inflation is sustainably within the its target band of 2% to 3%, something that cannot be achieved until wage growth is materially higher than current levels and unemployment subsides. Finally, the RBA mentioned that it is prepared to provide further support as necessary. Additional income from government stimulus, income tax cuts and central bank support boosted the NAB Business Conditions and Consumer Confidence indices which rose in November to levels above the previous corresponding period from a year earlier. The Australian 10-year bond yield rose over the quarter to 0.97% from 0.79% in September, well down from a year ago of 1.37%. The enduring low interest rate environment is anticipated to remain supportive of the commercial property sector.In September, we observed a growing disconnect between public and private property markets. Subsequently. the final quarter of 2020 heralded in a sustained uplift in listed property stocks (AREITs), with S&P/ASX 300 A-REIT Index rising 13.3% for the quarter.
Preliminary quarterly data provided by Jones Lang Lasalle, suggests that major office property markets continue to experience slowing demand for accommodation with all markets apart from Perth and Canberra expected to experience falling occupancies. Large tenants are delaying leasing decisions as the market tries to picture the long-term implications of Covid-19. Future office developments are reducing in number and scale which should serve to keep the supply / demand dynamic broadly in check. It is possible metropolitan office markets may benefit in the current environment in attracting and retaining tenants, as being able to drive and park becomes increasingly attractive. Demand for industrial property continues to remain strong. A supply response is underway with annual supply of 2.01 million square metres (sqm) of new completions in 2020, 73% higher than 2019 and the highest single year since 2008 (2.55m sqm). The pandemic induced acceleration of the e-commerce trend brought to the forefront just-in-time supply chain management and supplier concentration risks for corporates, with 2021 construction expected to remain elevated with 1.77 million sqm of new supply anticipated of which 62% is pre-committed.
Retail property leasing continued to improve throughout the December quarter with more deals executed, albeit rent reductions are generally playing out across the retail property sub-markets. Anecdotally, some neighbourhood shopping centers continue to experience rising rents depending on their catchment. CBD retail has been the hardest hit shopping format with vacancy across all CBDs (excluding Melbourne) at low to mid double digits. Neighbourhood shopping centres, the stalwart of the retail formats continues to buck the trend performing sturdily accounting for 65% of retail supply additions and 40% of the transaction volume in 2020. Investor appetite for larger malls and big box large format centres, particularly those with excess land, increased over the December quarter. As the States learn to manage outbreaks more effectively and border restrictions are eased we anticipate the operating metrics of many a landlord to continue to improve. For the quarter ending 31 December 2020, the Australian listed property sector, as measured by the S&PASX 200 A-REIT Accumulation Index, returned 13.3% marginally underperforming the broader equities market as measured by the S&P/ASX 200 Accumulation Index which returned 13.7%. Over the past twelve months, the A-REITs returned negative 4.6% underperforming the broader equities market which returned 1.4%. Retail landlords led the market up higher this quarter with Scentre Group (SCG) and Vicinity Group (VCX) posting returns of 26% and 19% respectively. Unibail-Rodamco-Westfield (URW) which owns large malls in Europe, UK and US posted a standout return of 111% for the quarter. Mirvac Group (MGR) and Charter Hall Group (CHC) both achieved strong returns over the period. The laggard over the quarter was Industrial property giant and developer, Goodman Group (GMG) recording a 6% return
File: https://commentary.quantreports.net/wp-content/uploads/2021/02/fund-update.pdfasset_class: Property and Infrastructure
asset_category: Unlisted and Direct Property
peer_benchmark: Property - Unlisted and Direct Property Index
broad_market_index: Dvlp Global Real Estate
manager_contact_details: Array
ticker: YOC0100AU
release_schedule: Quarterly
commentary_block: Array
factsheet_url:
https://www.australianunity.com.au/wealth/investment-options/property/property-income-fund-wholesale
Fund Update
fund_features:
AUI Property Income Fund Wholesale aims to maintain a solid level of liquidity through investing in a range of different property assets and cash. The fund generally invests in property investments. Typically the fund invests 40-70% of its assets in direct property and unlisted property trusts, 20%-50% in listed Australian-REITs, with the balance held in cash and similar investments. The Fund purchases direct properties and blends them with investments in listed Australian Real Estate Investment Trusts (A-REITs) and unlisted property trusts. This maintains a core exposure to direct property assets that provide consistent income and the potential for capital growth.
structure: Managed Fund