REITs forecast to deliver 4.8% growth: Merrill Lynch

Australia’s listed property sector is forecast to return 4.8% earnings per share growth for investors in 2012, according to Merrill Lynch analyst Simon Garing.

On the back of A-REITS returning to their “low-beta roots”, meaning they offer low risk but low potential returns, Garing expects the sector to “outperform in challenging times, where investors seek defensive exposure”.

He bases his predictions on the property sector, excluding residential, showing stable or improving conditions across the board.

During the June 2011 quarter there was a 428% increase in transactions in the commercial sector as investors bought office and retail assets, according to a CB Richard Ellis analysis of the market

BT Investment Management property portfolio manager Julia Forrest is also upbeat about A-REITs, saying the lacklustre performance of the sector to date in 2011 is “misleading”. Winston Sammut of Maxim Asset Management also says a number of A-REITs have performed well “beneath the surface”.

These he lists as Centro Retail Group, Charter Hall Office REIT, Investa Office Fund and EDT Retail Trust.

Charter Hall Office REIT, the subject of a management takeover battle involving three hedge funds and Moss Capital, is also the top pick of Phoenix Portfolios managing director Stuart Cartledge.

It comes as the REIT boosts its line of credit with Westpac by $25 million to $100 million to take advantage of further investment opportunities.

However, not all fund managers are upbeat about REITs.

In its June market insights report, Russell Investments recommends investors leave their REITS portfolio weighting at the current allocation and is forecasting modest earnings growth in 2012.