A-REITs bounce back after fall
Some of the biggest stocks in the Australian listed property sector rebounded strongly yesterday after taking a pounding earlier in the week.
On Tuesday the S&P ASX 200 A-REIT index regained 1.29% of its value, having plummeted by 3.1% on Monday.
Westfield Group, which touched a low of $7.52, closed at $7.79 last night. The stock accounts for more than a quarter of the market capitalisation of the $75 billion A-REITs sector.
Retail A-REITs are proving particurlarly resilient.
Westfield’s Australian and New Zealand shopping centre spin-off, Westfield Retail Trust, is trading up from around the $2.20 mark to $2.39 at close of trading yesterday.
CFS is also trading strongly, with the share price at $1.60 up from $1.50.
And the Charter Hall Retail Trust is heading back towards $3 a share, closing at $2.96 yesterday up from a monthly low of $2.73.
Stockland, which today revealed a 57% increase in statutory profit for the 2011 financial year, has also seen its share price turn around in the last few days and closed yesterday at $2.78 having traded around $2.70.
Analysts say sentiment towards A-REITs is improving, with companies now taking a more risk-averse approach.
Gearing ratios at the biggest REITs have fallen from about 35% in 2007 just before the onset of the GFC to about 25%, while secondary REITs’ debt-to-equity ratios have fallen from 45% to 35% over the same period.
The Stockland results revealed a debt-to-equity ratio of just 22%.
Morgan Stanley is forecasting 4.8% growth for A-REITs in 2011, and Russell Investments says there will be modest growth in 2012.
Laura Cummins, a research analyst at Cushman & Wakefield, told Property Observer that A-REITs had learnt the lessons of the GFC.
“Senior management is most concerned with stability and security. Lessons surrounding the increased availability of debt appear to have been learnt.
“A-REITs have changed their policies to allow distributions to be paid from only cash profits instead of shifts in asset valuations. Capital management is of paramount importance and long-term sustainability is the new black,” she says.