Conservative A-REITs performing best: Analyst
More conservative A-REITs with limited exposure to corporate and development activities have been the strongest performers in the sector over the last six months.
Analysis by Atchison Consultants has found that property developers Stockland and Australand have been among the worst performers, while office REITs have been among the strongest performers.
Over the six months to August, Stockland and Australand’s share prices have fallen by more than 26%, though they are some way off the worst-performing stock, supermarket owner Centro, whose stock has fallen more than 70%.
“Common determinants of the underperformance of these A-REITs included exposure to residential property development markets, disappointing earnings results and restructuring and corporate activities,” says Mark Wist, senior asset consultant at Atchison.
“Stockland’s performance may have been worse but for its announced buyback of 5% of its issued capital, which should be accretive to both earnings and asset backing.”
Strong performers include two office trusts – the Commonwealth Property Office Fund and the Investa Office Fund, which have lost less than 5% of their value over the six-month period, compared with All Ordinaries Accumulation Index, which fell by 17% over the period.
Besides being conservative, Wist says other common drivers of strong performers include solid net operating income growth, the ability to meet earnings guidance and a willingness to consider the needs of investors.
“An exception to the corporate activity element was Investa’s takeover of ING Office Fund in March, which corresponded to a share price increase, as it resolved rather than creating outstanding uncertainty,” he says.
Six-month A-REIT performance – the best and worst
Best performers of S&P/ASX 300 A-REIT Accumulation Index |
| Performance over six months to 19/08/2011 |
Commonwealth Property Office Fund | CPA | -3.4% |
Challenger Diversified Property Group | CDI | -4.0% |
Investa Office Fund | IOF | -4.9% |
Charter Hall Retail REIT | CQR | -5.8% |
General Property Trust | GPT | -7.0% |
Worst performers of S&P/ASX 300 A-REIT Accumulation Index |
| Performance over six months to 19/08/2011 |
Centro Properties Group | CNP | -72.7% |
FKP Property Group | FKP | -46.6% |
Charter Hall Group | CHC | -27.8% |
SGP | -26.8% | |
Australand Property Group | ALZ | -26.5% |
Wist says the future of Centro is dependent on whether shareholders vote in favour of a corporate restructure that will “extinguished any hope of rescuing any investor capital beyond the 5¢ for convertible bond investors” and cause it to emerge as a $4.4 billion new retail REIT “effectively controlled by the lenders”.
A vote against the restructure would be a disaster, Wist says.