SUMMARY
The AREIT sector had a strong bounce in August, up 7.95% for the month and outperforming the broader market, which returned +2.8%. The Fund delivered a return of 6.23%, underperforming the market by 1.72%.
The AREIT sector had a strong bounce in August, up 7.95% for the month and outperforming the broader market, which returned +2.8%. The Fund delivered a return of 6.23%, underperforming the market by 1.72%.
The AREIT sector had a strong bounce in August, up 7.95% for the month and outperforming the broader market, which returned +2.8%. The Fund delivered a return of 6.23%, underperforming the market by 1.72%.
This reporting season was one of the toughest that we have had to analyse. There were a lot of moving parts:
With all these uncertainties, it was not surprising that the majority of REITs have withdrawn guidance. A few exceptions where guidance was provided included Goodman Group (GMG), Charter Hall Group (CHC), Charter Hall Long WALE (CLW), Charter Hall Infrastructure Trust (CQE), APN Industria REIT (ADI), Centuria Capital (CNI), Centuria Industrial REIT (CIP) and Waypoint REIT (WPR). This is a testament that their cash flow is resilient in the wake of COVID-19. We are pleased to report that the portfolio owns four of these eight securities.
Key takeaways from reporting season:
Overall, the sector has worn the brunt of COVID-19 this reporting season and is set to recover over the medium term. From a top-down basis the sector is showing value with P/NTA at -31%; the yield spread to 10 year bonds at 413 basis points versus a long term average of 220 basis points; and a P/E discount against the broader industrials of 5.8x versus a long-run average of 1.3x.
In terms of thematics:
On a bottom-up basis we aim to pick the best-of-breed, targeting stocks with total returns of over 10% (dividend plus earnings growth).
In retail, our exposure is in defensive retailing and bulky goods with more than 60% exposed to supermarkets, essential services and home improvement. We see this sector to not only be more resilient from the impact of COVID-19 but, going forwards, should continue to benefit from structural shifts as people spend more time working, studying and entertaining at home.
In office, our preferred exposure is to metro offices with more than 20% exposed to government tenants and long WALEs (weighted average lease expiry) of 5 years and over.
We currently hold more than 40% of the portfolio in Alternative Real Estate. This includes childcare, seniors living, data centers, and affordable housing such as Manufactured Home Estates. We believe these sectors provide both sustainable earnings growth driven by secular trends and diversification outside the traditional core sectors of retail, office and industrial.
Portfolio Manager
Investment Specialist
A Property Fund focussed on capital security, income yield, and sustainable growth.
The Fund believes each security has an underlying or intrinsic value and that securities become mispriced at times relative to their value and each other.
The Fund seeks to exploit such market inefficiencies by employing an active, value based investment style to capture the underlying cashflows generated from real estate assets and/or real estate businesses.
The Fund believes that responsible investing is important to generate long term sustainable returns. Incorporating ESG factors along-side financial measures provides a complete view of the risk/return characteristics of our property investments.
The Fund is benchmark unaware. All positions are high conviction and assessed on a risk-reward basis, resulting in a concentrated portfolio of 10-20 securities.
1. Net performance figures are shown after all fees and expenses, and assume reinvestment of distributions. The Fund incepted on March 11th 2020. Index performance calculations include a complete month’s performance for March 2020. No allowance has been made for buy/sell spreads. Please refer to the PDS for information regarding risks. Past performance is not a reliable indicator of future performance, the value of investments can go up and down.
2. Inception 11 March 2020.
3. Annualised standard deviation since inception.
4. Relative to S&P/ASX 300 A-REIT TotalReturn Index.
* For further information regarding fees please see the PDS available on our website.