In its 20th year, the survey examined and ranked S&P/ASX 200 A-REIT Index trusts.The niche Australian real estate investment trusts (A-REITs) were the key performers for the 2014 financial year, reflecting demand for high-yielding, income-generating and conservatively managed stocks.
Ingenia Communities, which owns, operates and develops a portfolio of seniors living communities, won the top ranking for the third year running.
The others included Generation Healthcare REIT (healthcare property), Charter Hall Group (diversified – office, retail and industrial), ALE Property Group (pubs) and Folkestone Education Trust (early learning), accounting and advisory firm BDO’s 2014 A-REIT Survey showed.
The takeover activity of DEXUS with the Commonwealth Property Office Fund, the demerger of Westfield to create Scentre, and Fraser Centrepoint’s bid for Australand also boosted the cashflow circulation in the sector, the survey showed.
In its 20th year, the survey examined and ranked S&P/ASX 200 A-REIT Index trusts based on key financial and investment indicators like returns, operating cash yields and net tangible assets (NTA) in the 12 months to June 30, 2014.
BDO’s national leader of Real Estate and Construction, Sebastian Stevens, said the sector’s superior performance this year against the broader All Ordinaries Index was also underpinned by a return to conservative management.
This year was the first time S&P/ASX 200 A-REIT Index trusts delivered annualised returns of more than 14 per cent over the previous year and over three and five-year periods, he said.
“As a group, A-REITs have benefited from the low-interest-rate environment in terms of asset valuation, posted solid yields and demonstrated a refocus on low gearing levels, de-risking of asset portfolios and active capital management, which are all attractive qualities for investors,” he said.
A trend in the top A-REIT performers this year was the number of trusts that invested in non-traditional asset classes, such as pubs, healthcare, senior living and childcare, he said.
“The rise of the specialist A-REIT has been evident in the sector since the global financial crisis.”
There are suggestions that the six months to the end of the 2015 financial year will be dominated by traditional, yield-driven trade, with less merger and asset activity, particularly among the bigger A-REITs.
There could be some consolidation with the smaller trusts and management internalisation deals.
Instead, demand will be focused more on buying big-ticket assets, with the local and overseas super funds competing head to head.
More than $23 billion of funds changed hands this calendar year, and next year it is expected the sale of a share in the remaining commercial towers by Lend Lease at Barangaroo will boost the turnover. CBRE’s head of research, Australia, Stephen McNabb said next year would be a year for balancing the risks as growth divergences continued.
“Looking at markets in a broader, geographical context, the differing economic outlook between states will influence underlying tenant demand and ultimately the attraction for investors,” Mr McNabb said.
“NSW’s strong economic performance should continue in 2015, underpinning demand in occupier markets. Conversely, Western Australia will face headwinds as the mining construction boom unwinds and lower commodity prices erode state income.”