This article is from the Australian Property Journal archive
AUSTRALIAN real estate investment trusts (AREITs) total returns fell further into negative territory last month in the lead up to the annual reporting season.
According to Global Property Research’s latest market update, AREITs total return were -1.9% in June, which is worse than the -0.9% recorded in May.
As a result of the further decline, the six months total returns went into the red, delivering -3.9% compared to 8.4% in May, and year to date worsen from -2.0% in May to -3.9%.
Overall AREITs total returns underperform the global average of 1.6%. It was below Asia’s -1.0% and America’s 2.9%. However, it was ahead of Europe’s -5.0%.
In Asia, India led the way with 1.8% total returns, but elsewhere the China (-2.4%), Hong Kong (-6.0%), Japan (-1.0%) and Singapore (-2.2%) were in negative territory.
In Australia, National Storage REIT was the only trust that made it into Asia’s top 5 performers in June.
The other top performing REITS in the region were CRE Logistics REIT, KDC Realty, Mitsui Fudosan and Redefine Properties.
On the other hand, the worst performing REITs were Wharf Real Estate, City Developments, Wharf Holdings, Swire Properties and Henderson Land Development.
June can be characterised as the month for divestments for the AREITs sector.
After a quiet period in the capital markets, there were major real estate transactions last month which is expected to set the benchmark for valuations and asset repricing.
In the retail sector, one of the biggest transactions this year was Scentre Group and Sydney investment bank Barrenjoey purchasing a 50% stake in Westfield Tea Tree Plaza for $308 million.
The purchase price is a discount to the December 31 2023 book value of $349.5 million, and is lower than the pre-covid book value of $400 million.
In other retail related transactions, Region Group sold $133.2 million worth of investments after divesting the Soda Factory in Brisbane’s West End.
Mirvac was one of the most active players last month clocking up $1 billion in asset sales including the sale of a 66% stake in $2 billion 55 Pitt Street Sydney development to Japanese property developer Mitsui Fudosan.
It also sold 40 Miller Street North Sydney and 367 Collins Street in Melbourne last month for a combined $485 million. Both deals were struck at a 20% discount to peak book values.
Dexus was the most active seller in June. In addition to the Westfield Tea Tree sale, Dexus a Parramatta office building for $69.1 million, which was valued at almost $190 million as at June 2021.
Dexus and pension fund the CPP Investment Board sold 5 Martin Place in the Sydney CBD for $296.2 million to Cbus Property. The sale is below the June 2023 valuation of $380 million and the peak of $405 million in June 2022.
It also divested 26 and 28 Honeysuckle Drive in Newcastle for $43.3 million, at over 20% discount to the recent book value and over 35% below the peak.
Its industrial sales performed better, booking $140 million in sales, including the 13-19 William Angliss Drive, Laverton North property in Melbourne’s west, for $92 million, a premium to the valuation of $57.5 million.
And it sold 704-744 Lorimer Street Port Melbourne for $61 million – an 11% premium to the 31 December 2023 valuation.
The Charter Hall Long WALE REIT finalised due diligence on over $500 million worth of asset sales, which will give the trust substantial breathing room.
Analysts are expecting the Charter Hall managed Prime Office Fund to divest up to $850 million in assets in the year ahead to give itself more breathing room.
But the alternative real estate investment sector continues to attract capital with Singapore’s sovereign wealth fund GIC backing National Storage REIT and committing $270 million to acquire and develop self-storage centres across Australia.
