This article is from the Australian Property Journal archive
The Australian LPT sector has continued to gain favour with investors in 2006 and niche market LPTs are putting on a show of their own, according to the 12th annual BDO Australian Listed Property Trust Survey.
BDO Corporate Finance’s national head and partner Sebastian Stevens said the 2006 year continued to provide investors with strong returns.
According to the BDO Australian LPT Survey 2006, the average distribution return was 8.25% in 2006 compared to 7.86% in 2005.
BDO Corporate Finance’s partner Judith Ryan said the average total return in 2006 was lower at 17.84% compared to 24.84% in 2005, however, she added last year’s results were pushed up by Macquarie Leisure Trust Group and other stapled entities.
The survey has awarded Macquarie Leisure Trust as the standout performer for the second consecutive year. Macquarie Goodman Group, Babcock & Brown Japan Property Trust, Aspen Group and ING Real Estate Community Living Fund rounded out the top five performers in that order.
Stevens said Macquarie Leisure’s consistent performance in both the financial and investment criteria categories of the survey contributed to its overall first placing.
“The group’s performance highlights over the year included a 42% increase in the value of its key property asset, Dreamworld, on the Gold Coast, based partly on the improved operational performance of the theme park.
“Macquarie Goodman Group was the top performer in the investment category of the survey, with a total rate of return in the year of 55% and a three-year total return of 40%,” he added.
Once again, the 2006 year was a strong year for stapled securities, with six stapled groups featuring in the overall top 10.
Ryan said that it is not just the stapled securities delivering strong returns.
“Traditional trust structured vehicles with properties where returns are based on the success of, or profits generated from an underlying business, have performed well in the past year.
“ING Real Estate Community Living and Australian Education Trust were big movers in the 2006 Survey, both placing in the top 10. ING Real Estate Community Living’s returns are underpinned by the success of its retirement village portfolio,” she added.
“Similarly, Australian Education Trust’s strong performance in 2006 is due to the significant growth and success of its major tenant, ABC Learning Centres.” Ryan said.
The survey also showed gearing levels across the LPT sector continued to increase. The average gearing across participants for 2006 was 42%, an increase from 32% in the survey two years ago.
According to the survey, this increased appetite for borrowing is also evident in those trusts that listed during the year, having an average gearing level of 44%.
Stevens said a few years ago, trusts were inherently conservative but a low interest rate market has probably led to an increased gearing in the past two years.
“The LPT sector is just moving with the economy to maximise return to shareholders.
“Having said that, if interest rates continue to rise and borrowings begin to impact on distributions, we would probably see a reduction in gearing in the sector,” he added.
Stevens said that this year, the BDO Survey includes statistics and commentary on key global Real Estate Investment Trust (REIT)/LPT markets, highlighting some interesting comparisons with the Australian LPT market.
“Australia is the highest securitised property market internationally with almost 70% of investment grade properties held in the property trusts, both listed and unlisted. This compares to 12% in the US market and only 3% in Europe,”
Stevens said that BDO’s Global property experts and International property clients have been using the results of the Australian LPT Surveys to benchmark new offerings to be launched in 2007 as the global REIT markets of a number of countries expand.
“As these Global REIT markets expand, the competition for international property assets will provide a challenge for those in the Australian LPT sector seeking international expansion,” he concluded.
The 2006 Edition of the Survey is based on the annual reports of Listed Property Trusts and Entities with balance dates up to and including June 30, 2006 and comprised 48 entities with combined total assets of $147 billion.
BDO’s list of contenders was taken from a review of all entities within the listed property trust sector in Australia as at June 30, 2006 with a market capitalisation of greater than $50 million.
By Nelson Yap
