Welcome to this week's Property News and to the end of Week 23 of COVID impacts.
The key highlights from the AREIT results released this week were;
- SCentre funds from operations (FFO) were down -45% and -$4.0bn of assets were written down
- Stockland FFO was down -7.2% with retail earnings down -20%
- HomeCo FFO earnings were 13% ahead of prospectus, with valuations marginally increased.
- National Storage earnings were down -13% with lower occupancy in a growing portfolio
- Cromwell earnings up 3.5% per security
- Australian Unity Office Fund FFO down -2.8%
- GDI FFO down -7.8%
There has been a mixed bag of results among the AREITS with most reporting declines in earnings per security. Those who have focused on income from stable non-discretionary tenants with long leases have performed exceptionally well.
The direct investment market is marching to the same tune with industrial real estate seeing increasing levels of activity and strong capital flows continuing to drive yields lower, whilst regional and sub regional shopping centres are facing a shallow market with limited capital looking to invest.
With the majority of the AREIT results now released, we expect the market to continue to show strong support for those REITS which provide stable yields from long term tenants (ie 7+ year WALE). Portfolios with shorter WALEs will be more susceptible to increasing vacancies and short term market rent fluctuations.
Some of the better REITS are continue to reflect yields of circa 6% at current prices but as cash rates remain lower for longer, those REITS are likely to move higher as investors provide support for yields of circa 5%.
Until next week
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