Weekly Update 1/3/2021

1 March 2021

Welcome to this week’s Property News.

Big Deals

Three big deals were announced this week, each of which point to the attraction of Australia as a destination for offshore capital.

The first was LOGOS $1.65bn deal with QUBE Holdings for the 243ha Moorebank Logistics Park. The Logistics Park is connected to the South Sydney Freight Line direct from Port Botany. Read more about this transaction here.

If you’re not ware of the significance of development, watch the following video;

The second major deal this week was the offer from Canada’s NorthWest Healthcare to take 100% of Australian Unity’s Healthcare Property Trust worth $2.4bn. Read more about this transaction here.

The third deal announced this week, was the joint venture (& effective take over) of AMP Capital’s real assets businesses, including its Infrastructure and Real Estate business. Ares will pay AMP $1.35bn for their initial 60% interest and enable the group to pursue further opportunities. Put & Call arrangements for the balance of AMPs position will be triggered after 5 years, enabling Ares to own 100% of the business.

The outcome brings to an end the speculation that has hovered over the future of the AMP Capital real estate platform over the past 12 months or so.

Where to for AREITs ?

The Australian share market is closer to its pre-covid high, now just 2% below the Feb 2020 position however the comeback has not been so great in the property markets with the REIT Index still -20% below its Feb 2020 position.

The chart below shows the relative performance since the initial shock of the All Ords Index (orange), the AREIT Index( Orange dotted) as compared to the All Ord index after the 2008 and 1987 crashes. The chart implies there is another 12 months to go in the recovery of the the average AREIT, whilst the broader market will likely exceed its pre-covid levels within the next few weeks.

The AREIT market has not been helped by a dive backwards since the start of the year, particularly led by Goodman (down -9.9% this year), Charter Hall (down -15% this year) and Mirvac (down -13.5% this year).

The impacts to Operating Earnings from COVID have been significant for the larger Shopping Centre Managers but far less for most commercial and industrial managers.

For REITs with a large proportion of funds from Development, Transactional and Performance Fee incomes (such as Charter Hall ) the general lack of activity in the real estate sector has also impacted earnings.

A closer look at the key REITs shows that there was an obvious lift in October as FY20 distributions enabled investors to re-adjust portfolio allocations with many supporting some of the under valued stocks at the time such as (Mirvac, GPT, Vicinity & SCentre. Most of these have however underperformed since then.

The outlook for most REITs is positive when compared to the previous 12 months (though that is not hard) however there is still caution amongst landlords about the speed of the return of people to large scale real estate assets (office and shopping centres, particularly in CBDs).

This weeks reviews included;