Weekly Update 22/2/202122 February 2021
Welcome to this weeks Property News.
The Market Awakens
While transaction activity was lower last week, there is renewed confidence in the market with a large number of new listings hitting the market (see images below), with vendors hoping to secure buyers ahead of any long term structural changes post the pandemic.
One of the more significant buildings to hit the market this year in Perth, is AMP Capital’s 140 St George’s Terrace. Following on from a strong run of leasing deals in 2019, (which saw the property move from 70% occupied to near full leased), AMP is now looking to off load the 28 storey building which sits in a prime position in the CBD. AMP would be hoping to exceed $200m for the asset, however the proposed new supply and Perth’s high vacancy rate (20%) will temper the market.
In Sydney, Fort Street Real Estate Capital have appointed Colliers to sell the prominent 240 O’Riordan Street buildings near Sydney Airport. For Street paid $128m for the asset in 2017 on a passing yield of 6.6%. The 10 level A-grade office offers over 19,000sqm on NLA plus ground floor café, two levels of basement parking for 399 cars, premium end of trip facilities and an onsite gym. Expect pricing around $160m+.
Also on the blocks is 63 Exhibition Street, Melbourne, currently held by Salta Properties. The property contains an existing 13-storey commercial tower, but is being sold as a residential development opportunity. Salta has price expectations of c$80 million.
There are also a host of Shopping Centre and large format retail assets being offered in the market.
I haven’t review the IMs on these assets, however none of these assets really excite me. At this point in the cycle and with the post pandemic risks still unknown, we continue to prefer assets which offer strong income characteristics and are in markets likely to see ongoing tenant demand and capital growth. I am happy to be convinced by others that these assets fit the bill.
More Half Yearly Results
We continued to review the Half Yearly results of several REITs this week with similar outcomes to last week. REITS heavily weighted to Office and Retail are suffering with lower earnings (Vicinity earnings down -20%) and significantly lower valuation gains. REITs focused on Industrial and Convenience Retail assets including Neighbourhood Centres are performing well with income and earnings growth but valuation gains are again well short of previous years.
Charter Hall’s diversified platform also suffered due to significant falls in management, transaction and performance fee revenue as they also contend with much lower transaction volumes.
This weeks reviews included;
- APN Property Group
- APN Industria REIT
- APN Convenience REIT
- Home Co Daily Needs REIT
- Charter Hall
- Lifestyle Communities
As mentioned above we continue to favour investment or development property underpinned by long term secure tenants who rely on non discretionary consumer expenditure.
These include neighbourhood convenience retail, medical & health facilities, education and child care services, fuel & automotive services.
We are cautious on CBD office, hotels, regional and major regional shopping centres but expect there will be opportunistic buying in office and retail sectors to watch for.