Pandemic restrictions have severe impact on listed property
The complications surrounding rental leases and contract negotiations after the pandemic has been problematic for property funds, meaning zero Australian listed property funds have reported positive returns since the start of the year.
Many firms were considering whether they needed permanent offices in light of people working from home or trying to negotiate rent cuts or shorter leases. Meanwhile, retailers were seeing the impact of reduced footfall as people stayed home and shopped online instead with Vicinity reporting foot traffic down 74% year-on-year during May.
For industrials, some factories and manufacturers were closed as a result of social distancing measures.
This had led to the S&P ASX 200 A-REIT index losing 21.5% since the start of the year to 31 July, versus losses by the ASX 200 of 9.9% over the same period.
The sector fell sharply in March with the market downturn but has since rebounded led by retail traffic with retail landlords Scentre and Vicinity performing well as well as Stockland Group and Charter Hall.
Australian Unity Property Securities fund manager, Damian Diamantopoulos, said: “Rent collection, waivers and deferrals varied depending on type of asset, sector, location and tenant exposure. Smaller tenants with turnover of less than $50 million that had experienced at least a 30% reduction in turnover because of the pandemic or were entitled to JobKeeper were eligible for a proportional reduction in rent.
“This reduction to rent to be provided in the form of a combination of waivers and deferrals, while for larger tenants (or for small tenants experiencing less than 30% impact to turnover), the status quo remained in place, meaning full rent was required to be paid, there was no policy intervention.”
He said he expected major office markets were likely to see rising vacancy levels while future office developments would be reduced in number and scale.
According to data from FE Analytics, within the Australian Core Strategies universe, there were 60 funds in the Australian listed property sector.
However, there was not a single fund which had reported positive returns since the start of the year to 31 July, 2020.
The best-performing listed property funds were CF Property Capital Pty Chiodo Diversified Property Development Strategy which lost 1.4% and Crescent Wealth Property Retail which lost 2.8%.
These were the only funds in the sector which did not report double-digit losses and the wider Australian listed property sector lost 19.6% over the period.
The Chiodo funds invested in residential property development and had 80% of its portfolio allocated to residential assets, 15% to accommodation and 5% in cash while the Crescent Wealth fund invested in a diversified portfolio of listed, unlisted and infrastructure assets including industrials, office and retail.
Crescent Wealth was Australia’s first Islamic wealth manager and the property fund invested in assets which complied with Islamic and responsible investment principles.
AUTHOR
Laura Dew
Recommended for you
As ASIC chair Joe Longo pushes firms to prepare for the upcoming mandatory climate disclosure regime, what skills are necessary if firms are looking to expand their ESG teams?
First Sentier Investors has announced it will close four of its Australian investment teams amid a simplification of the business, with $14 billion expected to be returned to investors.
Over 90 finalists have been chosen to compete at the 36th annual Fund Manager of the Year Awards, to be held in Sydney on 13 June.
Clients may be asking their adviser whether there is still value in the US technology names after their rally, but Fidelity International’s Lukasz de Pourbaix believes they can still offer upside.
