REIT reporting season on track to deliver growth

It is the halfway mark for the 2016 full-year reporting season on the real estate investment trust sector and, by all accounts, it is achieving some gold star stamps.
Nanjing Night Net

The office landlords are predicting good times ahead, particularly along the eastern seaboard, while the retail owners are defying the mixed underlying economy with solid inflation-beating sales growth.

For the residential developers, the story is of continued undersupply and high demand.

It’s no surprise the results all come in at market expectations, as the REITs obey continuous disclosure and are in constant contact with investors, but the tone of the analysts’ reports indicate they are liking what they are hearing from the REIT managers.

AVJennings followed larger residential peers Mirvac and Stockland with an upbeat final result for the year to June 30.

The group reported revenue growth of 32.7 per cent to $421.9 million, growth in profit before tax of 22 per cent to $58.8 million and growth in earnings per share of 18.6 per cent to 10.71¢.

A final dividend of 3.5¢ per share was declared and is to be paid on September 23, bringing the annual dividend to 5¢.

AVJennings’ managing director Peter Summers said the results for the year were strong and consistent with previous comments about conditions in traditional housing markets.

“As we entered the 2016 financial year we continued to grow our level of stock under production in anticipation of continuing favourable conditions in the traditional housing markets. We saw issues as being primarily related to certain CBD high-rise apartment markets,” Mr Summers said.

But he took a mild swipe at governments over affordable housing.

“We believe the last 12 months or so has provided a better understanding that we need to supply not just housing but housing in areas where people want to live,” Mr Summers said.

“Unfortunately the understanding and debate around affordability has not been as clear. Governments continue to focus on property from a revenue-raising aspect. They also continue to implement short-term reactionary measures, often creating further longer-term volatility.”

“We hope governments start to focus more on their role in planning and other areas where they can work with developers to increase the supply of suitable, appropriately-located, affordable housing.”

For the office sector, Investa Office Fund unveiled that statutory net profit for the year ended June 30 increased 175.6 per cent to $493.8 million.

After adjusting for fair-value movements and other non-operating items, funds from operations increased 3.4 per cent to $175.6 million, driven by property level income growth and the income from 567 Collins Street, Melbourne, which completed in July 2015.

The dividend was 19.6¢ cents per unit, up 1.8 per cent on the previous corresponding period, and will be paid on August 31.

Having fought off a takeover, the group said it will now focus on its core office portfolio which has solid assets across Sydney, Melbourne and Brisbane and has forecast a 2.1 per cent increase on the past financial year. This includes its development at 151 Clarence Street, Sydney.

The group has 12 months to consider exercising its right to negotiate an acquisition of 50 per cent in the Investa management platform.

Charter Hall Retail REIT also improved its performance, with statutory profit of $180.7 million, an 11.2 per cent increase from the prior corresponding period. Full-year distribution is 28.10¢ per unit, up 2.2 per cent, and payable on August 31.

Scott Dundas, fund manager of the REIT, said that, despite the price war between its tenants Coles and Woolworths, its centres had net operating income growth of 2.2 per cent.

He said the fund had earmarked about $200 million in non-core asset sales in the coming year with a similar amount in purchases to refresh the portfolio.

This story Administrator ready to work first appeared on Nanjing Night Net.

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