Category: Listed Property

Monthly Newsletter Atlas High Income Property Fund

  • October was a tough month for investors globally with equity indices down between -5% and -10%, driven by concerns over higher interest rates and declining global growth. In this broad-based market correction, listed property held up relatively well with the ASX200 A-REIT declining “only” -3.1%, far better than the ASX 200 that fell-6.1%.
  • The Atlas High Income Property Fund declined by -2.4% in October, with share price falls were cushioned by gains in the value of the put options owned by the Fund and the position in SCA Property (+7%) that defied the prevailing market gloom.
  • October was a month where fear was the dominant emotion and the market ignored some very positive quarterly updates from the retail and office trusts which showed sales growth in the nation’s shopping centres and strong demand for office space. Indeed GPT (-1%) declined despite the trust upgrading profit and distribution guidance for the year.

 

 

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2019.

Lendlease: Experts ask if falling property market will end company’s stellar run

An office tower in Brisbane under construction by Lendlease.Lendlease is similar to Goodman Group in that it has experienced internal development capability and strong capital partner relationships which help it build its other arm: funds management, where it earns fees on performance and management of billions of dollars worth of property. Growth in funds under management was 15 per cent to $30.1 billion in fiscal 2018. But how sustainable is that growth? And will all this be enough when the commercial property cycle changes? When interest rates rise and when property valuations and volume transactions fall away?

Atlas fund manager Hugh Dive admits that Lendlease is a cyclical business but that it is shifting away from that.

“It’s a cyclical stock, but not as cyclical as it has been in the past,” he says. “If it had 40 per cent gearing you wouldn’t touch it!”

Lendlease’s net debt to total tangible assets, less cash is 8.2 per cent which will help the company wade through the cycles.

Dive also reminds investors that 40 per cent of Lendlease’s earnings come from offshore, giving it plenty of upside in the coming year from the depreciated Australia dollar.

To Read more:

https://www.afr.com/real-estate/lendlease-experts-ask-if-falling-property-market-will-end-companys-stellar-run-20181009-h16fis

 

Monthly Newsletter August 2018

  • In August, the Fund gained +0.8%. This return is around expectations given our conservative positioning towards higher yielding rent collectors with recurring income and away from Trusts relying on development profits.
  • The Australian Listed Property had a strong month in August though this was primarily driven by those Trusts with a large proportion of development earnings, which historically expand earnings towards the end of a housing boom. As developers such as Goodman are trading on 20 times forward earnings, the market is effectively assuming that this source of profits will both grow and continue indefinitely. We view that as a heroic assumption, given the visibly cooling Australian residential market.

Go to Monthly Newsletters for a more detailed discussion of the listed property market and the fund’s strategy going into 2019.

Monthly Newsletter December 2017

  • The Fund posted a gain of +0.6% over the last month of 2017, ahead of the underlying ASX 200 A-REIT index. December was dominated by the news of the potential takeover of Westfield by Unibail-Rodamco. Outside of Westfield, the overall performance of the index was weak.
  • The Fund remains positioned towards Trusts that offer recurring earnings streams from rental income rather than development profits, we see that this is likely to position us well going into 2018, as the property development market cools.
  • In December the Fund paid a distribution of $0.05; an increase of +2.9% over the September quarter distribution.

 

Go to  Monthly Newsletters for a more detailed discussion of the listed property market in December and the fund’s strategy going into 2018.

Monthly Newsletter November 2017

  • The Fund posted a gain of +3.6% over the month of November, which was ahead of our expectations in an exceptionally strong month for the Australian Listed Property sector. The derivatives overlay which we use to both enhance income and protect capital will naturally cause performance to lag in very strongly performing months.
  • The Fund remains positioned towards Trusts that offer recurring earnings streams from rental income,  rather than development profits. After the McGrath profit warning in November (attributed to slowing off the plan apartment sales), we remain convinced that this strategy will outperform as the market gives a higher value to recurring earnings as development profits being to wane.

 

Go to  Monthly Newsletters for a more detailed discussion of the listed property market in November and the fund’s strategy going into 2018.