Listed trusts just tread water against the index
THE listed property trust sector lacked any clear direction in October with volumes below average and the index falling 0.4 per cent.
Australia’s property trusts lagged the overall sharemarket by 3.3 per cent, for the second month in a row.
LPTs have trailed the broader market over three months ( down 1.3 per cent), six months ( down 7.7 per cent), a year ( down 12 per cent), and five years ( down 3.7 per cent).
Measured over a decade they have pulled ahead by 0.1 per cent.
ING Real Estate Community Living Group was the strongest performer for the month ( up 9 per cent) despite no material news during that time.
The ING fund has been a key pick among mid- to- small caps with potential upside from developments and stronger than forecast income growth from US and Australian retirement village and student portfolios.
Other strong performers included Macquarie Leisure Trust ( up 6.2 per cent) and Mirvac ( up 6.1 per cent).
Rubicon America Trust ( down 8.7 per cent), GPT ( down 8 per cent) and Australian Education Trust ( down 5.5 per cent) were the worst stocks.
Of the property trust sub- sectors, real- estate managers and developers beat both the LPT index by 6.7 per cent — with Lend Lease up 6.1 per cent — and the broader market by 3.4 per cent. Retail property trusts ( down 0.1 per cent), office trusts ( down 0.2 per cent) and industrial trusts were the strongest sub- sectors over the month, each pulling ahead of the LPT index.
Diversified trusts ( down 0.9 per cent) and leaders ( down 0.9 per cent) lagged the index.
The sector is trading at a 3 per cent premium to our estimated fair market value ( from a record discount of 14.3 per cent in September 2003 and 9.1 per cent discount during August 2007).
In market news, the residential sector continued to strengthen with building approvals up 6.8 per cent in September, underpinned by solid demand. Housing Industry Association data on new home sales revealed a solid 9.9 per cent rise for September, up from an 8.6 per cent fall in August.
The Reserve Bank’s 25- basis point interest rate rise this month may ease some of the strength in this market in the short term.
There had been strong demand in the retail sector for prime shopping centres given a favourable macro- economic backdrop which has driven retail sales. Low unemployment, solid income growth and tax cuts have also fuelled consumer demand. For September, retail sales rose 0.8 per cent.
The office property market is also healthy with the market speculating on what price will be struck for big assets now on the sales block.
Morgan Stanley is selling $ 1.3 billion of second- grade office assets owned by the nowprivatised Investa, while Queensland Investment Corporation is marketing the $ 800 million- plus Queensland Central Plaza complex in Brisbane.