BDO A-REIT Survey 2014

16 December 2014

Sebastian Stevens , National Leader, Private Equity
Partner, Corporate Finance

Strong sector performance led by the rise of niche REITs

Across the board, Australian Real Estate Investment Trusts (A-REITs) delivered strong returns in FY14, continuing the sector’s dramatic recovery and reinvention of the past few years.

Based on the S&P/ASX 200 A-REIT Index, property trusts have now delivered annualised returns of 14% over the past one, three and five-year periods. In FY14, the sector’s performance outpaced that of the All Ordinaries Index. Of even greater interest, four of this year’s five top performing funds were niche REITs - trusts that are tightly focussed on specific industry sectors.

The 2014 BDO A-REIT Survey examines and ranks the performance of S&P/ASX 200 A-REIT Index trusts, over the 12-month period ending 30 June 2014. Key findings include:

  • The sector averaged an 11% total return over the period
  • The median distribution yield of the sector (5.9%) continues to be higher than other income investments
  • Gearing increased slightly from 29% in FY13 to 32.6%, yet remains conservative
  • Valuations confirm that the sector is focused on sustainable and quality domestic assets
  • M&A activity was highlighted by Dexus’ acquisition of Commonwealth Property Office Fund and Frasers Centrepoint takeover of Australand
  • Four of the top five trusts were ‘niche’ trusts  - Ingenia (seniors living), Generation Healthcare (purpose-built healthcare facilities), ALE (pubs) and Folkestone (early learning sector)
  • The rise of the niche trust follows a global trend, with the Australian market poised to see more such entrants