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Listed property trusts turn aroundFont Size: Decrease Increase Print Page: Print Florence Chong | September 14, 2009
Article from: The Australian


LISTED property trusts have risen by 64 per cent since the market's March trough, well ahead of the 46 per cent boost for the general equities market.

The S&P/ASX 200 A-REIT Index, which is made up of listed property stocks, bottomed at 554.9 points on March 9, but closed at almost 900 on Friday.

All listed trusts have performed strongly since May, a notable late runner being the $4.5billion ING Industrial Trust, which ran so hard last week it prompted a price query from the Australian Securities Exchange on Friday.

The ASX wrote to the trust's chief executive Paul Toussaint when its unit price reached 63c, up from 52c at Tuesday's close. It closed lower on Friday at 60c.

Analysts say there is no takeover offer in the air and they can see no reason why ING Industrial Trust's unit price has risen so fast.

"Although it is on the index, people did not notice the stock when it was trading at 30c, but that changed when it hit 60c," an investment banker said.

But it is not the only trust to have risen in recent weeks.

Retail trust Macquarie Countrywide has risen from 15c to 65.5c, industrial trust Goodman Group bounced from 18.5c to 60c and diversified property trust GPT was up from 29c to 60.5c.

Even the world's largest shopping centre owner Westfield Group, which dominates the index, dropped to a low of $9.30 in its darkest days and has since recovered to $13.02.

The top 16 trusts that make up the index have collectively recouped $33bn of their market value, mostly since June when the sector completed a second round of capital raising to clean up respective balance sheets.

At the close of trading on Friday, the index capitalisation was $69bn, still down on its pre-crisis peak of $133bn in May 2007.

Fund managers and analysts believe a key reason for the strong rally was the return of institutional money to the sector.

They said investors were attracted to a sector that had been recapitalised, restructured and focused on the domestic market.

Australian real estate investment trusts, which represented half of corporate Australia's losses in 2008-09, of more than $22bn, sucked in almost $17bn in equity in the past financial year.

"A lot of money is flowing back into the sector from institutions which pulled out of the market early this year," Sydney fund manager Simon Marais said.

Unlike his peers, Mr Marais, who runs Orbis Investment Management, has been a consistent buyer of the property trusts in the past year and has made significant profits from trading his holdings.

"The sector was incredibly cheap at one time, but not anymore," he said.

Shaw Stockbroking's head of industrial research Scott Marshall agreed that many institutions that had deserted the sector were back because the income yields were better than general equities.

Mr Marshall said the trusts continued to trade at discounts to their net tangible assets and there was an expectation they would trade up to asset value over the next six to eight months.

Investment banks generally agreed that hedge funds and general equities funds had begun to invest in the sector, at a time when specialist property investors remained cautious.