Investment Update Q3 2018 - Standard Life Investments
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Global Real Estate Fund Quarterly Update
Investment UpdateQ3 2018
The Global Real Estate Fund quarterly update provides an overview of the market; fund
performance, positioning and portfolio changes; and the fund manager’s outlook for the months
ahead.
Economic Overview
▸▸Investment volumes appear to have reached a cyclical peak Continental Europe
in 2015. Pricing has not followed volume with the majority ▸▸The European economy has slowly ground into a more
of markets continuing to experience growth despite current sustained period of lower growth. The negative external
levels being at or above previous peaks. This trend may environment has been the main cause, with political
indicate that investors are more cautious in underwriting factors, such as Brexit, the Italian budget deficit hike and
investments and that there are very few forced sellers the trade war between the US and China taking their toll
creating a mismatch in price expectations between buyer on sentiment. Leasing conditions remain buoyant in the
and seller. commercial real estate market. In offices, demand hit the
highest level on record across the key European markets,
▸▸In occupier markets, supply pipelines remain relatively
recording more than 10.5 million square metres over
tight across the majority of core developed markets and
the year to Q2 2018. This has pushed the vacancy rate
risks of a supply-induced correction remain relatively low.
down to 7.6% on aggregate, also a record-low. In some
At a local level, there are some supply risks materialising,
submarkets, vacancy is now negligible, which is sustaining
which means that local knowledge and bottom-up
competition for space amongst tenants and squeezing
asset selection are as critical as ever for strategy
take up into secondary locations either as a result of price
implementation. Strong global growth should continue to
pressures due to high rents or due to a lack of options.
support occupier demand as the real estate cycle moves
Logistics rents have been relatively flat on the whole,
to a period of lower total returns; net income growth,
as developers have been happy to concede lower rents
rather than falling yields, will be the main driver of return
in favour of securing longer tenancies. Retail rents are
expectations.
split between the best dominant locations (where above
▸▸At this point in the cycle, core prices appear stretched inflation growth has been evident from listed shopping
relative to estimates of long-term worth. Where market centre reports) and other formats, particularly poor-quality
prices are above long-term worth, this implies that secondary retail which remains challenged.
investors are not being adequately compensated for risk.
In turn, this implies that investors may want to adopt Asia-Pacific
a lower-risk profile at this point in the cycle and make ▸▸From an occupier perspective in Asia-Pacific, occupational
selective sales to re-position portfolios accordingly. take-up of real estate space has continued to strengthen
into 2018. In the region’s mature markets, take-up was
Real Estate Market up over 5% over a 12 month period driven by Japan and
North America Singapore. Logistics demand is strong across the region
▸▸Investment activity remains down from 2015’s record though demand on the office sector is upbeat on growing
volume, but at 85% of peak levels, investors are still demand from co-working operators. Rental growth at a high
enjoying plenty of liquidity. Judging by real estate values, level has shown signs of a recovery, hitting a 2% annual
there is plenty of competition for assets: real estate prices pace in recent quarters but still half the pace of 2015.
are at all-time highs, 35% above last cycle’s peak and Moreover, growth is specific to certain markets or sectors
7.2% above the prior year, as of September. Investors rather than being generalised. Office occupier demand
searching for yield are causing prices to rise more quickly in the mature economies of Japan, Hong Kong, Singapore
in secondary and tertiary locations. While the six major and Australia have shown strength over the past year. An
markets saw a 4.5% price increase y/y, the non-major ongoing theme is pressure to save costs, with occupiers
markets rose by 8.4%. Similarly, suburban office pricing is taking advantage of relatively low rents in CBD locations
up 8.8%, relative to 2.7% in the CBDs, although suburban in some markets. For retail, retail occupier demand is
office prices are even with last cycle’s peak, relative to a subdued due to the growth in e-commerce, and rents have
40% premium in the CBDs. Apartments continue to be the stalled. However, food and experience-based retailers
hottest real estate type of all, with 10.7% y/y increases and are expanding with demand focused on key destinations;
pricing that’s 60% higher than the prior cycle. Industrial is secondary locations are suffering from weak demand.
the other real estate type garnering attention, with prices Occupier demand for logistics is robust.
up 6.2% at a level 20% higher than prior peak. Interest in
the retail sector is bouncing back somewhat as investors
begin to take advantage of select opportunities, but overall
prices remains relatively flat, up just 1.8
Past performance is not a guide to the future.
This information is for professional clients and investment professionals only and should not be relied upon by retail investors.
Global Real Estate Fund Quarterly Update
Investment Update
Q3 2018
Fund Positioning
% Contracted
Top 10 direct assets Fund % Top 10 tenants (Direct only)
Rent
3 & 5 Custom House Plaza, Dublin 8.1 Ogier 12.9
432 St Kilda Rd, Melbourne 7.9 Goossens 10.1
WTC Almeda Park Building 4, Barcelona 7.9 Revlon 8.0
44 Esplanade, Jersey 7.6 Dutch Heart Foundation 5.0
DC Goossens, Veghel, The Netherlands 7.5 Citco 4.5
Galeria Gniezno, Poland 7.3 Mainfreight Logistics Pty Ltd 3.2
Fleming Court, Dublin 5.1 Maxol Ltd 2.8
Retail Park Hana, Kafkova 4.3 Bruel & Kjaer EMS Pty Ltd 2.2
ExtraVerde, The Hague, Prinses Catharina Castorama 2.2
3.4
Amaliastraat 10, The Hague
Mobelix 2.2
Nishi-Shinbashi, Tokyo 3.0
Source: Aberdeen Standard Investments, 30 September 2018
Source: Aberdeen Standard Investments, 30 September 2018
Fund Facts Top 5 listed holdings Fund %
Fund size £411.8m Prologis 1.5
Average lot size £21.8m Duke Realty 1.2
Average lease length 5.6 years* Simon Property Group 1.0
Number of properties 13 Amer Tower Corp 0.9
Number of tenancies 148 Hilton Worldwide Holdings 0.9
Distribution yield 2.58%**
Performance – % growth
Standing Void 1.87%
Source: Aberdeen Standard Investments, 30 September 2018 3mths 6mths 1 yr 3 yrs* 5 yrs*
*Average Unexpired lease term (to first break) – Yrs
**Yields are historic based on the preceding 12 months’ distributions as a Global Real Estate Fund 1.9 3.5 4.4 8.6 6.5
percentage of the mid market unit/share price at date shown. Yields will vary,
do not include any preliminary charges, and investors may be subject to tax on
distributions. Based on institutional income shareclass. Source: Aberdeen Standard Investments, 30 September 2018
Fund performance is quoted net of institutional fees (GBP).
*Returns are annualised
Sector allocation Geographical breakdown
Ireland
United States
Retail 21.1 Netherlands
Australia
Poland
64.6 Spain
Offices United Kingdom
Czech Republic
Japan
Industrial 14.3 India
France
Hong Kong
Other 0.0 Germany
Sweden
Canada
0 10 20 30 40 50 60 70 80 90 Singapore
% 0 5 10 15 20
%
Source: Aberdeen Standard Investments, 30 September 2018 Source: Aberdeen Standard Investments, 30 September 2018
Past performance is not a guide to the future.
This information is for professional clients and investment professionals only and should not be relied upon by retail investors.Global Real Estate Fund Quarterly Update
Investment UpdateQ3 2018
Portfolio Update Property in Focus
The Fund completed the acquisition of the logistics Acquisition
warehouse in Melbourne, Australia, as planned in August.
This new acquisition provides the Fund with exposure to a 1651-1657 Centre Road,
Springvale, Melbourne
very heavy rated House View sector and an income yield of
around 6%. Post quarter end GREF has also placed a Sydney
logistics asset under offer and pending successful due
diligence the purchase is expected to complete during Q4.
This would reduce the Fund’s cash holding from around 11%
to 8% and with the earlier purchase would allocate around
60% of the proceeds from the Perth office sales.
The Dutch logistics warehouse which the Fund acquired in Q4
2017 has continued to witness strong capital value increases
and today is valued 21.5% higher than the initial purchase
price. In Barcelona, the Fund’s third largest tenant, Revlon,
have requested terms to extend their lease by a further
10 years (with a tenant break at year 5). The local asset
management team are engaging with the tenant with a view
to agreeing the terms of the renewal. At the Fund’s Jersey
office asset the tenant’s break option in 2021 has now been
removed thus providing a term certain to November 2025.
At the Fund’s office in The Hague we are in discussions to
extend the leases of Keizer Clinics and IGG Bointon de Groot
by a further 5 years.
During the quarter on the listed side GREF participated in the
share offering of the Invincible J REIT (alongside the other
Funds in the Real Estate listed franchise), added Canadian
Apartments to the portfolio and reduced exposure to Hilton in
favour of preferred industrial name, Duke.
Performance Overview
During Q3 the Fund’s unit price performance was 1.86%
and was largely driven by direct asset returns from Veghel,
Melbourne and Jersey. ▸▸Lot size of circa £9.3m reflecting a net initial yield of 6.0%
▸▸The purchase increases the fund’s exposure to the favoured
industrial sector
▸▸Asset is situated in a good location which will improve
further due a number of imminent infrastructure projects
▸▸Constructed in the 1990s however the spec remains
Forecasts and Outlook suitable for a number of uses (distribution, e-commerce,
▸▸We expect to conclude the purchase of the Sydney final mile delivery)
industrial asset during Q4. The residual cash weighting
would allow for a further purchase within the Australian
industrial sector. We will continue to target acquisitions
in the logistics sector as we believe it is benefitting
from a structural change (at the expense of secondary
retail). We will continue to evaluate office opportunities
in the Sao Paulo office market with the support of Wise
Capital. Medium term we will seek to reduce the Fund’s
exposure to Dublin offices and Central European retail
and will continue our efforts to come out of the collective
investments as and when possible.
Past performance is not a guide to the future.
This information is for professional clients and investment professionals only and should not be relied upon by retail investors.Important Information This document is intended for use by individuals who are familiar with investment terminology. To help you understand this fund and for a full explanation of specific risks and the overall risk profile of this fund and the shareclasses within it, please refer to the Key Investor Information Documents and Prospectus which are available on our website – www.standardlifeinvestments.com. Standard Life Investments has not considered the suitability of investment against your individual needs and risk tolerance. If you are in any doubt as to whether this fund is suitable for you, you should seek advice. An adviser is likely to charge for advice. We are unable to provide investment advice. Information and opinions contained in this document have been compiled or arrived at by Standard Life Investments. Standard Life Investments accept no liability for any loss arising from the use hereof nor make any representation as to their accuracy or completeness. Any underlying research or analysis has been procured by Standard Life Investments for its own purposes and may have been acted on by Standard Life Investments or an associate for its or their own purposes. Standard Life Investments is the trading name of the Standard Life Investments group of companies which includes Standard Life Investments (Mutual Funds) Limited. Issued by Standard Life Investments (Mutual Funds) Limited. Registered in Scotland Number SC123322. Further Information Web: www.standardlifeinvestments.com *Any data contained herein which is attributed to a third party (“Third Party Data”) is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use by Standard Life Aberdeen**. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Standard Life Aberdeen** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Past performance is no guarantee of future results. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates. **Standard Life Aberdeen means the relevant member of the Standard Life Aberdeen group, being Standard Life Aberdeen plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time. “FTSE®”, “FT-SE®”, “Footsie®”, [“FTSE4Good®” and “techMARK] are trade marks jointly owned by the London Stock Exchange Plc and The Financial Times Limited and are used by FTSE International Limited (“FTSE”) under licence. [“All-World®”, “All- Share®” and “All-Small®” are trade marks of FTSE.] The Fund is not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (“FTSE”), by the London Stock Exchange Plc (the “Exchange”), Euronext N.V. (“Euronext”), The Financial Times Limited (“FT”), European Public Real Estate Association (“EPRA”) or the National Association of Real Estate Investment Trusts (“NAREIT”) (together the “Licensor Parties”) and none of the Licensor Parties make any warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE EPRA NAREIT Developed Index (the “Index”) and/or the figure at which the said Index stands at any particular time on any particular day or otherwise. The Index is compiled and calculated by FTSE. However, none of the Licensor Parties shall be liable (whether in negligence or otherwise) to any person for any error in the Index and none of the Licensor Parties shall be under any obligation to advise any person of any error therein. “FTSE®” is a trade mark of the Exchange and the FT, “NAREIT®” is a trade mark of the National Association of Real Estate Investment Trusts and “EPRA®” is a trade mark of EPRA and all are used by FTSE under licence.” Aberdeen Standard Investments is a brand of the investment businesses of Aberdeen Asset Management and Standard Life Investments. Unless otherwise indicated, this document refers only to the investment products, teams, processes and opinions of Standard Life Investments as at the date of publication. Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Standard Life Investments Limited acts as Investment Manager for Standard Life Assurance Limited and Standard Life Pension Funds Limited. Standard Life Assurance Limited is registered in Scotland (SC286833) at Standard Life House, 30 Lothian Road, Edinburgh EH1 2DH. Standard Life Investments Limited is authorised and regulated by the Financial Conduct Authority. Standard Life Assurance Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority. Calls may be monitored and/or recorded to protect both you and us and help with our training. www.aberdeenstandard.com © 2018 Standard Life Aberdeen, images reproduced under licence
You can also read
