AREITS Maybe a time to buy

What are your thoughts on RFF, ARF, VVR with your experience you may see something that I am missing

 

Cant say I am very familiar with those particular funds as I have steered more towards the unlisted key sectors of retail, office and industrial.

But having a quick look I see that RFF's price has not been impacted much by this downturn. Again I don't know much about there assets but based on there price and current yield you would be only buy this if you strongly believe there income and asset price will not be impacted by this virus conundrum. There yield being in the 5% range is not very attractive considering possible downside in the current climate.

ARF looks to be offering a slightly better yield for a listed reit but that sector of childcare and aged care has to many uncertainties for my liking. They are heavily reliant on government funding and there viability can turn on a dime every time the government decided to chop and change the funding model.

VVR which I believe is now coded WPR again offering a 5.4% yield right now is not exciting me. While assets such as service station will probably be the least affected by this virus downturn, 5% yields are what was normal pre virus. I would not be paying it mid virus crisis. I would want a decent discount on any investments I make right now, to allow for the uncertainty that lies ahead.

The prices therefore yields these above reits are offering aren't enticing for me to consider buying in todays virus affected world. That's what I see from the limited knowledge I have on these particular reits.

 

Picked up Charter Hall Retail recently (ASX: CQR) being the non discretionary neighbourhood centres which are fairly defensive. I have an unlisted syndicate investment in the space and it hasn't missed a beat for the past nine years.

At current prices and even with (possible) rent contraction the yield is strong. I imagine Vicinity, Scentre and the like will have big rental resets in the coming 12-18 months. Would probably buy more CQR on the dips or if we see another correction down this year.

 

Cant disagree with that. At the current yield of almost 10%, even if they did slash distribution in half your worse case is a 5% yield.

And that's what I meant by the above post. If your buying now at a 5% yield then you haven't allowed for a possible drop in distributions.

Again only reason I am not considering CQR at current prices is because I am so heavy in unlisted property trusts already. Also the plan from here is to not buy an individual shares. Just sticking with active and index funds from here on. The two individual shares I do hold being CLW and COF I will sell down at some point and move that into the active/index funds I hold.

 

Yeah, very comfortable with non-discretionary Coles/Woolies anchored assets. I can envision the discretionary retail centres could see yield halving and I am not averse to taking a flutter if they retrace and break below their March lows, but long term that landscape is due for disruption anyway even before Covid came along. Those mega malls that aren't destinations and have a "resort feel" will end up as land value. I reckon retail shop fronts will be smaller with provision to try clothing, shoes, etc and order in store on their ipads or then order online at home or on your phone and take a pick of delivery or store pickup. Fashion stores in the future will carry less in store stock. There will be some interesting tech releases in the next five years or so with smart mirrors (virtual trying of garments in any chosen colour and sizing perfect for your frame) and probably not too far after, phone apps that do the same. Most retailers will have to have this enabled to survive online. I invest a little in startups and read a lot. The future of retail is going to change. How will huge discretionary shopping centres be repurposed?

I've had a look at listed Centuria ( COF) @Big A and wonder what office assets will look like moving forward also. I don't envisage everyone will work from home, but Covid enabled a great experiment to show that it can work. Social isolation will be an issue as well as OH&S in a home environment. Those returning to office type work will be spaced out and hot desking and open plan set ups will disappear. Based on the reduced density requirements that might be permanent, will tenants ask for rent reductions or to accommodate their workers require more space at the same rental rates and increase their prices for services to their clients? There may even be a hybrid of mixed office and at home work duties. Interesting new world.

Based on my reading of some of your posts @Big A I understand you hold a great deal of unlisted REIT's. If you were looking at the listed space what would your watchlist hold. Keen to hear your rationale and also that of @The Y-man and other A-REIT's holders here.

 

To be honest I reckon as long as this virus problem passes or we find a vaccine / solution then life will go back to being the same as before. I don't believe people and habits change that easily. If you believed there was a fundamental shift away from a particular asset before this virus then sure. But I felt office investments were a good investment pre virus and I think they will be post virus. I don't believe that all of a sudden there is going to be a shift to working form home. Its barely been a week since things have started to reopen and most people have gone back to the same behaviour. We are creatures of habit.

Either way, as long as populations grow and more business continues to expand there will be continued demand for more office space.

Regarding what I would look at right now in the listed space. Without giving specific names as I would have to have done some research on the individual trusts to be able to say for certain whether I like it at the moment or not, I would say this.

I would look at the big reputable players. I would consider what property asset type they are holding. E.g office, retail , industrial. Are you comfortable with that asset type now and into the future? And at what price / yield?

Industrial is the hot thing right now. Its future is looking bright with the shift towards online shopping. But if you look at the good quality industrial funds I wouldn't pay the asking price / accept the yield they are offering. 5% yield for any commercial property investment is not appealing to me, let alone the ones trading at 4% yields. Give me something close to 7% today for a quality industrial asset fund and that I would consider.

I and many others don't particularly like retail right now and its future prospects. But the right retail with the right manager for the right price / yield and I would consider a retail holding fund.
What's the right price? For me in todays market, if I felt a good manager was holding retail assets that would hold some value in the future regardless of the shift to online shopping and the price offered me a yield of close to 10% today, then sure I would consider it.

Manager wise and based on my dealings on the unlisted side, I like both charter hall and centuria. I am comfortable with there ability to navigate the property market in the difficult times.
I know there are many other reputable managers like goodman and dexus e.t.c, but I have had no experience with them so I cant really comment there.

 

Cheers for your thoughts @Big A. Appreciated.

 

I am personally in RFF and CIP

RFF because of the specialist nature (agriculture). Yield on cost is not amazing, but I believe should be compelling into the future.

CIP because the yields are now more compelling, I do believe the shift towards e-commerce/logistics, just in case instead of purely just in time and probably one of the safer bets in commercial property alongside healthcare in the foreseeable future in my opinion.

 

Hi Bookworm,
Are there any other Reits that you own.?

 

No, only those two. I do hold some unlisted.

 

How do you decide choosing unlisted funds? Just yeild or wale also plays part in your decision making along with occupency?

Occupency may fluctuate therefore hard to guess

 

First and most important is looking at the manager. Especially with unlisted because once your in and normally unlisted being illiquid, your stuck with that manager for a while. I would stick with the larger , reputable players who have history and experience that you can judge. Yield is obviously important but you want to weigh that up against the quality of the asset. Type of asset e.g retail , office , industrial. Location. Tenant quality. And yes wale is also important and is looked at in line with yield. Longer wale assets in prime locations with high quality listed or government tenants you will have to accept a lower yield for.

Then again what do you consider high yield. With unlisted 7%-8% was fairly normal a few years ago. Now 6%-7% is more likely what you will get. Anything over 7% right now and you should be questioning the asset quality.

 

Either live in the CBD/Southbank or in Truganina.

 

Hi folks looking at ADI as it is industrial reit buy this week Looks strong long term