The most recent chance to peek under the bonnet of the Australian Real Estate Investment Trust or Listed Property (AREIT) sector was most welcome, arriving after an eventful 12 months. US voters elected a surprise new leader, US interest rates were increased for the first time since the global financial crisis and, more recently, political tensions in North Korea have grabbed the headlines.
None of the uncertainty provoked by these events was evident in the results. The sector remains primed to deliver the defensive and sustainable income returns on which investors have come to rely.
Balance sheet strength is improving, especially among the stocks in APN’s portfolios; property-level operating metrics were impressive; and managers have taken sensible capital management decisions. For us, this was a most satisfying reporting season, with a few fascinating developments.
These impressive results have been delivered in a challenging environment. As the table below shows, economic growth, core inflation and wage growth are now all lower than they were two years ago.
And yet the retail, office and industrial sectors each delivered comparable income growth of between 2-3% to 30 June 2017 whilst maintaining high occupancy levels. This performance, along with capital and investment market dynamics, was reflected in rising AREIT book values.