This issue’s featured property: 447 Collins Street, Melbourne
Highlights
- The Fund's 12 month rolling total net return to March 2022 was 12.24%.
- There has been no further damage or related insurance claims on the Fund’s properties due to the floods in QLD and NSW. Our teams are safe and well, with the Fund’s properties in affected areas fully operational.
- Following Probuild’s Voluntary Administration, ISPT has reached an agreement with Roberts Co (VIC) as a replacement builder, to recommence development works in early April 2022 across affected projects. The agreement will see Sydney-based Roberts
Co establishing a Victorian presence and re-employing much of Probuild’s team and subcontractors.
The new partnership will include the Fund’s current development at 500 Bourke St, Melbourne and provide post completion support and defects coverage for our completed projects at Karingal Hub, Frankston VIC and VU City Tower, Melbourne VIC.
- The Fund’s rent collections remain stable with 93% of March 2022 billings collected from 100% owned properties.
Q1 2022 Valuation
On aggregate, independent valuations for Q1 2022 increased with the total direct property portfolio (excluding unit trust interests) now valued at $16.43B. This reflected an increase of $166.32M (after development and capital expenditure) from the valuations
recorded in Q4 2021.
Key drivers of valuation
Commercial: Increased by $74.84M after capital expenditure. Property-level movement after capital expenditure ranged between -4.50% and +10.04%. Movement has been attributed to value-accretive leasing and/or re-leasing activity, and selected
firming of investment metrics, with the assets with the longer WALEs and strong tenant covenants experiencing the greatest tightening of metrics. Several assets otherwise benefiting from capitalisation rate support have seen valuation stability or
gains offset by softening leasing fundamentals or increased allowances (downtime, incentives, and refurbishment on expiry). This has been more widely observed in the Melbourne, Brisbane, and Perth markets.
Retail: Increased by $25.64M after capital expenditure. The investment market continued to experience high demand and strong transaction activity which has provided valuers with evidence to firm capitalisation rates and discount rates
throughout the portfolio, particularly in the sub-regional market. CBD Retail continues to experience the greatest valuation declines, primarily due to valuers taking a conservative approach to the sustainability of retail rental income. As VIC and
NSW emerge from government-imposed lockdowns, valuers continue to focus on sustainable gross occupancy costs, ensuring market rentals are in line with industry benchmarks.
Logistics & warehousing: Increased by $53.41M after capital expenditure driven by further capitalisation rate compression, following continued strong demand for prime and well-leased logistical and warehousing assets. This market
has demonstrated the buyer depth is deeper and stronger than pre COVID-19 as we continue to see a substantial number of large-scale transactions attracting interest from institutional investors.
Education: Increased $12.44M after capital expenditure, which is attributable to valuation movement within the VU City Tower gross realisation value and the release of some of the retained development allowances no longer needed post
Practical Completion.
Unlisted property assets are a source of stability and great long-term returns for REI Super’s portfolio.
Approximately 65% of REI Super’s property portfolio within Balanced is invested in unlisted property assets, through one of our long-standing investment managers, Industry Super Property Trust (ISPT).
Unlisted property assets are assets that are not listed on the Australian stock exchange and are generally not readily available to individual investors.
Unlisted property investments are excellent long-term investments, providing a combination of growth and income to REI Super’s portfolio. They also have fewer short-term ups and downs in their returns than many investments.
REI Super’s investments in ISPT are through its Core Fund, which is a diverse portfolio of around 75 Australian commercial, industrial and retail properties across capital cities and regional centres.
Since inception on 31 August 1994 the ISPT Core Fund has achieved a total gross return as at 31 March 2022 of 9.56% p.a.
The portfolio includes many iconic Australian properties:
- Melbourne’s GPO
- Westfield’s Doncaster Shopping Centre, Melbourne
- Brisbane’s Wintergarden complex
- Casselden Place, Melbourne
- Liberty Place in Castlereagh Street, Sydney
- 2 National Circuit, Canberra
- 100 St Georges Terrace, Perth
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Future investment performance can vary from past performance, and you should not base your decision to invest in REI Super simply on past performance. Past earning rates are not an indicator of future earning rates. The investment returns of REI Super are not guaranteed, and the value of the investment may rise or fall.
The information contained in this article does not constitute financial product advice. However, to the extent that the information may be considered to be general financial product advice, REI Super advises that REI Super has not considered any individual person’s objectives, financial situation or particular needs. Individuals need to consider whether the advice is appropriate in light of their goals, objectives and current situation.
REI Superannuation Fund Pty Ltd ABN 68 056 044 770 AFSL 240569. RSE L 0000314 REI Super ABN 76 641 658 449 RSE R1000412 MySuper unique identifier 76641658449129. April 2022