This issue's featured property: Brisbane's Wintergarden complex
FY2022 Highlights
Performance
- The ISPT Core Fund recorded a Net Total Return of 11.38% over one year and 7.43% over five years at 30 June 2022.
- During FY2022, the ISPT Core Fund grew $1.23B to $18.05B, attributable to improving property values and two property acquisitions.
Income
- Net property income for FY2022 increased $16M to $681.01M, mainly due to reduced rent relief relating to COVID-19 provided to tenants relative to FY2021.
- The ISPT Core Fund rent collections remain stable with 96% of June 2022 billings collected from 100% owned properties.
Q2 2022 VALUATION
• On aggregate, independent valuations for Q2 2022 increased with the total direct property portfolio (excluding unit trust interests) now valued at $16.75B. This reflected an increase of $103.25M (+0.63%) (after development and capital expenditure) from the valuations recorded in Q1 2022.
Key drivers of valuation
Commercial: The portfolio increased by $19.20M* (+0.21%) after capital expenditure. For investment properties, property-level movements after capital expenditure generally ranged between -1.18% and +2.96%. There were three instances of capitalisation rate compression: 18 Marcus Clarke St, Canberra ACT (25bps), 6 National Circuit, Barton ACT (25bps) and The Barrington, 10 Smith St, Parramatta NSW (12.5bps).
Retail: The portfolio increased by $37.37M (+0.74%) after capital expenditure. For investment properties, property-level movements after capital expenditure generally ranged between -0.94% and +2.40%. There were four instances of capitalisation rate compression of 25 bps this quarter, three of which were sub regional shopping centre (Karingal Hub, Frankston VIC, Cranbourne Park, VIC and Halls Head Central, WA). Sub regional sales evidence this quarter is limited, however the market continues to demonstrate divergence, shown by strong performing assets with low capital requirements attracting strong pricing.
Industrial: The portfolio increased by $46.24M (+2.46%) after capital expenditure. This occurred without any capitalisation rate compression within the established or standing assets. The $17.49M of uplift was predominately attributable to increased market and passing rents.
There were two instances of capitalisation rate compression of 25 bps for the assets under development, being Bessemer Business Park, Blacktown NSW and Elevation at Greystanes, Prospect NSW. This contributed to an increase valuation of development projects by $14.23M (+8.31%). Land and ancillary property also experienced a strong quarter with an increase of $14.53M (+5.19%), primarily attributable to an increase in land value at Elevation at Greystanes, Prospect NSW and 744 Boundary Rd, Truganina VIC.
Education: The portfolio increased $5.46M (+1.33%) after capital expenditure. The increase is primarily attributed to movement within the VU City Tower with the valuer highlighting the asset is underpinned by 30-year lease to VU and the adopted market value has a resultant 10-year IRR of 6.35%.
Unlisted property assets are a source of stability and great long-term returns for REI Super’s portfolio.
Approximately 75% 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 in 1994 the ISPT Core Fund has achieved a total gross return as at 30 June 2022 of 9.57% 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. July 2022