What are Australian Real Estate Investment Trusts?
The Australian Real estate investment trust or A-REIT is a company that provides access of property assets to investors; usually that are out of reach for individual investors. A-REITs may appeal to investors interested in property portfolio diversification, offering an alternative to direct property investment. REITs professionally manage a portfolio of real estate assets, enabling investment in property domestically in Australia or internationally. The enable investors to access a mix of real estate assets (including retail, commercial, industrial) that might not be available to an individual investor otherwise. However, some A-REITs specialise in particular sectors like Industrial, Official, Hotel and leisure, Retail and others.
Benefits of Real Estate Investment Trusts
Now, the question arises that “Why the investors are drawn to REITs”?
As the interest rates in Australia are still at historic lows (at 1.25 per cent after the recent cut by the RBA), investors are searching for more income alternatives to the traditional assets.
REITs are one such alternative that comes with the following benefits:
- Quality investment portfolio: REITs provide access to a wide range of Australian properties held through property stocks listed on the ASX.
- Actively managed and diversified: REITs offer exposure to different parts of the property market across the retail, office, industrial and residential sectors.
- Liquidity: REITs are highly liquid assets relative to traditional real estate investing.
- Potential for Capital Growth: Without any requirement to purchase the physical property, investors can earn a share of the income generated by the tenants and capital growth through REITs.
REITs listed on the ASX
There are several REITs that are listed on the Australian Stock Exchange. Let us have a look at three of such REITs that have announced their dividends recently:
Charter Hall Education Trust
Charter Hall Education Trust (ASX: CQE) is one of the largest real estate investment trusts (A-REIT) listed on the ASX that invests in social infrastructure properties. One of Australia’s leading fully integrated property groups, Charter Hall Group (ASX: CHC) manages the Charter Hall Education Trust. The Trust invests in early learning properties within New Zealand and Australia, having about 387 early learning properties in its portfolio.
The Trust has recently declared a dividend of 4 cents per unit for the quarter ending 30 June 2019. The dividend amount is in line with the 2019 full year distribution guidance of 16.0 cents per unit. The dividend is to be paid on 19th July 2019, with the ex-distribution date and record date being 27th June 2019 and 28th June 2019 respectively. Also, the dividend will be 100 per cent unfranked.
The Trust informed that the Distribution Reinvestment Plan will also apply to the distribution with a discount of 1.5 per cent. The DRP price has not yet been reported by the Trust; to be calculated on the basis of the average of the daily volume weighted average market price of all sales of CQE units recorded on the ASX from 2 July 2019 to 15 July 2019.
The Trust announced its results for the half year ending 31st December 2018 on 13th February 2019. The Distributable income improved 1 per cent on pcp to $21.2 million during the period. However, the Statutory profit of the Trust declined from $55.4 million to $42.2 million on pcp, owing to the lower property revaluation increments.
CQE is trading lower on the ASX today at AUD 3.830 (As at 1:10 PM AEST, 24 June 2019), down by 0.26 per cent relative to the last closed price. The stock reported a 52-week high and low value of AUD 3.94 and AUD 2.60, respectively. The performance of the stock has been fairly well in the past that can be witnessed from the YTD return of 27.57 per cent.
Abacus Property Group
A leading diversified property group of Australia, Abacus Property Group (ASX: ABP) invests in real estate opportunities to deliver enhanced returns. Established in 1996, Abacus has a track record of acquiring real estate assets over a wide range of sectors. The Abacus Property Group is a stapled entity that combines the securities in 3 companies including Abacus Storage Operations Limited, Abacus Group Holdings Limited and Abacus Group Projects Limited.
The Group announced a dividend of 9.25 cents for its fully paid ordinary/units stapled securities today. The dividend is related to a period of six months, with the ex-date and record date of 27th June 2019 and 28th June 2019, respectively. The dividend is 100 per cent unfranked and is to be paid on 30th August 2019. The Group informed that the Distribution Reinvestment Plan (DRP) would be applicable at zero per cent discount rate. The DRP price has not yet been revealed by the Group; to be calculated as the volume weighted average price of securities traded on the ASX over the fifteen trading days following the record date.
The Abacus Property Group’s HY19 results were announced on 15th February 2019. The Group reported a rise of 9 per cent in statutory profit to $127.8 million in HY19 from $117.5 million in HY18. However, the underlying profit of the group was 7 per cent down to $72 million relative to HY18.
ABP is currently trading at AUD 4.310 (As at 1:25 PM AEST, 24 June 2019) with a market capitalization of ~ A$2.5 billion The stock has delivered an enormous return of 152.56 per cent since it began trading on the ASX with an impressive YTD return of 32.21%.
Dexus Property Group
One of Australia’s leading real estate groups, Dexus Property Group (ASX: DXS) manages a high-quality Australian property portfolio. The company directly owns 13.9 billion dollars of office and industrial properties and invests only in Australia. Besides this, the company manages a further 15 billion dollars of industrial, healthcare, retail and office properties for third-party clients.
Dexus has announced a distribution of 23.0 cents per stapled security for the six months ending 30th June 2019. Considering the distribution of 27.2 cents per stapled security for the six months ending 31 December 2018, this distribution represents a 5 per cent increase on the prior year, resulting in a total distribution of 50.2 cents per stapled security for the 2019 financial year. 80.1805 per cent of the distribution amount will be unfranked, and the remaining 19.8195 per cent will be franked with 30 per cent corporate tax rate applicable for franking credit.
The declared dividend carries an ex-distribution date and record date of 27th June 2019 and 28th June 2019, respectively. The company informed that the payment date and dispatch of distribution and taxation statements will be 29th August 2019. The company also mentioned that the distribution reinvestment plan will not be in operation for this distribution payment.
The company released its 2019 Half year results in February this year, reporting a rise of 9.8 per cent on Funds from Operations to $353.3 million relative to pcp. The company’s net profit after tax was 27.2 per cent down to $726.4 million during the period.
Stock Performance:DXS is currently trading at AUD 13.510 on the ASX today, up 0.223% (As at 1:25 PM AEST, 24 June 2019) with a a market capitalisation of AUD 14.79 billion. The stock has generated a huge return of 206 per cent since it started trading on the ASX and has provided a decent return of 28.14 per cent on a YTD basis.