Property Portfolios and Real Estate Stocks - SCG, CNI, COF, VCX

Summary

  • The Australian property market has fallen during the COVID-19 pandemic due to increasing rates of unemployment and credit dwindling.
  • Scentre Group to report net operating cash flow of more than A$250 million for half-year ended 30 June 2020.
  • Centuria Capital disclosed acquisition of Telstra Data Centre in Victoria for A$416.7 million, by Centuria Industrial REIT.
  • Centuria Office REIT remains well-positioned with a 9% yield for FY21.
  • The net portfolio valuation of Vicinity Centres declined by ~11.3%, indicating impact COVID-19.

The property market in Australia, with a reasonable start in 2020, is now falling during the COVID-19 pandemic. The market has been nipped by the lockdown and social restrictions that have prohibited buyers from inspecting properties or participate in the auctions.

The increasing rates of unemployment, credit dwindling, including the increase in the lending risk, are together standing as obstacles in the path of recovery. The property market may also be affected because of the current travel restrictions, along with restrictions on immigration.

DID YOU READ: Bubble versus an Affordable Dream Property: The Real ‘Real Estate’ Bargains in Australia

The International Monetary Fund (IMF) projects that economic growth in Australia to plummet by ~6.7% in 2020 as the globe is dealing with the economic consequences arising due to the ongoing COVID-19 turmoil. However, the IMF is forecasting Australia to grow up by 6.1% in 2021, more swiftly than the economies of other countries like Japan, the UK, the US, Germany, Canada, and France.

With this backdrop let us highlight four ASX-listed property stocks- SCG, CNI, COF, VCX

Scentre Group to Report Half-year net Operating Cash flow over A$250 million

Real estate company Scentre Group (ASX:SCG) is the owner as well as the operator of Westfield living centres in Australia and New Zealand. The retail real estate assets AUM of Scentre Group are worth ~A$56.0 billion. This includes 42 Westfield Living Centres, with more than 12k outlets.

Scentre Group anticipates reporting a net operating cash flow of more than A$250 million for the six months ended on 30 June 2020.

The half-year results shall also include valuation of the Scentre’s property portfolio as of 30 June 2020. SCG expects that the carrying value (on 30 June 2020) of the property portfolio shall decline by ~10% from the value on 31 December 2019.

Moreover, Scentre Group has not received any funds from the government of Australia under its Job keeper scheme. The Group maintains available liquidity of approximately A$4.4 billion as of 30 June 2020.

Scentre Group disclosed that it would reveal its results for the half-year ended 30 June 2020 on 25 August 2020.

DO READ: How REITs Are Reacting to COVID-19 Uncertainty: Lens on VCX, ARF, GPT

Stock Information: On 6 August 2020, SCG closed at A$1.920, down 2.29%. The market cap of the Company stood at A$10.2 billion.

Centuria Capital Provided Market Update

Specialist investment group Centuria Capital Limited (ASX:CNI) operates through four major groups- Investment Bonds, Property Funds Management, Reverse Mortgages and Corporate segments. The Company offers several investment opportunities which include listed as well as unlisted real estate funds and tax-effective investment bonds.

On 5 August 2020, Centuria Capital provided market update highlighting its acquisitions, takeover, and platform growth.

  • Acquisition of Telstra Data Centre in Victoria for A$416.7 million, by Centuria Industrial REIT (ASX:CIP).
  • As of 4 August 2020, Centuria had received acceptances for 85.04% of the total ordinary shares in Augusta. The offer is scheduled to close (if not extended) on 10 August 2020. Augusta manages A$1.7 billion in AUM.
  • Once acceptances exceed 90%, Centuria has signalled that it plans to compulsorily acquire all the outstanding shares of Augusta on issue, delist the Company from the NZX, and operate the business as a complete subsidiary.
  • Centuria’s platform has experienced rapid growth in AUM. Since 2017, CAGR growth has exceeded 34% per annum, with over 50% AUM growth since the commencement of FY20.

Centuria Joint CEOs, John McBain and Jason Huljich stated-

Stock Information: On 6 August 2020, CNI closed at A$1.800, down 1.907%. The market cap of the Company stood at A$953.6 million.

HAVE YOU READ: Property market’s struggle expected to persist while Australians focus on stocking food

Centuria Office REIT Remains Well-placed with 9% Yield for FY21

Australia’s largest ASX listed pure-play office REIT Centuria Office REIT (ASX:COF) owns a portfolio of high-quality assets situated in core office markets across Australia. Centuria Office REIT is supervised by an active manager and provides income and capital growth opportunity to the investors through a portfolio of superior Australian office assets.

On 5 August 2020, Centuria Office REIT declared its Full Year financial results for the period ended 30 June 2020.

Owing to its high-level occupancy, solid underlying tenant covenants along with an average building age of nearly 15.9 years, Centuria remains well-positioned to continue delivering decent income returns, with FY21 distribution guidance comparing to the current distribution yield of c.9.0%.

Highlights from the financial front-

  • During FY20, the funds from operations were reported to be ~A$85.4 million.
  • The distributions per unit was 17.8 cpu, in line with the guidance provided for FY20.
  • Statutory net profit for FY20 was reported to be A$23.1 million.
  • The net tangible assets of COF recorded at A$2.49 per unit.
  • For the period April-June 2020 rent collections averaged to nearly 92%.

Source: COF ASX Announcements

Stock Information: On 6 August 2020, COF closed at A$1.945, down 0.256%. The market cap of the Company stood at A$1 billion.

Vicinity Centres’ Portfolio net valuation decline by 11.3%

One of the prominent retail property groups in Australia Vicinity Centres (ASX:VCX) has an integrated asset management platform and almost 64 retail assets under management.

On 24 July 2020, Vicinity disclosed June 2020 valuations for the half-year ended 30 June 2020-

  • The net portfolio valuation of Vicinity declined by ~11.3%, indicating COVID-19 impact and the evolving retail landscape.
  • Net valuation loss in Flagship portfolio was reported being 8.8%.

The table gives an outline of the valuations of Vicinity’s directly-owned portfolio on 30 June 2020 compared to 31 December 2019.

Source: VCX ASX Announcements

The main drivers for the 11.3% valuation decline over the half-year include:

  • 21 basis point moderating in the weighted average capitalisation rate of the portfolio to ~5.47% on 30 June 2020 from 5.26% on 31 December 2019.
  • Short term one-off adjustments related to COVID-19 including the waiver and deferral of rent for impacted tenancies, higher vacancy allowances, as well as improved downtime and leasing capital statements.
  • Market rent growth and reduced sales, and therefore, market rental reversions for ~three years for the pandemic’s full impact.

Moreover, Vicinity Centres stated that additional details on the June 2020 valuations should be incorporated in its FY20 annual results to be released on 19 August 2020.

Stock Information: On 6 August 2020, VCX closed at A$1.270, down 3.053%. The market cap of the Company stood at A$5.96 billion.

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