Investors have deserted the listed A-REIT sector at a rate of knots over the past week as bond yields have soared, with the once defensive area losing much of its lustre for general equities players.
Big property devaluations are coming down the pipe, hurting both passive landlords and fund managers who depend on their deal-making nous to generate earnings.
Some areas have been harder hit than others over the past five relentless trading days, with big-name funds player Charter Hall off by almost 10.3 per cent, and industrial titan Goodman down 8.7 per cent, despite their healthy operations.
Retail landlords are suffering with Vicinity Centres off 10.6 per cent and Scentre down 9.3 per cent over that period.
Residential developers are also being hit, with Stockland off by almost 8.9 per cent and Mirvac by 8.8 per cent.
The companies have not reported any operational hiccups, with the property values the pressure point.
Some sub-sectors have been hit even harder.
Childcare landlords have copped a sell-off in the wake of news that Australia’s competition watchdog will review spiralling prices in the sector, as they have leapt by 41 per cent over the past eight years. The Albanese government has ordered the investigation to begin in January and report back by the end of 2023.
Even though the sector’s worries are not immediate, nervous investors exited.
Over the past five days the Charter Hall Social Infrastructure REIT was off by 11.4 per cent and rival Arena REIT dipped even further, losing 12.5 per cent over that time. Sellers are worried that childcare landlords and their tenants, which take on the operational risk, could be left with a smaller piece of the pie.
The swing is a long way from when investors were chasing the sector for its attractive fundamentals, including fixed and CPI-linked rental growth and structural growth in childcare.
It comes as the Australian government 10-year bond yield jumped to 4.09 per cent while the three-year yield rose to 3.76, the highest since 2012. REITs often come under pressure when there are fears of a slowdown, as returns on the assets ease compared to when the economy is in growth mode.
With many A-REITs trading at five-year lows, it could become a question of when some will be taken out of public hands.
Dexus chasing airports owner
Dexus is believed to be positioning itself for another attempt to take control of one of Australia’s airport assets after missing out on Gold Coast airport owner Queensland Airports.
BHP may be mulling new bite at Anglo American
Attention has turned back to BHP and its buying intentions surrounding Anglo American after the former’s chief executive, Mike Henry, recently paid a visit to South Africa.