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Marriott International Real Estate Fund Acc - News
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Marriott Int Real Estate (Acc) comment - Mar 19
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Monday, 10 June 2019
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Fund Manager Comment
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Real Estate Investment Trusts (REITs) have been on something of a roll over the year to date. In part, much of the performance has been no more than a retracing of the falls experienced at the end of 2018, but the recovery is welcome, nonetheless. The main reason behind the recovery has been the tempering of expectations for interest rate rises in the US. The explanation for last year's market falls has been the main reason for this year's rise. Like it or not, the US Federal Reserve Bank is still the leading influencer on global monetary policy. In 2018, higher US interest rates badly affected nearly all market classes. This year, the Fed's policy U-turn has had the opposite effect. Last December's 'dot-plot' projection for two interest rate hikes in 2019 has been changed to precisely none. The Fed now expects just one quarter point rise in 2021. Markets (the ultimate judge and jury) actually think that the Fed could even cut rates later this year. Consequently, interest-sensitive sectors like property are back in fashion, as investors pursue yield, safe in the knowledge that they are not going to be caught out by a sudden change of heart by the central banks.
The reason behind the change in central bank forecasts has been officially attributed to slowing economic growth. The latest GDP figures vindicate this stance with the most recent release suggesting that the US is now growing by 2.9% annually. The latest quarterly figure of 2.6% marks a slowdown in growth from 3.4% in the previous quarter and 4.2% the quarter before that. The trade dispute with China cannot have helped, nor can the US Federal Government shut-down at the start of the year. Either way, rates don't look like they are moving higher any time soon, which will please President Trump who appears to have got his own way, if only by default.
Results released in the first part of 2019 have also been consistently fine to date. Most companies have met expectations. This is no great surprise as REIT results tend to be both stable and predictable. Dividends have only inched higher, however, as companies remain wary of increasing payouts unless they are firmly covered by earnings. Those companies who have increased debt have been duly punished by the market, almost exclusively in the retail sector where trading remains grim.
The reporting season has been a story of haves and have nots, with industrial warehouses still setting the pace but shopping malls and strips lagging badly. Intu, the UK shopping mall company (formerly known as Liberty International), which we don't own, has had a particularly torrid time as store closures affected income and mall valuations leading to a dividend cut and further revaluations. This theme has further to play out as the shopping sector remains oversupplied, retailers are struggling and e-commerce continues to gain traction. At some point, this will be a buying opportunity, but not just yet.
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Marriott Int Real Estate (Acc) comment - Jun 14
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Friday, 29 August 2014
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Fund Manager Comment
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Property shares, measured by the MSCI Global REIT index, consolidated their recent gains with a rise of 7.2% in the second quarter of 2014. This lifted the gain, year-to-date, to 13.6%, well ahead of the broader equity indices in all major markets. The Marriott International Real Estate Fund tracked this gain with a year-to-date rise of 13.5%.
It is noteworthy that, against general expectations, bond (fixed interest) markets have also been strong in 2014, despite the threat of higher interest rates and the ongoing tapering of quantitative easing in the US. Neither event is especially supportive to property shares, but investors are still hungry for yield. Interest rate hikes, when they do arrive, are likely to be in 0.25% incremental shifts and phased in over a period of time, maybe even years. Base rates are, therefore, likely to remain below historic averages for the foreseeable future and so it is the sentiment of the upward move in rates rather than the actual cost to businesses which is likely to influence investors over the months ahead.
Whilst the US has remained reasonably constant in guiding the market towards a likely rate hike in 2015, newly elected Governor of the Bank of England, Mark Carney, has sent out mixed messages, leading a member of the UK's Treasury Select Committee, Pat McFadden, to describe him as an 'unreliable boyfriend'. Mr McFadden has a daughter and 6 siblings, so presumably speaks from experience. The point is that no one knows for sure when the Bank of England intends to make its first move. Autumn 2014 seems the most likely date, but we still wonder whether or not a rate hike will happen this side of the 2015 UK General Elections. The decision may yet be impacted by the referendum on an independent Scotland due in September but, in truth, nobody knows, not even the Governor. Either way, property markets have treated all of the vapidity with indifference. It should come as no surprise when rates do start to move higher and that, perhaps, is the point of the whole exercise.
On the corporate front, the news is rather more interesting. The shareholder spat over the division of the Westfield Group into two parts has been finally resolved. Westfield will now own shopping malls in the US and Europe whilst the Australasian properties will be held in a new company (Scentre Group). We remain long term holders of the Westfield Group but the initial attitude of the Westfield management towards dissenting minority shareholders has not been the best example of good corporate governance. Elsewhere, Land Securities have bought a 30% stake in the Bluewater shopping centre in Kent from rival Australian property developer Lend Lease Corporation. Lend Lease have made a significant profit from this investment and it is a surprise that Land Securities have chosen to buy in at this stage of the cycle for an estimated yield of 4.1%. However, Bluewater has potential for rental growth and Land Securities are leading experts in this area. We are long term holders of Land Securities whose management team has an impressive track record. We would not bet against them.
The immediate outlook for property markets will be determined above all by interest rates. It may, however, also be driven by the ongoing search for portfolio diversification. With this in mind, Norway's $887bn state pension fund has announced that it is looking to boost its investment in real estate markets. Norges Investment Bank (their investment manager) plans to increase real estate exposure in the fund by 1% every year through to 2016. Such a move would take property up to 5% of its total portfolio, from just 1.2% last year, with the emphasis on London and Paris (Europe) and New York, Washington, Boston and San Francisco (US) - e.g. "prime" locations; a very similar macro strategy to our own.
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Marriott Int Real Estate (Acc) comment - Mar 14
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Thursday, 5 June 2014
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Fund Manager Comment
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Property shares generally underperformed a falling equity market in the first quarter of 2014. Technically, there was no good reason behind this other than that the events unfolding in Crimea meant that this was generally a 'risk off' quarter and the smaller average capitalisation size of property shares as an asset class meant that the downside reaction was exaggerated.
Investors are, however, still concerned about the impact of higher rates on the sector. Newly installed Fed chairman Janet Yellen did little to dispel the uncertainty earlier in the month but we remain of the view that when it happens, rates will be raised in a controlled and steady manner. Once markets have adapted to the early realisation that the theoretical has turned into the practical, then we expect the sector reaction to eventually turn positive, much like the reaction to the end of Quantitative Easing in the US.
Otherwise, results from major property REITS continue to trickle down in a positive manner with few shocks, befitting to a market now well into recovery mode. As before, the UK looks to be the brightest star with London centric companies firing on all cylinders. The London effect will gradually ripple upwards and westwards into the rest of the UK, maybe even in time for the 2015 general election but probably too late for the Scottish vote. The US too remains in a steady holding pattern, as does Europe, albeit thanks to an entirely different set of circumstances. Only emerging markets, where we have minimal exposure, remain steadfastly in the doldrums with the events in Ukraine unlikely to change investors' mind sets any time soon.
There have been minimal changes made to the fund during the quarter. Results have been generally in line with expectations and we have seen dividend increases across the board, albeit still not at the rate which we became used to prior to the 2008 banking crisis. Whilst the US and UK are in a pattern of accelerating growth, in Europe the recovery situation remains very patchy. Given the domestic nature of the property market, we remain extremely selective in this area with investments confined to carefully chosen Swedish and German property companies in specific areas of interest and a single French company, Unibail Rodamco, whose track record during and after the banking crisis has been exemplary.
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Marriott Int Real Estate (Acc) comment - Sep 13
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Monday, 30 December 2013
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Fund Manager Comment
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Property shares have had a disappointing quarter relative to the wider equity market. The cause has been the performance of bond markets where yields have risen in anticipation (prematurely, as things turned out) of the tapering of Quantitative Easing. In theory, this pushes up borrowing costs for real estate businesses and puts pressure on rental yields which are often set with reference to prevailing government bond yields.
In practice, most of the companies in the Fund have extremely solid balance sheets and high occupancy rates. Many tenants are locked into fixed or even rising rental agreements, so the impact of higher bond yields is not felt immediately, if at all. A more likely issue for property companies has been the greater attraction of government bonds, from a yield perspective, after the latest setback. With both UK and US benchmark government bond yields flirting with the 3% level, net yields offered by many major US property companies are only fractionally higher but with a greater element of risk.
On the other hand, bonds (other than pricey inflation proofed issues where yields are really low) neither offer a rising income stream nor the potential for growth. Nor do they offer diversification. The only real candidates for such investments right now are pension funds, who have a strict mandate to match future liabilities with known income streams today. In almost every other regard, property shares are the more attractive asset class for the medium and long term, if one can live with the added volatility of equity ownership.
After the recent setback, prices and yields in this sector are looking attractive once again. Companies have been steadily increasing dividend payouts whilst few are reporting significant, if any, distress patterns from their underlying tenant base. Central London has remained especially strong thanks to a shortage of space and opportunities for redevelopment. Improving retail sales on both sides of the Atlantic will help the major shopping malls in the portfolio whilst companies providing ancillary services such as the industrial major Prologis should also benefit from the ongoing economic and corporate recovery. Once the market has come to terms with the world post QE, we expect some form of upward re-rating to the property sector as investors recognise and return to the yield and inflation proofed qualities offered by those companies typical of the sort held by this Fund.
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Marriott Int Real Estate (Acc) comment - Jun 13
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Wednesday, 18 September 2013
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Fund Manager Comment
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The Marriott International Real Estate Fund fell by 4.1% in dollar terms in June bringing the fall over the course of 2013 to date to 0.1%. The industry benchmark Global Property Research 250 Index fell by 2.4% in Dollar terms during the month, losing some of the momentum built up earlier in the year and leaving year-to-date gains at 3%. The Fund remained consistently above its yield benchmark throughout the period, ending the quarter with a gross yield of 4% ahead of the 2.2% composite benchmark drawn from the JP Morgan Global Government Bond Index.
US Real Estate Investment Trusts (REITs) weakened during the month as US Treasury yields rose on worries that the Federal Reserve Bank was considering tapering off its programme of Quantitative Easing, buying bonds in exchange for improved liquidity in the banking system. By the end of June, US 10 year Treasury yields had risen to 2.5% from a low point of 1.6% just a few weeks earlier. This led to a sell off across the investable universe, from bonds to equities, commodities and even gold as investors reined in borrowing in anticipation of higher interest rates and shifted into short-term risk free assets (cash).
Whilst we remain wary of bond markets, we believe that equity markets will quickly regain upwards momentum once the shock of the possible tapering of QE has been fully absorbed. REITs and property companies in general have a closer correlation to lending rates than other equity sectors, hence the initial reaction to the possibility of higher interest rates in the US by the sector, which underperformed the broad equity market by 1%, peak to trough during the recent correction. However, the lengthy period of low rates in the wake of the banking crisis gave many REITs the opportunity to restructure their balance sheets and reduce their interest payments. For the best companies in the sector, any upturn in rates in the near term will not have the impact it might have had in previous rate cycles.
Elsewhere, commercial property markets are showing signs of improvement, in line with the broader economy. Vacancy rates continue to fall and in most of the major central business districts around the world, demand for high quality property remains good with the exception of the Eurozone (ex-Germany) where high unemployment rates and falling GDP continue to take their toll on most areas of the market.
Excellent results from our central London specialists British Land and Land Securities in May underlined the strength of the commercial property market in the city. The supply of good quality office and retail space in this area remains close to all-time lows and is severely restricted by planning conditions preventing easy development. As yet, such strength has yet to reach the rest of the UK which remains lacklustre at best. As we reported in May, there has been a notable increase in activity in the industrial sub-sector of the market where operators such as Prologis and Segro are well positioned to take advantage of growing demand for their warehouse space which is typically strategically positioned near to major airport and other transport hubs.
We expect equity markets to stabilise quite quickly following the recent sell off. Nothing has really changed other than the realisation that lending rates cannot remain low forever. The Fed has now put a draft timetable on the course of action over the next couple of years which is probably not good news for long term bond investors but bodes well for equity investors if world GDP growth can continue to accelerate from current levels.
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Marriott Int Real Estate (Acc) comment - Mar 13
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Thursday, 23 May 2013
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Fund Manager Comment
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The Marriott International Real Estate Fund gained 1.1% in dollar terms during the first quarter of 2013. This performance reflected a generally strong period for global equity markets whilst a number of other asset classes, notably government bonds, lost ground. Performance was distorted to some extent by currency movements, in particular, the strength of the US Dollar which gained nearly 7% against sterling since the start of the year flattering returns from internationally diversified portfolios measured in sterling but having the opposite effect on dollar denominated accounts. Global equities rose by 14% during the quarter led by the US and Japan. Once again, emerging markets were relative laggards gaining just 4.8% in sterling terms over the same period.
The Fund remained consistently above its yield benchmark throughout the period ending the quarter with a gross yield of 3.7%, ahead of the 1.7% composite benchmark drawn from the JP Morgan Global Government Bond Index.
Quoted real estate generally underperformed the wider market in the first quarter of 2013. As far as the Fund is concerned, some of this can be attributed to currency movements - many of the underlying Fund holdings are quite domestic in their nature, in contrast to the growing international sales base of other non-property market constituents. Property is also typically a late cyclical asset class and we expect some catch up in the second quarter of 2013 if, as we anticipate, global equities extend their recent strong run.
Individual company news has been good during the last few weeks. Numbers from some of our core holdings in the likes of Unibail-Rodamco and British Land have underscored our desire to expose the fund exclusively to leading management teams in their respective sectors. This emphases our belief that the pause in the property sector rally is temporary and expect it to resume, especially as investors rotate out of those sectors which have out-performed during the latest rally.
The strength of the equity market was at odds with the disappointing economic news from the UK and, in particular, the Eurozone. China, too, is struggling to make the transformation from a rapidly growing emerging market to a world superpower, a problem reflected in the relatively disappointing returns from Asia during the quarter.
On the other hand, the US economy continues to gain momentum. Whilst the pace of growth is subdued by historic standards, it is growth nonetheless and much of the stock market's recent strength has been based on the assumption that US growth will eventually lead to a global recovery. Certainly, despite the problems in Cyprus, the Eurozone crisis feels very much like yesterday's story even if the core problems still remain.
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Marriott Int Real Estate (Acc) comment - Sep 12
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Wednesday, 14 November 2012
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Fund Manager Comment
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Global Real Estate followed the broader market higher during the third quarter of 2012, albeit at a slightly subdued pace. Whilst valuations of prime commercial property assets have been firm, occupancy levels remain vulnerable to contraction, most notably in the retail sub sector which continues to struggle with flat sales figures and store closures. Of course, prime commercial property sites are so called because of their location and the majority of businesses in our real estate portfolio own tracts of land and buildings in some of the best sites in the world which, if not entirely immune to economic slowdown, are at least shielded from the worst of any impact.
The largest component of the portfolio is located in the US and Canada which, we continue to believe, offer the best prospect for recovery from the fallout of the 2008 banking crisis. With the US housing market showing tentative signs of recovery and unemployment levels stabilising, prospects for growth in certain regions remain reasonable. In the UK, the focus remains very much on the central London market which is effectively in a housing bubble although demand from wealthy immigrants shows little sign of easing. This effect has a natural impact across all sub sectors of the central London market where nearly all of our UK holdings have good exposure. Europe, on the other hand, remains depressed although valuations are low. We do not expect an early turnaround in this area, however, which remains a relatively underweight part of the Fund portfolio.
Not all parts of the portfolio operate in such difficult and often stagnant markets. Our only Asian equity, The Link REIT in Hong Kong, which is the largest quoted REIT in Asia, continues to benefit from a strong trading performance from its portfolio of shopping malls and car parks. Land in Hong Kong, where The Link carries out most of its business, is underpinned by scarcity value making this an ideal investment and one which the Fund has held for several years. As an investment, in addition to the rising value of the company's land and assets, The Link has always pursued an active dividend policy and avoided the dividend cuts incurred by other parts of the industry in the wake of the banking crisis. The current yield of 3.5% is paid gross to investors and distributions have grown since the first dividend was paid in August 2006.
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Marriott Int Real Estate (Acc) comment - Jun 12
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Wednesday, 15 August 2012
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Fund Manager Comment
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International Real Estate has held up remarkably well in 2012 to date. The Fund returned 11% over the first half of the year which was an improvement on the returns from global equities (+6%) and global bonds (+0.4%) which have struggled to make much headway against a backdrop of difficult market conditions. The company visits we have made over the course of the last quarter have highlighted why this level of outperformance has occurred and why it is likely to continue in the near future if, as we expect, markets remain choppy pending a resolution to the Eurozone crisis.
Firstly, most of the securities in the underlying Fund portfolio have a strong tenant base. This is absolutely critical to the success or otherwise of a commercial property portfolio as it enables landlords to look through short term weaknesses in the market place and to build up cash balances either for acquisitions, refurbishments or return of cash to shareholders by way of dividends. Secondly, and not unrelated to the first point, property portfolios need to be centrally located in areas of above average growth. In the UK this currently means London although a number of our property companies have sites out of London where returns have been robust, if not spectacular. This leads to the third criteria that management teams must be able to add value in falling as well as rising markets. Whilst age and experience is often considered to be a barrier to entry in more hi-tech markets, in property it is almost a prerequisite for success. That is not to say that younger management teams cannot do as well as their more experienced colleagues. It is just that successful property investing is a longer term, cyclical business and we are generally reassured by the longevity and track records of the management teams running the businesses in which we invest.
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Marriott Int Real Estate (Acc) comment - Mar 12
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Monday, 21 May 2012
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Fund Manager Comment
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It has been a good start to 2012 with the Fund up by nearly 11% in Dollar terms in the first quarter. To a greater extent, this move reflected the ongoing recovery in the US commercial property market where the fund has a near 50% exposure. Much of the stock-market gains in the quarter were driven by a recovery in financial and technology stocks, many of which carried on their ascendancy from the depths reached in the third quarter of 2011. Nonetheless, the pattern of recovery in the major commercial property sector is well underway and the fund price has now doubled over the last three years.
Improving economic conditions translate into improved profitability for the companies in the Fund portfolio, most of which have a high correlation with the wider economy. Better GDP growth means a more secure tenant base and provides scope for rental growth as well as a reduction in tenant failure, something which has hurt UK high street retailers in recent years. Despite the difficult conditions in this market, our holdings have proved to be generally resilient with the exception of those exposed to the UK industrial sub sector which has suffered as economic growth in the region has failed to gain meaningful traction. Elsewhere, however, the Canadian market, which represents our third largest regional exposure (after the UK) has fared well whilst our European holdings have been resilient despite the ongoing eurozone crisis.
We do not expect to shift asset allocation significantly within the portfolio in the short term. The large weighting in North America has worked in our favour and the US is now some way ahead of other major economies in terms of recovery from the banking crisis, in part thanks to its relatively limited exposure to Europe (from an export/import perspective). We also remain diversified across a range of sub sectors and we expect the ongoing recovery to filter through to investors in the form of improved dividend payouts as the year progresses. The commercial property sector remains divided between the 'haves' and the 'have nots' with the best opportunities being found in the more significant players with financial muscle and deeper pockets. From our perspective, this means a focus on top end city centre properties rather than second tier businesses where conditions are far more difficult. Inevitably, it also means a focus on the leading Real Estate Investment Trusts where dividends are robustly covered by rental income streams and liquidity is ample.
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Marriott Int Real Estate (Acc) comment - Dec 11
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Monday, 19 March 2012
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Fund Manager Comment
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The global real estate sector had a tough 2011, falling by 8% in Dollar terms. The International Real Estate Fund fell by 3.8% over the course of the year, due in part, to its large exposure to the US Real Estate Investment Trust (REIT) sector, which was the only major global property market to record a meaningful total return over the year. Australia, where we also have an overweight position, performed reasonably well but the UK and especially Europe were both disappointing as their respective economies spent most of 2011 grappling with the fallout from the Euro zone crisis and fears of a double dip recession.
Within the portfolio, shopping malls performed well. Apartment companies also performed well as the shift from home ownership gathered momentum but it was another poor year for the hotel sector. This helped our relative performance as we typically avoid this part of the market. Elsewhere, the office sector performed indifferently thanks to weakening employment trends whilst industrials too lagged the market thanks to their correlation with the wider economy. Interestingly, emerging market property, where we have a very low weighting, performed badly as risk aversion prevailed, liquidity dried up and economic growth sagged.
We do not expect to alter our asset allocation significantly in the first half of 2012. Growth in the US is forecast to be the highest in major markets, at least in the first half of 2012, and the US has relatively low exposure to Europe. We may reduce our holdings in this region as, Germany aside, it will be some time before the Euro zone crisis abates although yields are attractive and dividend payouts are secure thanks to the widespread financial restructuring which took place in the wake of the 2008 credit crisis. Central London prices are holding up well, but outside this area the UK is suffering from anemic economic growth and high unemployment, neither of which is likely to improve in the near term. However, from a yield perspective, the UK market is attractive and withholding taxes are generally lower than in other parts of the world.
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Marriott Int Real Estate (Acc) comment - Sep 11
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Thursday, 22 December 2011
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Fund Manager Comment
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The quoted property sector held up relatively well against the wider financial sector in the third quarter of 2011 although this was cold comfort for investors who still watched their investments fall by 15% in Dollar terms versus a fall in the wider market of 17.3%. We have referred to the decoupling of the property sector from the wider financial sector in the past and this trend remains very much intact. To a greater extent, this reflects the poor attributes of the banking sector but it also highlights the fact that the property sector is underpinned by strong fundamentals and, in the case of our own holdings, because of balance sheet strength and quality of the underlying tenancy base.
Consensus earnings for the listed property sector are now forecast to slow by around 1% in 2012. Our work on dividend projections for the same period suggests either flat or slightly rising rates across most sub sectors. The downturn in the property market, though, reflects wider concerns over the economy and fears of a sharper deterioration in earnings than are currently being reported by property companies operating on the front line.
The sector, however, is not immune from this sort of global downdraft despite the apparent lack of correlation between, for example, government occupied office space in Washington DC and the threat of a Greek default. One area where we do have a more direct exposure to the global downturn is in the industrial sub sector where companies such as Prologis and Segro have been marked down in anticipation of a slowdown in their respective markets. At 6% in total, this is a relatively small component of the fund but more sensitive to the current crisis than the more domestic companies elsewhere in the portfolio.
We believe that, from a price perspective, the property sector will stage a recovery assuming that North America and the UK, in particular, manage to avoid recession and that the Eurozone produces a credible package to salvage the debt crisis. However, the breadth of the recent sell off has left very few areas unscathed and, despite the nature of the underlying holdings, property companies are not immune from a general flight to risk free assets such as treasury bonds and cash. At this point in the cycle, we are looking to add to some of our existing holdings in the fund to lock in dividend yields and prepare ourselves for the eventual upturn. Admittedly, this may be some time away but when it arrives, the best value will already have gone and the discount price gap to net asset value will have closed. Investors in the fund should be looking to do the same thing; adding to holdings at these lower levels and allowing the underlying equities time to recover whilst benefiting from the reliable income stream.
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Marriott Int Real Estate (Acc) comment - Jun 11
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Thursday, 8 September 2011
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Fund Manager Comment
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Unlike the beleaguered banks, the property companies in our universe have little or no exposure to the Greek crisis and the property sector has decoupled from the broader financial sector as a result. Property sometimes has a patchy record in times of high inflation which is usually accompanied by high interest rates and economic malaise.
Unusually, with interest rates so low, the better commercial property companies are neither struggling to raise capital nor worried about escalating levels of debt. It is, however, a sector of 'haves' and 'have nots'. The 'haves' include leading names in the commercial space with high occupancy levels and a great tenant mix across all sub sectors of the market. These companies typically own prime real estate in desirable locations, depending on their exact business. Industrial winners like Prologis own the best warehouses close to airports and other transport hubs; leading retail REITs like British Land or Riocan own the best shopping centres; downtown office owners like Washington REIT own prime real estate in key city centres and so on. These and others like them are the sort of names we own in the International Real Estate Fund.
On the other hand, the residential market in the US in particular remains in disarray. New mortgage approvals are at historic lows and most urban markets are overloaded with empty properties for sale, a legacy of the 2008/9 credit crunch. In the UK and swathes of Europe too, the commercial property market outside of major hubs and cities is still weak. The Fund, however, owns as many of the best real estate investment trusts in the UK, US and Europe that we are able to find. Yields remains good (gross dividend yields are typically over 4%) and the strong are getting stronger as second or third tier businesses struggle in an environment of lacklustre growth and high unemployment. In time, the strength of the urban sector will spread to the rest of the region but not for 2 or 3 years, in our view. However, despite the good performance of the REIT sector over the last 12 months, valuations remain significantly below their pre credit crisis levels and we believe that the next 5 years will prove to be particularly rewarding for the Fund's investors on a total return basis as economic growth slowly gathers momentum and investors revisit a relatively neglected asset class.
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Marriott Int Real Estate (Acc) comment - Mar 11
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Wednesday, 25 May 2011
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Fund Manager Comment
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Commercial real estate has been a good performer in 2011 to date with the distribution units in Marriott International Real Estate Fund up by nearly 6% after adjusting for the recent dividend payout. In part, this is thanks to the first world nature of the underlying investments. Since the start of the year, developed economies have out-performed emerging markets, an area where the Fund has little direct exposure. Unlike the troubled residential sector, commercial property is proving to be a good investment both for income seekers and for investors wishing to put money into an inflation hedge other than gold which has the disadvantage of paying no dividend and proving impossible to value from a fundamental perspective. Commercial property occupancy levels on both sides of the Atlantic are very good and, as we have commented before, balance sheets are exceptionally strong, resulting in excellent dividend streams. Liquidity in the fund remains. The holdings in our fund are blue chip in nature; tenancy bases are of the highest quality and defaults, whilst not unheard of, are rare. We have also seen some corporate activity during the quarter with the recently announced $14.2bn merger of two of our US REIT holdings AMB and Prologis helping to support an already buoyant sector. With general equity markets remaining volatile, government bonds and cash yields at low levels and the political risk of emerging market investing rising daily, we believe that the commercial property sector is a relatively low risk area in which to be exposed in 2011, something which we expect stock prices to reflect as the year progresses.
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Marriott Int Real Estate (Acc) comment - Dec 10
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Thursday, 24 February 2011
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Fund Manager Comment
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Real estate owning equities have continued to outperform the broader equity market into the final quarter of 2010. It has, however, paid to be selective. Whilst major city centre properties have recovered remarkably quickly from the credit crisis of 2008/9, non core markets in suburban areas continue to generally struggle, as do developers. Here, vacancy rates often remain high across all sectors, but especially retail where smaller players are still struggling to make headway against a backdrop of high unemployment and lacklustre growth. As we have noted before, the strongest players have already raised cash to provide a buffer against any further market weakness and a fighting fund to acquire distressed assets at low prices. These companies form the core of our portfolio and with dividend growth on the ascendancy, the real estate investment trust sector is rapidly returning to a period of steady inflation proofed growth with excellent dividend yields, particularly when compared to returns from bonds and cash. The latest round of Quantitative Easing will also help the sector. We do not expect interest rates to start moving higher at least until 2012 by which time credit markets should have eased further. Our principal worry is that the weakness of the Dollar will begin to sap returns in global terms but currency predictions are fraught with uncertainty and so our best course of action is to remain currency neutral, allowing us to concentrate on holding assets of the highest quality in those centres where we expect growth to continue to accelerate throughout 2010 and into 2011.
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Sector Changed
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Tuesday, 28 December 2010
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Official Announcement
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The fund changed sectors from Global--Equity--Varied Specialist to Global--Real Estate--General on 28 Dec 2010
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Marriott Int Real Estate (Acc) comment - Jun 10
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Wednesday, 8 September 2010
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Fund Manager Comment
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After rallying strongly in 2009 and the first quarter of 2010, the real estate sector has tracked the financial sector downwards amid concerns over the possible break up of the Euro zone and the ongoing debt crisis surrounding Greece and the peripheral Euro zone economies. On the street, vacancy levels appear to be stabilising, dividend suspensions are ending and corporate activity, supported by capital raising exercises, is on the increase. Whilst the Fund holds shares in companies owning some of the finest city centre real estate in the world, future growth depends on economic recovery. The emphasis on the US and Canada within the fund supports our view that North America will lead any global recovery helped by demand from developing markets. The key to growth in the real estate sector lies with the availability of credit, something which is gradually improving after the near collapse of the mortgage market in 2008. It also depends upon the creation of jobs and there is, as yet, no clear evidence that the economic recovery is translating into lower jobless figures. There is, however, evidence to suggest that private equity activity is increasing, particularly in prime city centre properties but the market remains patchy and we expect it to be several months before we can confidently predict a wider and more sustainable recovery.
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Marriott Int Real Estate (Acc) comment - Mar 10
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Thursday, 24 June 2010
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Fund Manager Comment
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Returns from the quoted real estate sector have settled down to a more consistent trading pattern since the start of the year. Most companies which cut dividends in 2009 in response to the credit crisis have now resumed payouts and the flurry of capital raising activity appears to be coming to an end. Although over half of the Fund is invested into North American REITs, Dollar strength has somewhat diluted performance over the course of the year to date. Property companies tend on the whole to be quite domestically focussed and we are always mindful of the need to be invested in strong economies as well as the top property companies within the sector. Our exposure to Canada and Australia for example, whose currencies have been strong of late, has had a positive impact upon performance. As at the start of March, the Fund was fully invested.
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Marriott Int Real Estate (Acc) comment - Dec 09
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Wednesday, 24 March 2010
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Fund Manager Comment
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The real estate sector enters 2010 at an interesting junction in its recent history. After performing poorly in 2007 and 2008 as the credit crisis unfolded, real estate bounced back spectacularly in 2009 on the back of improving credit markets and a generally better economic backdrop. Access to capital markets is essential for many real estate companies and the best of these businesses have been able to improve their balance sheets in 2009 providing ample capital for growth moving forward. Ironically, although share prices are still significantly below the highest levels reached in early 2007, many such companies are in far better shape now than they were then. Dividends have been largely restored, tenant defaults are falling and the strongest survivors are actively seeking out distressed sellers in the market. The focus on quality and liquidity within the Marriott International Real Estate Fund means that Marriott is able to invest in many of these leading businesses and expect a number of them to initiate modest dividend rises in 2010 as economic conditions continue to improve.
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Marriott Int Real Estate (Acc) comment - Sep 09
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Thursday, 17 December 2009
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Fund Manager Comment
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Real Estate tracked the market lower in October thanks to a combination of profit taking and general nervousness over the direction of the market after such stellar performance since March. Results from US REITs have, however, been marginally better than expectations and this has provided some support to share prices albeit not enough to prevent indices and this fund from slipping into the red during October. Moving forward, we expect markets to remain range bound until more evidence can be provided that vacancy rates and rents are levelling out. Most capital restructuring has already taken place either through debt or rights issues and we do not anticipate further dividend cuts of the kind which decimated the sector this time last year. Yields remain very good and the gross yield generated by the fund is over double the yield available from the benchmark 10 year US Treasury bond.
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