|
|
Catalyst Global Real Estate UCITS Fund A - News
|
|
|
|
|
Catalyst Global Real Estate comment - Sep 19
|
|
Wednesday, 27 November 2019
|
Fund Manager Comment
|
Our fund benchmark, the FTSE EPRA/NAREIT Developed Net Rental Index, recorded a net total USD return of 2.48% in September. The best performing listed real estate market was the UK, which recorded a total USD return of 8.32% for the month. Australia recorded the lowest total USD return of -3.17%.
Year to date, our fund benchmark has recorded a net total USD return of 21.20%. The best performing listed real estate market for the nine months was the US, with a net total USD return of 25.55%. Hong Kong recorded the lowest total USD return of 3.44% for the nine months.
Global debt and equity market returns have been strong so far this year. The MSCI World Index is up just over 18% and the 10-year US Treasury note has decreased by 100bps. Investment grade corporate bonds, as measured by the Moody’s BAA Index, are trading below 3.9%, the lowest yield ever. Most of the government debt in Europe, as well as in Japan, is trading at negative yields. This low-yielding environment has been a tailwind for real estate returns, as demand for assets that deliver positive cash flow with growth prospects has been high.
However, it goes without saying, that not all listed real estate has performed equally well. There is a wide range in the best and the worst company returns this year. Some of the highest returns for companies on our radar are (all returns are in USD): Equinix 66% (Data Centres), Rexford 52% (Industrial), and Invitation Homes 50% (Single Family Homes). The stocks that have delivered the lowest returns are all retail names, with Intu (UK) delivering -62%, CBL & Associates (US) -30%, and Wereldhave (Continental Europe) -23% year to date.
The wide range of returns reflects how drastically different the fundamentals and outlook can be for various real estate sectors. In our August report we wrote extensively about Data Centres and Towers, which continue to experience secular tailwinds from the ever-increasing consumption, storage and transmission of data to and from smart devices. However, attractive development profit margins have led to increased supply in some data centre markets, notably in Northern Virginia – the largest and most important data centre market. CBRE estimates that around 55% of new data centre developments in Northern Virginia is pre-leased. Leasing transactions can be lumpy in the data centre business. Due to strong demand, expectations are for the remaining available space to be leased without causing significant disruptions in market rents.
Overall, real estate fundamentals remain healthy, mainly due to manageable supply levels relative to demand. The estimated forward FAD (Funds Available for Distribution) yield for the sector is 4.46%, and medium-term growth prospects are decent. Listed real estate has performed well this year and, on the whole, appears to be fairly priced given our USD real return requirement of approximately 4.8% and current global bond yields. Within the real estate universe, more attractively priced opportunities exist in specific real estate sectors and stocks.
|
| |
|
Catalyst Global Real Estate comment - Mar 19
|
|
Thursday, 6 June 2019
|
Fund Manager Comment
|
Our fund benchmark, the FTSE EPRA/NAREIT Developed Net Rental Index, recorded a net total USD return of 3.22% in March. The best performing listed real estate market was Australia, which recorded a total USD return of 5.59% for the month. The UK recorded the lowest total USD return of -1.77%.
Listed real estate stock performance has been admirable during the first quarter of 2019. Quarterly earnings results as a whole were in-line with expectations and most welcomed given the uncertain macro-economic backdrop. In light of the performance year-to-date and recent results, it is an opportune time to share key takeaways from the management meetings and investor discussions in which we participated, at the Citi Global Property CEO Conference held in Miami this March.
A distinguishing factor of the conference is the significant attendance of CEOs and supporting executives. This allows for meaningful discussions within the context of the businesses themselves and the environments in which they operate, as well as the strategies being employed to seize opportunities, mitigate risks and ultimately create long-term shareholder value. While attendees were relatively upbeat about the prospects for real estate stock performance, they acknowledged that the cycle is protracted and is likely a maturing story.
Good management teams have generally looked to improve portfolio quality by selling lower quality assets and reinvesting the proceeds into core existing assets at attractive risk-adjusted returns, as well as by buying better quality real estate that should prove more defensive in tougher conditions. While management teams by-and-large anticipate that interest rates will remain low, many have taken the opportunity to fortify balance sheets by deleveraging through asset sales or equity issuances, fixing debt at low interest rates and extending debt maturity profiles. Additionally, demand for real estate and new supply seem to be in equilibrium, and development pipelines remain disciplined and of a manageable scale given the perceived maturity of the cycle. Barring any severe macro-economic shock, companies exhibiting this confluence of factors are well positioned for the future. Notwithstanding this, the different real estate sub-sectors are exposed to unique fundamentals, geographic nuances, headwinds and tailwinds. Please refer to our monthly report for a summary of how the various sectors are currently positioned.
Overall, real estate fundamentals remain healthy, mainly due to manageable supply levels relative to demand. The estimated forward FAD (Funds Available for Distribution) yield for the sector is 4.61%, and medium-term growth prospects are decent. Listed real estate appears to be fairly priced to slightly expensive, while more attractively priced opportunities exist in specific real estate sectors and stocks.
|
| |
|
Management Company Switched
|
|
Friday, 13 November 2015
|
Official Announcement
|
The fund switched Management Company from PSG Fund Management (CI) Ltd. to ML Capital Asset Management Ltd. on 01 October 2014
|
| |
|
Catalyst Global Real Estate comment - Jun 14
|
|
Tuesday, 16 September 2014
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a net total USD return of 1.24% in June. The best performing listed real estate market was Australia, which recorded a net total USD return of 4.01%. Asia ex Australia recorded the lowest net total USD return for June of 0.60%.
The real estate markets have had a strong first six months of the year, with the global index up 15.34% during this period. The strong market appears to have been driven primarily by good company results and positive company outlooks, supportive capital markets and strong real estate fundamentals in most regions. These strong real estate fundamentals should continue as long as supply remains limited. There is a risk that as market rents recover supply will start to increase and that is what most public real estate companies are watching closely as the recovery continues.
During the month the Westfield Group officially demerged its Australia/ NZ business from its US, UK and Europe business and merged it with Westfield Retails Trust's business to form a new entity called Scentre Group. The restructure resulted in the formation of two independent and fully integrated property groups namely Westfield Corporation and Scentre Group. Scentre Group will be an Australia/NZ focused company comprising a dominant retail property portfolio of 47 shopping centres together with an internalised operating platform.
Westfield Corporation will be an internationally focused company comprising US & UK/Europe portfolios together with the associated operating platform.
Listed real estate currently trades at an estimated forward FAD (funds available for distribution) yield of 5.00%, which for a long term investor appears attractive given where current 10 year government bonds are.
|
| |
|
Catalyst Global Real Estate comment - Mar 13
|
|
Wednesday, 26 June 2013
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a net total USD return of 2.60% in March. The best performing listed real estate market was Asia ex Australia, which recorded a net total USD return of 8.62%. Europe recorded the lowest net total USD return for March of -1.46%.
The total return performance of Asia ex Australia was driven by Japan, which recorded a total return of 22.98% (in USD). Recent political change has triggered a marked improvement in sentiment towards Japanese equities. The stock market has risen significantly following the new prime minister Shinzo Abe's vow to kick start Japan's economy via reflation policies. The Bank of Japan has been set an inflation target of 2%. The inflation rate in Japan was -0.7% in February, but if the Bank of Japan is able to inflate the economy and create some real growth over a long term period, property along with general equities would be beneficiaries.
A lack of supply over the last few years has meant that property fundamentals in most regions have recovered reasonably well since the financial crises. Known future supply is also low and although demand is not significantly strong, the lack of supply has meant that there has been some rent growth, particularly for quality product. Coupled with this, the low interest rate environment means that the listed property companies with solid balance sheets and quality assets are able to lock in very favorable funding costs as they secure new debt funding or re price existing debt. This should all contribute to strong earnings growth over the medium term.
Currently trading at an estimated forward FAD (funds available for distribution) yield of 4.94%, global listed property provides a positive yield spread versus 10 year government bonds, with reasonable earnings growth forecasts over the next few years.
|
| |
|
Catalyst Global Real Estate comment - Dec 12
|
|
Tuesday, 25 June 2013
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a net total USD return of 2.71% in December. The best performing listed real estate market was US and Canada, which recorded a net total USD return of 3.55%. Asia ex Australia recorded the lowest net total USD return for December of 0.39%. For 2012, the UBS Global Investors Index recorded a net total USD return of 23.70%. The best performing global real estate market was Asia ex Australia which recorded a net total USD return of 40.86% for the year.
The previous year, 2011, was characterized by the Eurozone sovereign debt crisis and ended after a protracted period of political indecision around raising the US debt ceiling (that almost brought the US to default on fiscal obligations). These issues are still lingering. This year ended with unknowns surrounding the US 'Fiscal Cliff' and the continued concerns surrounding the Eurozone sovereign debt crisis and the potential contagion thereof. The Eurozone debt crisis and US fiscal cliff remain on the "watch list" for 2013. US Congress passed legislation aimed at averting the so-called fiscal cliff with a bill representing the largest tax increase in the past two decades but containing no long-term spending cuts of any significance. The law will raise taxes on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession. In Europe, investors will be following closely how the 'PIIGS's countries handle their debt problems and whether the French banking system falls victim to problems affecting the peripheral European countries. Global financial markets look set for another challenging year in 2012.
In general global real estate fundamentals improved in 2012 and, on average, global REITS recorded satisfactory earnings growth and improving outlook statements. Global REITs that have strong balance sheets, own prime quality properties, have clear strategies and strong management teams remain attractive going forward.
Currently trading at an estimated forward FAD (funds available for distribution) yield of 5.16%, global listed property provides a positive yield spread versus 10 year government bonds, with reasonable earnings growth forecasts over the next few years.
|
| |
|
Catalyst Global Real Estate comment - Sep 12
|
|
Wednesday, 14 November 2012
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a net total USD return of 0.13% in September. The best performing listed real estate market was Asia ex Australia, which recorded a net total USD return of 5.67%. North America recorded the lowest net total USD return for September of -1.90%. Year to date, the UBS Global Investors Index has recorded a net total USD return of 18.56%.
During September, one of the largest apartment REIT's (real estate investment trusts) Avalon Bay raised $450 million of 10-year unsecured debt at 2.95%, or 130 bps spread over treasuries. Although Avalon Bay has got a cost of capital advantage over most other REIT's, there are cheap sources of capital available to well capitalized REIT's. A number of REIT's in the US are now sourcing debt at rates below 4% fixed for 7 - 10 years. This low cost of debt boosts earnings growth, as old debt is re priced downwards, it also gives companies with low leverage the opportunity to buy quality assets that are still accretive from day one. The risks to watch out for are that companies do not buy poor quality assets that are accretive in the short term, but erode long term growth; in addition there are risks that companies increase their balance sheet leverage too much.
In an environment where debt funding is cheap (to well capitalized companies), new supply is very limited and yields on assets are reasonable, there are great opportunities for real estate companies. However, there is also the ability to destroy value by taking on too much balance sheet risk, buying poor quality assets, overpaying for assets or issuing equity at the wrong times (when trading at discounts to NAV). As a result of this, a lot of emphasis should be placed on management teams and their ability to create or destroy value in the long term.
Currently trading at an estimated forward FAD (funds available for distribution) yield of 5.23%, global listed property provides a positive yield spread versus 10 year government bonds, with reasonable earnings growth forecasts over the next few years.
|
| |
|
Catalyst Global Real Estate comment - Jun 12
|
|
Friday, 31 August 2012
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a net total USD return of 6.00% in June. The best performing listed real estate market was Australia, which recorded a net total USD return of 9.83%. Asia ex Australia recorded the lowest net total USD return for May of 4.49%. Year to date, the UBS Global Investors Index has recorded a net total USD return of 14.14%, compared to the S&P 500 which has recorded a total return of 8.31% in USD over the same period.
We recently attended REIT Week (US listed property conference) in New York. Reading between the lines, most listed property management teams were happy with current fundamentals and cautiously optimistic about the future. There were a number of noteworthy themes to take out of the conference.
Across all property types, supply is extremely low. Since 2008 there has been very limited supply bought to market and it will continue to be well below historic norms over the next 3 to 4 years. Even though economic growth expectations are also below historic norms, the lack of supply means that this growth will be good enough to move property fundamentals in the right direction.
For companies with solid balance sheets and quality assets, funding is readily available. A number of companies have recently raised funding at fixed costs of below 4% for periods of 5 - 10 years. The quality management teams are also ensuring that they have a wide variety of options when raising capital.
Apartments continue to have the strongest fundamentals and although rent growth in this sector is expected to slow a bit, it is still strong. High end malls are also trading well, which should result in tenants being able to afford higher rents going forward. This is a function of two major themes; supply in this sector has and will be almost non existent for the foreseeable future and the high end consumer has been the least effected by the financial crisis. In the high barrier to entry office market, nodes with exposure to technology and energy are strong, while government and financial services continue to be weak.
At the back of the fundamentals queue are suburban office and industrial properties. Net new demand is weak in these sectors (baring certain nodes in industrial) and suburban office in particular was oversupplied during the last cycle. However, as vacancies get filled, fundamentals are improving and negative rent spreads have improved over the last 12 months, but the recovery is slow.
Currently trading at an estimated forward FAD (funds available for distribution) yield of 5.2% and with reasonable growth, global listed property looks attractive in an environment where low growth seems to be the "new normal".
|
| |
|
Catalyst Global Real Estate comment - Mar 12
|
|
Thursday, 31 May 2012
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a total USD return of 3.06% in March. The best performing listed real estate market was North America, which recorded a total USD return of 4.86%. Australia recorded the lowest total USD return for March of -4.77%. For the first quarter of 2012, the UBS Global Investors Index recorded a total USD return of 11.44%. Singapore was the strongest market during this period recording a total USD return of 17.29%.
During March, Simon Property Group, the largest REIT (real estate investment trust) in the world, purchased a 28.7% stake in Klepierre, Europe's second largest pan-European shopping centre REIT. The stake was purchased from BNP Paribas, who have retained a 22.2% stake in Klepierre. It is unlikely that Simon will pursue the remainder of the BNP stake until 2013, as there is a possibility that they would trigger capital gains tax if they purchased this stake prior to 1 January 2013. After 1 January 2013, it is expected that Simon will attempt to purchase the remaining BNP stake and take control of the company, unless there are issues that arise as a result of their due diligence. This deal provides evidence of two themes:
o Companies with strong balance sheets are in a position to take advantage of attractive acquisition opportunities.
o Simon Property Group, who have a proven track record as an astute investor and are one of the most successful operators of malls in the US, are happy to increase their exposure to European retail assets.
This deal will take a while to play out, but what will be interesting to watch is what value a quality management team like Simon can add to an operation like Klepierre, who until now have had a fairly lack luster management team.
The global listed real estate sector is currently trading at an estimated forward FAD (funds available for distribution) yield of 5.3%. The spread between the FAD yield and 10 year government bond yields is well above its historic average. We continue to favour companies with quality assets in high barrier to entry markets with good management teams and strong balance sheets.
|
| |
|
Catalyst Global Real Estate comment - Dec 11
|
|
Tuesday, 20 March 2012
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a total USD return of 1.52% in December. The best performing listed real estate market was North America, which recorded a total USD return of 4.50%. The UK recorded the lowest total USD return for December (-6.80%). For the year the UBS Global Investors Index recorded a total USD return of -0.03%. North America was the strongest market recording a total USD return of 8.60% and Hong Kong was the weakest market recording a total USD return of -18.70%.
During the first half of the year markets performed well, with the UBS Global Investors Index up 13% to mid July 2011; this in spite of the tragic earthquake in Japan and conflicts in a number of countries in North Africa and The Middle East. The second half of the year was dominated by the European debt crisis. This resulted in an increase in volatility and weaker returns as investors reduced exposure to "risky" assets.
Looking at listed property markets, the "safe haven" status of the US ensured that this region outperformed other regions during the year. Less cyclical sectors like regional shopping malls, self-storage and high barrier to entry residential were the winners from a sectoral point of view. The losers were the more cyclical sectors like offices and hotels.
The global listed real estate sector is currently trading at an estimated forward FAD (funds available for distribution) yield of 5.8%. The spread between the FAD yield and 10-year government bond yields is well above its historic average. We continue to favour companies with quality assets in high barrier to entry markets with good management teams and strong balance sheets.
|
| |
|
Catalyst Global Real Estate comment - Sep 10
|
|
Tuesday, 9 November 2010
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a total USD return of 7.30% in September. The best performing listed real estate market was Europe ex UK, which recorded a total USD return of 17.66%. This was partly fuelled by the special dividend declared by Unibail-Rodamco, which will amount to EUR 1.8 billion and will pay out in early October, as well as Euro currency appreciation. For the quarter to the end of September, the strongest market has been Europe ex UK (up 34.01% in USD) and the weakest market has been North America (up 13.70% in USD); during the quarter, the Global Investors Index has been up 17.78% in USD.
During September we travelled to Europe and the UK, where we spoke to a number of different listed property management teams. The common themes were as follows:
o Going forward there will be a greater divergence between prime and secondary properties
o The flood of distressed properties for sale has not materialized, but could play out to a lesser extent over the next few years, especially during 2012 and 2013 when 2007 five year debt matures
o The bid offer spread on assets prices has also narrowed and management teams now have more time to focus on their property portfolios; the last 18 months has been consumed by balance sheet repair
o Management teams are taking advantage of the low interest rate environment and using it to extend their fixed debt exposure further into the future; it also appears that margins on debt have improved over the last 6 months
o Austerity measures will have a negative impact on consumer spending over the next few years and having assets of superior quality in the correct locations will be key
o Investment pipelines are focused on redevelopment of current portfolios and not speculative development
o Property fundamentals have bottomed out and in some cases started to turn the corner. Europe is also expecting some positive indexation going forward vs. flat to negative indexation over the last 12 months.
Over the Atlantic, the US Fed has mentioned the potential for further quantitative easing as the risk of deflation still exists. This caused both the equity and bond markets to rally, while the US dollar weakened to a number of currencies during the month. With the US 10 year Government Bond trading at a yield of under 2.5%, current FAD (funds available for distribution) and dividend yields for global listed property offer an attractive relative yield, with the opportunity to grow earnings per share.
|
| |
|
Catalyst Global Real Estate comment - Jun 10
|
|
Tuesday, 7 September 2010
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a total USD return of -2.61% in June. The best performing listed real estate market was Hong Kong, which recorded a total USD return of 5.45%. North America was the poorest performing market in June, recording a total USD return of -5.01%. For the first six months of the year the UBS Global Investor's index has recorded a total USD return of -2.13%. Over the same period, Japan has recorded the highest total USD return of 5.73%, whereas the UK (-19.16%) has recorded the lowest total USD return. We attended REIT Week in Chicago in early June. There were a number of noteworthy themes spoken about by most of the listed property companies. The retail sector agreed that retail sales seemed to have bottomed between September 09 and March 2010 (depending on which region they were talking about) and that retailers are focusing more on margins and less on turnover. Retailers have adapted well to the current environment and are generating strong cash flows and returns. Office market rents, which had come off significantly over the last few years, seem to have bottomed out and in certain areas there is talk about reasonable growth in these market rents over the next few years as certain areas become undersupplied in grade A space due to a lack of development recently. The industrial sector has been negatively effected by the reduction in trade and stock levels, however this is starting to improve and as a result there has been a recent increase in leasing activity. Owners of residential properties are also seeing a pick up in demand mainly attributed to rental values as a percentage of household incomes being below historic norms as well as "decoupling" (children moving out of home or people moving from a shared residence to their own) starting to happen as the economy recovers. Generally the listed property's view on unemployment was that it was not going to decrease much in the near future, but if this did happen then this would be a catalyst for earnings growth. The balancing act between creating economic growth and reducing debt will be the focus for most markets in the immediate future. Short term volatility will remain, as good and bad news is released into the market, however with global listed property trading at a historic FAD (funds available for distribution) yield of 6.3% versus the US 10 year government bond of just under 3%, we see global listed property as an attractive long term investment.
|
| |
|
Catalyst Global Real Estate comment - Mar 10
|
|
Tuesday, 29 June 2010
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a total return of 7.12% in March resulting in a year to date return of 5.14%.North America continued it's strength from February (up 5.63%) to post the strongest regional gain ending up a further 9.76% in March bringing the year to date return to 9.81%. Europe remains the weakest region year to date down -2.36% with currency weakness being a significant contributor. The UK remains the weakest sub market down -6.55% this year to date. Capital markets continue to lack conviction on the nature of a recovery. The US ten year treasuries traded in a range from 3.5% to 4% over the quarter but ended close to where it began. Within our Global universe we estimate the average forward FAD (Funds available for distribution) yield of to be 5.8%. The North American region is trading at the lowest forward yield at 5.1%.We expect FAD growth to be strongest in the US given the weak fundamentals currently in place and resultant opportunity for earnings enhancement. We are concerned however that too much of this opportunity is priced into the US market with insufficient margin of safety given a macro environment which remains unsettled. Although we are total return focused our bottom up stock picking is pushing the portfolio toward higher yield and lower risk investments which we feel offers better risk adjusted value at this time. We are currently seeing better opportunities in Europe and Asia and the portfolio is therefore positioned accordingly.
|
| |
|
Catalyst Global Real Estate comment - Sep 09
|
|
Thursday, 17 December 2009
|
Fund Manager Comment
|
The UBS Global Investors Index recorded a total return of 6.98% in September. The best performing listed real estate market was Australia, which recorded a total return of 14.83%. Europe was the poorest performing market in September, recording a total return of 3.91% with the European Continent (+7.68%) being weighed down by the UK which recorded a total return of -2.65%.
The downward momentum in property valuations has for the last couple of months been decelerating and appears now to have stabilized. This was illustrated by the IPD UK Monthly Index, which saw a rise of 0.2% in capital values for the month of August. This is the first monthly rise since June 2007.
Activity was evident in the UK this month as the 2 largest REIT's in the UK, Land Securities and British Land both sold fairly large assets. British Land sold a 50% stake in Broadgate, the 30 acre City of London office estate to Blackstone for £1.07 billion and Land Securities sold their 33% stake in the Bullring Shopping Centre in Birmingham to an Australian Government Fund for £210 million. The Bullring deal was reportedly priced at a 6.85% net yield and is the first large transaction in the UK to be done at lower than 7% this year.
South African investors would have been interested in the capital raising that Liberty International undertook in September. They raised £280 million via a placement of 56.1 million shares at 500 pence per share. The share price has come under pressure since the capital raising, falling 18.10% from its high on 18 September of 580 pence to 475 pence at month end when it went ex its 5 pence dividend.
As we move further along in the recovery cycle, the larger, better capitalized property companies are increasingly commenting on acquisition opportunities. This is likely to be the catalyst for future growth in earnings in the sector as yield accretive capital deployment replaces dilutionary issuances, sales and debt repayment, but at this point companies appear to be biding their time.
|
| |
|
|
