10 Best Australian REITs to watch in 2020

We examine what a Real Estate Investment Trust (REIT) is; Australia’s largest and most prominent REITs and how investors can buy and trade them.

What is a Real Estate Investment Trust (REIT)?

In the most basic of terms, a real estate investment trust – or REIT – is an investment product that gives investors exposure to property assets. Australian REITs are known as A-REITs and are publicly listed on the Australian Stock Exchange.

Different types of A-REITs

On a more granular level, real estate investment trusts invest in different types of property assets – from residential property to office buildings. While many A-REITs focus on a specific sector within real estate, some may hold a diversified basket of property assets across a number of different sectors.

The most common type of property assets that A-REITs have exposure to include:

  • Retail property, including shopping centres, grocery stores and outlet stores
  • Industrial property, such as warehouses and distribution centres
  • Residential property which may include student accommodation, apartment buildings and standalone homes
  • Office buildings, ranging high rise office buildings to smaller-scale office parks

Overall, investors are often drawn to real estate trusts for the potential to receive both capital growth – from an A-REIT increasing in value – as well as access to a potential income stream, in the form of distributions or dividends.

Mind you, while REITs have historically proven desirable as a source of passive incomes – the coronavirus pandemic has significantly impacted both the share prices as well as distribution policies of many prominent Australian real estate trusts.

Elsewhere and in more pragmatic terms, A-REITs may prove appealing to investors who want exposure to real estate assets – without having to deal with the complications often associated with owning physical properties. Some of these complications include: insurance costs, taxes, fees, a lack of liquidity and the time associated with property management.

A-REITs offer property-minded investors flexibility in a way physically owning property does not. Or, as the Australian Securities Exchange puts it, one of the key benefits of investing in listed A-REITs:

‘Is that they can provide access to assets that may be otherwise out of reach for individual investors, such as large-scale commercial properties.’

Top 10 Australian REITs in 2020

January to May proved to be a difficult time for Australian REIT’s – with the S&P/ASX 200 A-REIT index falling some 23% in that period. Even so, below we look at Australia’s top 10 A-REIT’s – ranked in terms of market capitalisation – that investors may want to keep an eye out for in 2020.

  1. Goodman Group
  2. Scentre Group
  3. DEXUS Property Group
  4. Mirvac Group
  5. Stockland Corporation
  6. GPT Group
  7. Charter Hall Group
  8. Shopping Centres Australia
  9. BWP Trust Retail
  10. Growthpoint Properties Australia

Company

Ticker

Share price

Market capitalisation

Goodman Group

GMG

$15.24

$27.15 billion

Scentre Group

SCG

$2.38

$11.99 billion

DEXUS Property Group

DXS

$10.91

$10.82 billion

Mirvac Group

MGR

$2.46

$9.4 billion

Stockland Corporation

SGP

$3.78

$8.77 billion

GPT Group

GPT

$4.47

$8.53 billion

Charter Hall Group

CHC

$10.07

$4.58 billion

Shopping Centres Australia

SCP

$2.39

$2.51 billion

BWP Trust Retail

BWP

$3.94

$2.47 billion

Growthpoint Properties Australia

GOZ

$3.33

$2.47 billion

*Share price and market capitalisation values correct as of 17 June.

Goodman Group (GMG)

Goodman Group represents the largest industrial property groups on the ASX with a truly global footprint. Indeed, across its expansive property portfolio Goodman Group has an impressive 97.5% occupancy rate, has 2.4 million square meters leased across Australia/ New Zealand, Asia and the UK and Europe and has a staggering $55.1 billion in assets under management (AUM).

Moreover, unlike many of the REITs we will look at below, the property group recently reaffirmed its earnings guidance ‘and full year distribution of 30cps.'

Scentre Group (SCG)

With an impressive $56 billion in assets under management, Scentre Group owns and operates Westfield shopping malls across Australia and New Zealand.

Scale or not, during March Scentre Group saw its operations significantly impacted. And although things have since recovered to a degree, the company recently wrote:

'Given the uncertainty regarding the pandemic, its duration, the economic impact and the timing of operating cash flows for the Group, the Group has determined not to pay an interim dividend distribution.'

DEXUS Property Group (DXS)

With a property portfolio valued at $33.8 billion, Dexus Property Group is unique in that it directly owns $16.8 billion of the assets in its portfolio. More broadly speaking, Dexus places a strong emphasis on office space and industrial real estate, with 1.8 million square meters of office workspace space spread across 55 properties.

Dexus recently told investors that 'The estimated distribution amount for the six months ending 30 June 2020 is 23.2 cents per stapled security.'

Mirvac Group (MGR)

Mirvac Group not only boasts a diversified property offering across residential, retail, office and industrial properties; but one of the Group’s key advantages comes from the fact that the Mirvac is both designer, developer and manager, which means the firm 'has control over every stage of a development's lifecycle.'

Even so, like many of the other REITs we have discussed, as a result of Covid-19 induced uncertainty, Mirvac withdrew its earnings and distributions guidance during Q1 of CY20.

Stockland Corporation (SGP)

With interests that span shopping centres, housing estates, industrial real estate and retirement housing, Stockland represents a significantly diversified Real Estate Investment Trust.

Diversified or not, as part of the firm's recent Q3 update it was noted that 'for the full year to 30 June 2020, the outlook remains uncertain and funds from operations and distribution guidance remains withdrawn until further notice.'

GPT Group (GPT)

As a result of the uncertainty created by Covid-19, GPT Group recently said it would be 'adjusting the timing of the declaration of its distributions to coincide with the release of the Group's financial results in February and August each year.'

Maybe more importantly however, GPT also flagged that it would be adjusting its distribution payout policy. The REIT would now aim to distribute 95% to 105% of Free Cashflow, compared to the previous policy which saw distributions derived from Adjusted Funds from Operations. These changes will take effect following the Group’s 2020 interim distribution.

For reference, GPT withdrew its distribution guidance in March.

Charter Hall Group (CHC)

With $39.2 billion funds under management and a development pipeline valued at $7.3 billion, Charter Hall Group boasts a diverse property portfolio, which prioritises quality and long lease agreements.

Speaking to the firm’s quality focus, of Charter tenants, the Australian government, Telstra, Wesfarmes, Woolworths, Coles Group and Amazon make up the top ten.

Moreover, unlike many of the other A-REIT's we have looked at above, as part of the Charter's latest presentation, it was noted that:

'The Group re-affirms its FY20 guidance for after-tax OPES growth of approximately 40% over FY19 and FY20 distribution per security guidance for 6% growth over FY19'.

Shopping Centres Australia (SCP)

As the name suggests, Shopping Centres Australia's real estate holdings are mainly focused on Woolworths and Coles-anchored shopping centre.

Moreover, though Shopping Centres Australia joined a long list of A-REIT's to withdraw its FY20 earnings and distribution guidance; at the same time the company stressed 'Our centres remain resilient. All but one of our 85 shopping centres are anchored by either a Coles or Woolworths supermarket, and as such our centres are benefitting from the elevated foot traffic being generated by these anchor tenants.'

Looking forward, the company further noted that 'The COVID-19 pandemic may provide a unique opportunity to secure quality assets at competitive prices over the next 6-12 months.'

BWP Trust Retail (BWP)

Of BWP Trust Retail's 75 properties, 68 of them are Bunnings Warehouse sites. Beyond that, the retailed-focused A-REIT boasts an impressive occupancy rate of 97.5%, has a total portfolio value of $2,460.4 million and brings in annual rent of $150.7 million – as of 31 December 2019.

The REIT withdrew its FY20 distribution guidance in March as a result of the coronavirus pandemic.

Growthpoint Properties Australia (GOZ)

With a focus on office and industrial real estate, Growthpoint owns and manages over 58 properties across Australia, with the firm’s total portfolio valued at some $4.2 billion. As of 31 March 2020 Growthpoint had a 94% occupancy rate, gearing of 32.7% and a strong balance sheet with undrawn debt facilities of $235 million and $41 million in cash on hand.

'Growthpoint's tenants are predominately large, listed companies and government bodies. We estimate that approximately 96% of the Group's portfolio income is derived from tenants with turnover above $50 million.’

How to buy and trade A-REITs

Now that we’ve examined the broad strokes of Australia’s best and largest real estate trusts, we look at how investors can buy, sell and trade these investment products.

How to buy Australian real estate investment trusts

Traders and investors can buy any of the A-REITs we have covered today through IG’s share trading platform in just four simple steps:

  1. Open a share trading account with IG or login to your existing account
  2. Fund your newly created share trading account – open IG’s share trading platform and type the name of the A-REIT you want to trade in the search bar.
  3. Select the number of A-REIT units you would like to buy and choose between a market order or a limit order.
  4. Confirm the trade

How to trade A-REITs

For traders who want to take a more active approach to investing in the A-REITs we have discussed today – you can utilise IG’s world-class trading platform to trade A-REITs long or short. As with buying A-REITs, trading real estate trusts on IG’s world-class platform can be done in just a few simple steps.

  1. Create an IG trading account or log in to your existing account
  2. Look for the A-REIT you would like to take a short or long position in
  3. Choose your position size
  4. Click on ‘sell’ or ‘buy’ in the deal ticket
  5. Confirm the trade

Mind you, unlike buying A-REITs outright, trading these products through CFDs come with a number of benefits and some additional risks. For example, as a leveraged product, CFDs allow investors to gain greater exposure to an underlying product’s price fluctuations – in this case an A-REIT – than you would by simply purchasing the instrument physically. However, it’s important to note that by using leverage – you both magnify your potential investment gains and losses.

CFDs may also be useful for investors who want the flexibility to easily trade A-REIT’s long and short as well as implement risk management strategies, such as hedging strategies.

Ultimately, though CFD trading may not be appropriate for every investor, if you're interested in finding out more click here now or open an IG trading account today.

The Best Australian REITs of 2020 summarised

A-REITs have often proven a popular choice for investors looking to gain exposure to Australia’s real estate market, a steady income stream and potentially benefitting from capital growth. Additionally, buying and trading A-REITs gives investors exposure to some of the benefits of real estate investing without a number of its complications.

However, for investors looking to invest in A-REITs in 2020, you should also realise that the coronavirus has uniquely impacted many of Australia’s best and largest Real Estate Investment Trusts.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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