Resolution Capital Global Property Securities Unhedged SII aims to achieve an annual total return that exceeds the total return of the Benchmark after fees measured on a rolling 3 year basis. The Fund primarily invests in global listed REITs and real estate securities that derive most of their returns from rental income. The Fund’s investments provide exposure to a range of underlying real estate from around the world including office buildings, shopping centers, industrial warehouses, residential communities, hotels and healthcare facilities. The Fund may also have exposure to companies which undertake activities such as real estate development, real estate construction contracting and real estate funds management activities.
The FTSE EPRA/NAREIT Developed Index (AUD Unhedged) produced a total return of -5.8% for the month ended 30 September 2023. Negative total returns were posted in all regions except Japan.
Japan was the best performing market in the global real estate index, returning 0.6% in local currency terms. Japan continues to benefit from rising expectations for inflation and wage growth, as well as governance reforms.
Although the US Federal Reserve held interest rates steady during the month, the dot plot, which charts FOMC projections for the federal funds rate over time, indicated that interest rates have higher to go. As a result, the 10-year yield surged to the highest seen in 16 years, resulting in a broad-based equities sell-off. REIT sectors with high earnings multiples, e.g., industrial and datacentres, were most impacted.
W. P. Carey (WPC), a net lease REIT, announced its intention to spin-off the majority of its office exposure into a new publicly listed entity, Net Lease Office Properties (NLOP). As a result of the transaction, WPC expect to improve their cost of capital, investment spreads, and increase the quality and stability of its cash flow.
Portfolio holding, Kimco Realty (KIM) announced the acquisition of smaller listed rival RPT Realty (RPT) in an all-stock transaction which values the portfolio at US$2bn. RPT owns a national portfolio of grocery anchored open air shopping centres. KIM expect modest funds from operations (FFO) and net asset value (NAV) per share accretion from the deal.
What is Resolution Capital Glbl Ppty Secs UH SII Resolution Capital Glbl Ppty Secs UH SII is an Managed Funds investment product that is benchmarked against Dvlp Global Real Estate and sits inside the Property - Global Listed Property Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Resolution Capital Glbl Ppty Secs UH SII has Assets Under Management of 441.93 M with a management fee of 1.05%, a performance fee of 0.00% and a buy/sell spread fee of 0.4%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Resolution Capital Glbl Ppty Secs UH SII has returned 1.13% in the last month. The previous three years have returned 2.52% annualised and 11.68% each year since inception, which is when the Resolution Capital Glbl Ppty Secs UH SII first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Resolution Capital Glbl Ppty Secs UH SII first started, the Sharpe ratio is NA with an annualised volatility of 11.68%. The maximum drawdown of the investment product in the last 12 months is -4.27% and -21.36% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Resolution Capital Glbl Ppty Secs UH SII has a 12-month excess return when compared to the Property - Global Listed Property Index of -3.09% and 1.28% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Resolution Capital Glbl Ppty Secs UH SII has produced Alpha over the Property - Global Listed Property Index of NA% in the last 12 months and NA% since inception.
What are similar investment products?
For a full list of investment products in the Property - Global Listed Property Index category, you can click here for the Peer Investment Report.
What level of diversification will Resolution Capital Glbl Ppty Secs UH SII provide?
Resolution Capital Glbl Ppty Secs UH SII has a correlation coefficient of 0.85 and a beta of 0.69 when compared to the Property - Global Listed Property Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Resolution Capital Glbl Ppty Secs UH SII and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Resolution Capital Glbl Ppty Secs UH SII with the Dvlp Global Real Estate?
For a full quantitative report on Resolution Capital Glbl Ppty Secs UH SII compared to the Dvlp Global Real Estate, you can click here.
Can I sort and compare the Resolution Capital Glbl Ppty Secs UH SII to do my own analysis?
To sort and compare the Resolution Capital Glbl Ppty Secs UH SII financial metrics, please refer to the table above.
Has the Resolution Capital Glbl Ppty Secs UH SII been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
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Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Resolution Capital Glbl Ppty Secs UH SII. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - August 31, 2023 The FTSE EPRA/NAREIT Developed Index (AUD Unhedged) produced a total return of 0.6% for the month ended 31 August 2023. Negative total returns were posted in all regions except Japan and Europe, with headlines throughout the month centring around half yearly or end of financial year earnings.
U.S. REITs underperformed the global index, returning -3.2% in local currency terms. Inflation trends showed ongoing improvement in August with month-on-month CPI results down to or near long-term trends for most major CPI categories, except for rents. However, wages and wages growth continue to remain elevated preventing the Federal Reserve from signalling the end of inflation concerns. Portfolio exposure to the U.S. contributed positively to relative returns due to stock selection.
Japan was the top performing market in the global index, returning 2.7% in local currency terms. During the month the Japanese economy demonstrated strong GDP growth, spurred by net exports driven by a weaker Yen. Despite a slight loosening of yield curve control (YCC) policy the Bank of Japan (BoJ) continues to maintain an ultra-easy monetary policy, which remains highly accommodative and lends support to REIT earnings. Portfolio exposure to Japan contributed positively to relative returns.
In contrast, Hong Kong was the weakest region, returning -9.7% in local currency terms. The region has suffered from a continued decline in Chinese consumer confidence amid a deteriorating Chinese property market which has prompted several interventions from China’s central bank and the People’s Bank of China (PBoC). Portfolio exposure to Hong Kong detracted from relative returns.
All property sectors posted negative returns in August.
Retail was the weakest performing sector, returning -5.6% in local currency terms. While retail REITs posted generally solid results which showed robust leasing activity, increasing consumer uncertainty weighed down the sector with warnings of slowing discretionary sales and higher bad debt. Overweight portfolio exposure contributed negatively to relative returns.
Data centres was the best performing sector for the month, returning -0.2% in local currency terms. Data centre results were in line with expectations, however, generative AI and its potential impact on demand drove strong performance.
There were two significant M&A transactions over the month.
Hersha Hospitality Trust (HT), a U.S. hotel REIT, announced its acquisition by private equity firm KSL Capital Partners in an all-cash transaction that values the company at ~US$1.4bn. The purchase price was 60% above the last share price and value per key of ~US$362,000.
U.S. shopping centre REIT Kimco Realty (KIM) announced an agreement to buy RPT Realty (RPT) in an all-stock transaction for ~$2bn. The transaction price reflected an 18% premium to RPT’s last share price and 8.1% implied cap rate. The deal will add 43 wholly owned and 13 JV shopping centres to KIM’s portfolio of 528 properties and is expected to close in early 2024.
Performance Commentary - July 31, 2023 The FTSE EPRA/NAREIT Developed Index (AUD Unhedged) produced a total return of 2.5% for the month ended 31 July 2023. All regions posted positive total returns as evidence of disinflation and rhetoric from central bankers has become less hawkish. Lower terminal rate expectations benefited vehicles with higher financial leverage in July, as evidenced by the outperformance of both Continental Europe and the office sector.
U.S. REITs modestly underperformed the global index, returning 2.8% in local currency terms. Despite the lowest CPI print since March of ’21, the Federal Reserve hiked rates an additional 0.25%. Portfolio exposure to the U.S. contributed positively to relative returns due to stock selection.
Continental Europe was the top performing region returning 9.0% in local currency terms. The market responded positively to signs of disinflation, suggesting that the end of the ECB rate hike cycle could be on the horizon. With elevated leverage in the region, a pause in rate hikes would provide much needed relief. The portfolio’s underweight position detracted from relative returns.
In contrast, Hong Kong was the weakest region, returning 0.4% in local currency terms. The post-Covid reopening trade in China has disappointed thus far, with consumer spending remaining subdued. Overweight portfolio exposure contributed negatively to relative returns, albeit modestly.
Except for self-storage, all property sectors posted positive returns in July.
Performance Commentary - June 30, 2023 The FTSE EPRA/NAREIT Developed Index (AUD Unhedged) produced a total return of 0.1% for the month ended 30 June 2023.
The U.S. was the top performing region returning 4.8% in local currency terms. The market responded positively to the U.S. Federal Reserve pausing its interest rate hiking cycle and ongoing resilience in the broader economy. The portfolio’s overweight position to the region contributed positively to relative returns.
In contrast, the U.K. was the weakest region, returning -7.3% in local currency terms. REITs in the region were pressured as the Bank of England raised interest rates higher than anticipated by 0.5% to 5%. Meanwhile inflation remains stubbornly high in the region, signalling further hikes are likely in order to return it to target levels. The portfolio’s overweight position to the region detracted from relative returns.
With the exception of industrial, all property sectors posted positive returns in June.
Data centres was the strongest performing sector returning 7.2% in local currency terms as investor enthusiasm persisted driven by robust secular tenant demand. Canadian office REIT Allied Properties (AP) capitalised on investor appetite, selling its Toronto urban data centre portfolio to Japanese telecommunications operator KDDI Corporation (9433) for C$1.35bn, an estimated low-4% cap rate and a 10% premium to book value. The portfolio’s underweight position detracted from relative returns.
Industrial was the weakest performing sector, returning -1.1% in local currency terms. The sector was negatively impacted by decelerating tenant demand and an elevated supply backdrop. The portfolio’s underweight position contributed positively to relative returns.
Office was in the middle-of-the-field, returning 4.1% in local currency terms. Performance diverged by region with U.S. strength diluted by weakness elsewhere. Late in the month, U.S. office REIT SL Green (SLG) sold a 49.9% stake in 245 Park Avenue, New York to unlisted Japanese developer, Mori Trust, for $2bn ($1.1k/sqft), which reflected a low -4% cap rate. The valuation was meaningfully higher than public market implied values for A-grade quality assets and drove a re-rating in depressed valuations.
Elsewhere, Australian office REIT Dexus (DXS) sold an A-grade asset, 44 Market Street, Sydney, for $393m or AU$12.8k sqm (US$797/sqft) to APAC focussed investment firm, PAG. The deal reflected a meaningful 17% discount to its December valuation. The portfolio’s underweight position to the office sector detracted from relative returns.
Performance Commentary - May 31, 2023 The FTSE EPRA/NAREIT Developed Index (AUD) produced a total return of -2.5% for the month ended 31 May 2023. All regions posted negative returns over the month, except for Japan, as the takeout of First Republic Bank by JP Morgan Chase at least temporarily resolved the U.S. banking crisis, with focus shifting toward U.S. government debt ceiling negotiations in Washington.
U.S. REITs modestly outperformed the global index, returning -3.2% in local currency terms as the market digested persistent inflation and another 0.25% interest rate hike by the Fed, coupled with commentary hinting at the potential conclusion of the end of the hiking cycle. Overweight portfolio exposure to the U.S. contributed positively to relative returns.
Japan was the top performing market in the global index, returning 0.1% in local currency terms, and the portfolio’s underweight position detracted from relative returns. Logistics REITs Nippon Prologis REIT (3283) and GLP J-REIT (3281) raised ~$200m & ~$240m of equity in May to acquire logistics facilities.
Hong Kong was the weakest region, returning -8.9% in local currency terms, and the portfolio’s overweight position to the region detracted from relative returns. REITs in the region were affected by multiple factors in China, including a softening Chinese property market and declining manufacturing production.
Continental Europe returned -8.9% in local currency terms, and the underweight position contributed positively to relative returns. The European Central Bank (ECB) raised its marginal lending rate and signalled for additional raises after headline Eurozone inflation accelerated through April, increasing pressure on troubled REIT balance sheets in Europe. Several highly levered European REITs made progress on balance sheet remediation in May through equity raises, asset sales or a combination of both. Castellum (CAST) launched their previously announced SEK 10bn (~US$920m) rights issue which aims to lower net debt/EBITDA to ~11x from 13x and reduce LTV from 44% to 38%.
CAST also reported the disposal of 20 properties for the year to date, for SEK 2.3bn (~US$210m) in line with book values.
Meanwhile, German landlords Vonovia (VNA) and Aroundtown SA (AT1) disclosed asset sales for the purpose of deleveraging, with VNA disposing of five newly built assets to CBRE for €560m and AT1 reporting €320m of disposals YTD at close to book value.
Unibail-Rodamco-Westfield (URW) completed two sale transactions during the period, including the disposal of Westfield Brandon, a U.S. shopping centre in Florida for $220m representing a 10% net initial yield and a 4% discount to the most recent valuation. Proceeds from the asset sales will be used to reduce debt.
All property sectors posted negative returns in May, except for data centres.
Data centre REITs was the strongest performing sector returning 3.3% in local currency terms as investors were buoyed by signs of ongoing, robust secular tenant demand. Chipmaker NVIDIA Corporation (NVDA) reported strong first quarter earnings with bullish AI growth projections which have positive implications for future total data centre demand. The portfolio’s underweight position to data centres detracted from relative returns.
Retail was the weakest performing REIT sector, returning -5.8% in local currency terms. The sector was negatively impacted by concerns over tenant credit and a slowdown in retail sales.
Overall, real estate transaction activity remains meagre providing limited evidence for valuers, lenders and investors on which to rely.
Performance Commentary - April 30, 2023 The FTSE EPRA/NAREIT Developed Index (AUD) produced a total return of 3.3% for the month ended 30 April 2023. All regions posted positive returns in the month except for Hong Kong as there was increased clarity regarding the impact and reach of the recent banking crisis.
The urgency with which the U.S. government and The Fed backstopped deposits and a proactive resolution from Swiss policymakers to contain the potential Credit Suisse turmoil appears to have mostly assuaged near-term liquidity and solvency concerns. Inflation appears to possibly be peaking across most global economies, and there has been increased confidence that rate hikes from central banks are nearing a pause.
The UK was the top performing market in the global index, returning 6.3% in local currency terms, and the Portfolio’s overweight position benefitted relative returns. The region reversed course in April after underperforming the rest of the world by more than four percentage points in March. Clean balance sheets in the UK relative to Continental Europe are a tailwind for capital flows in a turbulent environment. The U.S. had positive returns that modestly underperformed the global index, returning 0.8% in local currency terms. U.S. CPI for the month of March was reported at 5%, suggesting The Fed is nearing an end to its current hiking cycle.
The operational outlook for U.S. REITs is solid with constructive commentary by management teams in the current REIT earnings season. Office has been a negative standout that has weighed on the broader U.S. region. Portfolio exposure to the U.S. contributed positively to relative returns due to stock selection. Hong Kong was the weakest region, returning -0.1% in local currency terms, and the Portfolio’s overweight position detracted slightly from relative returns. After outperforming other regions in March, Hong Kong slid on a relative basis in April on softness in office and luxury residential.
Most property sectors posted positive returns in April, except for self-storage.
Healthcare was the strongest performing sector returning 5.5% in local currency terms. Robust Seniors Housing operating fundamentals stood in stark contrast to the murky medium-term outlook of many other sectors. During April, Portfolio overweight position Welltower (WELL), the U.S. REIT with the largest exposure to seniors housing, outperformed the global index by nearly ten percentage points. The Portfolio’s overweight position to healthcare benefitted relative returns.
Self-storage was the weakest performing sector, returning -2.3% in local currency terms. After a flurry of potential consolidation news in March, M&A headlines slowed in April after the announcement that Life Storage (LSI) agreed to merge with Extra Space Storage (EXR). Good stock selection in self-storage drove positive relative performance for the Portfolio in April.
Performance Commentary - March 31, 2023 The FTSE EPRA/NAREIT Developed Index (AUD) produced a total return of -2.6% for the month ended 31 March 2023. All regions posted negative returns in the month except Hong Kong as the collateral damage of central bank interest rate hikes extended to the banking sector causing heightened liquidity and solvency concerns. Echoing the 1980s Savings & Loans crisis, the failure of Silicon Valley Bank and Signature Bank in the U.S., and the bail-out of Credit Suisse by UBS in Europe, highlighted the fragility of banks with weak capital structures and concentrated asset exposures.
The consequences for REITs will take time to comprehend but we anticipate tighter lending conditions and reduced credit availability for those property sectors with weak operating fundamentals, notably U.S. office. Hong Kong was the strongest region, returning 0.6% in local currency terms. REIT earnings recovery expectations are supported by economic and behavioural trends, which highlighted a sharp rebound in travel and consumption and improving residential sales. Our overweight exposure to Hong Kong contributed positively to performance. The U.S. modestly outperformed the global index, returning -2.8% in local currency terms. The Portfolio’s overweight position benefitted relative returns.
The Fed delivered another 25bps rate hike, as U.S. policymakers balanced taming inflation with calming concerns regarding instability in the banking sector. In light of the banking turmoil, relative strength was broadly observed across U.S. REITs which satisfied three key characteristics: (a) defensive income streams, (b) low leverage, and (c) low exposure to technology/life-science oriented markets such as San Francisco. In turn, our exposure to single-family residential, manufactured housing, seniors housing and net lease sectors contributed positively to performance. Continental Europe was the weakest region, returning -12.4% in local currency terms. Troubles in the banking sector added to the challenges facing highly levered European REITs.
Remedies to cure elevated leverage and refinancing risk via common pathways (e.g., asset sale or equity raise) are hindered by the higher cost of capital environment. The wave of dividend reductions or suspensions and utilisation of script dividends continued in March. Announcements included German residential REITs Vonovia (VNA) and LEG Immobilien (LEG), and diversified REITs Aroundtown (AT1) and Immofinanz (IIA).
Our underweight exposure to Europe contributed positively to performance. Most property sectors posted negative returns in March with the exception of data centres, self-storage and industrial.
Performance Commentary - February 28, 2023 The FTSE EPRA/NAREIT Developed Index (AUD) produced a total return of -0.1% for the month ended 28 February 2023. All regions apart from Japan posted negative returns in the month of February. REITs have delivered mixed earnings results with positive Q422 results preceded by 2023 guidance that suggests an expected slowdown in the latter half of the year, with rising operating expenses and interest costs posing a challenge to earnings in 2023.
Japan was the strongest region, returning 2.3% in local currency terms. Japanese stocks rallied late into February after Bank of Japan Governor nominee Kazuo Ueda expressed support for the current ultra-loose monetary setting, signalling interest rates are unlikely to rise in the short to mid-term. Our underweight exposure to Japan detracted from performance.
The U.S. underperformed the global index, returning -4.8% in local currency terms. Positive economic and employment data released in February suggests that the Fed’s efforts to control inflation have been inadequate, leading to a greater likelihood of interest rates staying higher for longer. Sticky inflation concerns and decelerating growth from earnings combined for downward pressure on the U.S. Our overweight exposure to the U.S. detracted from performance. Hong Kong was the weakest region, returning -6.1% in local currency terms. Geopolitical concerns and uncertainty surrounding Chinese business recovery led to a consolidation in Hong Kong equities throughout February after a strong post-Covid reopening rally since November of last year. Our overweight exposure to Hong Kong detracted from performance.
All property sectors apart from self storage posted negative returns in February. Self storage was the strongest performing sector during February, returning +1.7% in local currency terms after optimistic growth guidance was delivered by the sector. However, earnings results were overshadowed by Public Storage’s (PSA) rejected informal $11b takeout offer to acquire Life Storage (LSI) at a 17% premium to LSI’s unaffected share price, with indications that PSA may improve the offer. Our overweight exposure to the sector added to performance.
The data centre sector was the weakest performer during the month, returning -7.4% in local currency terms. Despite strong bookings with record backlogs, the sector underperformed due to flat earnings guidance delivered by Digital Realty (DLR) which was negatively impacted by rising financing costs, while Equinix Inc’s (EQIX) margins declined because of increasing electricity costs. Our nil exposure to DLR and underweight exposure to the sector contributed positively to performance.
A number of REITs have been active in raising capital to reduce leverage and fund future acquisitions. Hong Kong based portfolio holding Link REIT (823-HK) announced a highly dilutive one for five rights issue at HK$44.2per unit, equivalent to 20% of shares outstanding, aiming to raise US$2.4b at a 30% discount to last unaffected close. Link indicated the proceeds will be used to reduce debt and fund future investment opportunities.
Swedish developer Castellum AB (CAST) revealed a SEK$10b (c.US$950m) rights issue to be completed in Q223 with the purpose of reducing leverage. In Singapore, ESR-Logos REIT (J91U) launched a private placement and preferential offering to raise $300m of equity to fund ‘future acquisitions, redevelopments and asset enhancement initiatives’, with the private placement three times oversubscribed in February.
Furthermore, ASX listed Centuria Industrial REIT (CIP) issued A$300m of exchangeable notes maturing in 2028, paying a 3.45%-3.95% p.a. coupon and 25% exchange premium. As rising interest rates to start to impact REIT earnings, capital restructuring will become a focus for those with leverage concerns this year. This is highlighted by the default of PIMCO’s Columbia Property Trust on $1.7bn of mortgage notes secured over seven office buildings in the U.S.
Other notable news over February included the Competition and Markets Authority in the UK unconditionally clearing an all-share merger of Capital & Counties Properties (CAPCO) and Shaftesbury (SHB), the merger is expected to be completed in early March 2023. SHB is a portfolio holding.
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