Low cash rate to make A-REITs attractive
Australia Real Estate Investment Trusts (A-REITs) are set to become increasingly attractive to investors, on the back of low interest rates.
A market review from Folkstone Maxim Asset Management, revealed that for the 12 months to 31 May 2015, the S&P/ASX 300 A-REIT Accumulation Index provided returned 29.3 per cent, outperforming the broader market return by 19.4 per cent.
"Having regard to the reduced cash rate as well as the prospect of rates staying lower for longer, the A-REIT sector continues to offer attractive distributions, providing appeal for investors seeking yield," the review said.
"An additional attraction for the sector includes the prospect for the A-REITs to deliver cap rate compression higher property values from a further compression of cap rates in August when releasing their 2015 full-year results."
Meanwhile, the merger of A-REITs, Novion Property Group and Federation Centres, is set to go ahead after Federation Centres sold its 50 per cent stake in the Frankston shopping centre, Karingal Hub, to co-owner ISPT for $115 million.
The sale came after ACCC Commissioner, Jill Walker, gave the green light for the merger, that will see the combined Federation/Novion group own or co-own 91 shopping centres across Australia, after they entered a court-enforceable undertaking to divest their stake in either the Karingal Hub shopping centre or the Bayside centre, which is 100 per cent owned by Novion.
Walker said the ACCC flagged concerns over the Karingal Hub and Bayside shopping centres, as they were the only large multi-purpose shopping centres within 20km of the Frankston CBD.
AUTHOR
Nicholas O'Donoghue
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