One of the big takeaways from the August reporting season is that Australian property is well and truly intact, particularly in the commercial real estate (CRE) sector.
Amongst the many Australian real estate investment trusts (A-REITs), there were 3 standout performers in the S&P/ASX 200 Index (INDEXASX: XJO) that I’ve chosen to dive deeper on as we enter September.
1. Charter Hall Long WALE REIT (ASX: CLW)
The Charter Hall Long WALE REIT was the top-performing A-REIT in the ASX 200 in August, which was thanks to a big acquisition announcement alongside Charter Hall Group (ASX: CHC).
Charter Hall is set to own a 24.5% stake in a $700 million portfolio of telecommunications properties to be leased back to Telstra Corporation Ltd (ASX: TLS).
The Charter Hall Long WALE REIT security price climbed 14.64% and hit a new 52-week high in August and could be set to surge higher in September with its larger portfolio and stronger balance sheet following its $261 million equity raising.
2. National Storage REIT (ASX: NSR)
The National Storage REIT security price climbed 11.59% higher in August despite posting full-year earnings below market expectations.
National Storage reported a total return of 15% with an Australian portfolio occupancy rate of 81.4%, up 100 basis points (bps) from the prior corresponding period (pcp).
Total revenue for the Aussie REIT climbed 12% higher to $152.2 million as the self-storage group saw operating margins expand 500 bps to 59%.
The Aussie self-storage REIT has continued its aggressive acquisitions throughout FY19 adding to both its Australian and New Zealand portfolios during the year, and could be set for further growth if operating conditions improve in 2020.
3. Viva Energy REIT (ASX: VVR)
The Viva Energy REIT security price was another top performing A-REIT in August, with a strong earnings result the biggest catalyst for the surge in August.
The A-REIT reported $2.54 billion in portfolio value as at 30 June 2019 with half-year distributable earnings of 7.18 cents per share (cps), up 2.7% on 1H 2018.
As with the Aussie energy market, the Viva Energy REIT portfolio remains heavily weighted towards eastern Australia with significant assets in New South Wales (31.1% of portfolio), Victoria (27.7%) and Queensland (21.7%).
The Viva Energy REIT security price climbed 10.15% higher in August and hit a new 52-week high along the way, but I think 2020 could have more good news for Viva Energy REIT shareholders.
With the Federal Government being returned to power in the May 2019 election, a more stable energy policy could be on the agenda in the next 6–18 months, which should boost investment in the sector.
If this is the case, we should see greater investment from the likes of AGL Energy Ltd (ASX: AGL) translate to more demand for energy properties, boosting the margins of the Viva Energy REIT higher in 2020 and beyond.
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Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has recommended National Storage REIT. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.