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These are the 5 best ASX real estate shares of 2020

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The real estate sector started 2020 on a rather high note, but that all changed as the COVID-19 pandemic swept across the world, including Australia.

In fact, real estate was one of the worst performing sectors in the first half of the year.

The ASX 200 Real Estate Index (ASX: XRE) however, has rebounded strongly in the second half, as confidence seeps back to the market. Overall, the index is only down by 11% for the year.

Some real estate companies have even made the most of the situation, with strong share price returns over the year.

Here we’ll look into the 5 best performing ASX real estate shares in 2020.

Company 1-year share price return Current share price Market cap
1. Lifestyle Communities Limited (ASX: LIC) 43% $12.64 $1.3 billion
2. Goodman Group (ASX: GMG) 36% $18.82 $34.8 billion
3. Charter Hall Group (ASX: CHC) 30% $14.72 $6.9 billion
4. Centuria Capital Limited (ASX: CNI) 14% $2.52 $1.5 billion
5. Ingenia Communities Group (ASX: INA) 5% $4.87 $1.6 billion

 

1. Lifestyle Communities

You may not have heard of this company, but the Lifestyle Community share price has been the best performer in the ASX real estate sector so far in 2020.  Although not part of the elite ASX 200 club, the company still commands a hefty market cap of over $1 billion.

The Lifestyle Communities share price has returned a cool 40% this year for its shareholders. This is after dropping by 43% in March at the height of the pandemic-induced market panic. So technically, the share price has returned 154% since March.

This means that if you had invested $10,000 in Lifestyle Communities shares on 23 March, your money would be worth $25,400 today.

So what does Lifestyles Communities do? Essentially, it’s a group 4,494 retirement villages, all located in Victoria, for people aged 50 and over.

However, the business doesn’t operate like a typical retirement village — instead it operates under a land lease model. Under the land lease model, homeowners own their home while leasing the land. In a retirement village on the other hand, you only have a license right to occupy a home.

The business has boomed this year due to retired or semi-retired people choosing to purchase and move into resort-like villages, where all necessities are available within the confines of the complex — eliminating the need to make trips to the grocery stores.

In its latest update to the market, the company said its full-year profit after tax for FY20 actually decreased from $55.1 million to $42.8 million.

It will be interesting to see how the Lifestyle Communities share price fares next year when the pandemic subsides.

2. Goodman Group

This gargantuan company is the biggest real estate company in Australia, hands down. 

The Goodman share price has gained 36% over the course of a year, reaching its all-time high of $20.07 in early November.

Goodman is one of the world’s premier developers and managers of industrial property projects and investments. The group was co-founded in Australia by Gregory Goodman, who remains CEO today.

It operates a unique real estate portfolio with a high concentration of industrial properties, compared to the more ‘traditional’ office and retail REITs. 

Goodman manages projects during build, charging development and leasing fees. Then it manages the completed assets, charging management fees. The company usually then holds a minority stake in most of its completed projects, earning potential upsides.

For FY20, the company reported an operating profit of $1,06 billion, up 12.5% on FY19. The solid result was mainly fuelled by strong demand for well-located industrial properties, such as warehouses for booming businesses like e-commerce.

3. Charter Hall

The Charter Hall share price rounds out the top 3 performers in the real sector this year, returning 30% for shareholders. The Charter Hall share had at one point plunged by as much as 55% in March, when it was trading at a 52-week low of $4.93.

The company owns some well-known retail shopping centre properties across regional Australia, including  Secret Harbour Square in Western Australia, Rockdale Plaza in New South Wales, and Campbellville Plaza in Victoria.

The company also invests in unlisted property investments, as well as listed REITs. It typically co-invests in its own funds, aligning itself with its own funds management customers. This gives Charter Hall exposure to a diversified property portfolio, and the relatively predictable rental income accounts for nearly a third of the group’s earnings.

Charter Hall reported announced solid full year results for FY20, with operating earnings topping $322.8 million, up 46.3% from Fy19.

The company followed that up with a strong trading update for the first-quarter of FY21, where it reported $51.7 billion total assets under management, with a stable occupancy rate of 97.8%.

4. Centuria Capital

Centuria is another company on the list that has not made the cut for the ASX 200 club, however it still commands a market value north of $1 billion.

The Centuria share price has returned 14% for the past year.

This share is basically a pure REIT play, and through its REIT investments, the company owns a diversified portfolio in Australia as well as across the Tasman.

The company’s funds have made some major acquisitions this year, fuelled by extra low interest rates. 

Its Centuria Industrial REIT (ASX: CIP) for example, is Australia’s largest domestic, pure play listed industrial REIT.

This fund expanded its portfolio with over $300 million of acquisitions in FY20. Meanwhile, the company’s Centuria Office REIT (ASX: COF) also expanded its portfolio with $637 million of acquisitions in 2020.

As a result, for FY20 the company reported an increase in assets under management of 52% to over $9.4 billion, while its cash earnings per share was 12 cents, ahead of 11.5 cents in its earlier guidance.

5. Ingenia Communities

Rounding out the top 5 real estate shares in 2020, the Ingenia share price has returned a rather modest 5% for investors. 

This is despite the company reporting record FY20 earnings before interest, tax and depreciation and amortisation (EBITDA) of $71.9 million, which was up 7% on previous year. This bottom line result was based on a top line revenue of $244 million.

Ingenia may not have received widespread coverage in the media, but it’s a sizeable company with a market cap of $1.6 billion.

What does Ingenia do? It’s a property company that owns, operates and develops a portfolio of lifestyle and holiday properties across urban and coastal markets. The portfolio also includes parks, cabins, and camping areas.

Just like Lifestyle Communities, Ingenia has been able to take advantage of people’s preference to move away from major city centres during the pandemic.

It remains to be seen how the Ingenia share price will perform when the pandemic is declared over.

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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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