Investing in ASX Real Estate Investment Trusts (REITs) is a popular strategy for those looking to gain exposure to the property market without the complexities of direct ownership.
The Australian markets are home to a basket of long-standing REITs that have rewarded shareholders with dividends and long-term capital gains.
Although FY24 was a challenging year for the sector, commercial real estate valuations have been marked down, and some ASX REITs saw large share price declines last year.
Not all incurred the same fate, though. Three were standouts. Let's examine the top-performing ASX REITs of FY24.
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Scentre Group (ASX: SCG)
In third place on the list is Scentre Group, which owns and operates Westfield shopping centres in Australia and New Zealand. Its shareholders saw impressive gains coming into the new year.
The ASX REIT hit 52-week closing lows of $2.39 apiece in October. Investors then drove it higher before it peaked at $3.39 on 22 March.
In total, Scentre Group has rallied more than 21% in the last year, a more than 12% advantage over the S&P/ASX 200 Index (ASX: XJO).
In its latest update, Scentre noted that customer visits to its 42 Westfield destinations totalled 175 million in the first nine months of 2024.
Tenant sales reached $6.5 billion in Q1 2024, and its portfolio occupancy is almost full.
Scentre Group anticipates Funds From Operations (FFO) to grow by up to 5.4% in 2024, with distributions expected to increase by at least 3.6%. Distributions are to REITs what dividends are to individual stocks
If correct, this could make the ASX REIT an attractive choice for income-focused investors.
HMC Capital Ltd (ASX: HMC)
The second-best REIT for FY24 was HMC Capital, an alternative asset manager focused predominantly on real estate. It is not structured as an ASX REIT per se but operates two REITs.
HMC completed the acquisition of Payton Capital this month, a private credit fund manager in the commercial real estate space.
This move is the first in HMC's efforts to establish a $5 billion "diversified private credit asset management platform over the medium-term".
Macquarie recently upgraded HMC to a buy, setting a price target of $7.97. Meanwhile, consensus rates the ASX REIT a hold, per CommSec.
Goodman Group (ASX: GMG)
In first place as the top-performing REIT for FY24 was Goodman Group.
Goodman's value grew the most in FY24, with its share price soaring by 73% over the last 12 months.
This global integrated property group focuses on industrial and commercial properties, including warehouses and, more recently, data centres.
According to my colleague James, data centres are in high demand due to the rise of e-commerce and digitalisation – a positive for Goodman shares.
Based on this, Citi rates the ASX REIT a buy with a price target of $40.00 per share.
Barrenjoey recently downgraded Goodman to an underweight rating, citing caution "on the market's lofty expectations", according to The Australian Financial Review.
Meanwhile, according to CommSec, consensus rates Goodman a buy. However, the decision is split. Five rate it a buy, 4 a hold, and 2 a sell.
If Citi's valuation is correct, it signifies an upside potential of more than 13% at the current Goodman price.
Goodman had a market capitalisation of around 66 billion at the end of FY24.
ASX REIT's continue
Goodman Group, Scentre Group, and HMC Capital represent some of the best ASX REITs of FY24, each offering unique strengths and growth prospects.
Time will tell if these current trends will continue. As always, remember to conduct your own due diligence.
