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Winston’s Weekly: A wrap up of this week’s A-REIT results and a capital raise

The following transcript was AI-generated.

Manny Anton: Good morning and welcome to this week’s edition of Winston’s Weekly: Covering All Things Property. I’m Manny Anton, your host for today’s Property Chat. Winston, welcome back.

Winston Sammut: Thank you. Just before we start, I just want to make a statement about my shirts. I have sort of classified every day about a different topic. So we have Manic Monday, Toxic Tuesday, Wacky Wednesday, Thirsty Thursday, and Floral Friday. So every Friday I wear a floral shirt.

Manny Anton: Fantastic. If any of you were wondering if that’s the reason for the shirts. All right. Well, let’s start with with an update on this week’s property news, and it has been a busy week on the property earnings front. We’ve had some big names reporting Charter Hall, Stockland, JPT, Scentre (which is, of course, is the owner of Westfield), Centurion and Ingenia, all reporting results. So some pretty big names there. What were the key takeaways from these earnings results and did any of these surprise you?

Winston Sammut: No, not really. The key point really to take out from these results is that once again, valuations have fallen pretty well across the board to the extent that people are probably a little bit more comfortable, but they feel that they’re probably going to fall a little bit further in the next six months or so. Having said that, the earnings – so the bottom line was effectively impacted by the losses in the valuations, but the results themselves operationally were pretty good. So as no surprises either on the upside or the downside, there was another result for lifestyle communities, which is based in Victoria and is a manufactured home estate operation, but they’re doing a capital raise and the issue with lifestyle communities is that they’ve never had a capital raise since 2012 because what they’ve been doing is recycling assets. But now they’ve got to the stage where, given what’s happening with interest rates, the fact that the settlements have slowed, not only did settlements slow for lifestyle communities, but also for Ingenia and also for Stockland in the residential area, because people are finding it taking a little bit longer to sell their property to settle.

So settlements are being pushed out. So there will be a catch up at some stage. And the last community is looking to raise 275 million on a one for six issue for $16. And I still think they are very, very good operation. They have an excellent product, excellent management and I think that they will go on to continue to do very well. As for stocks like Charter Hall, in the past number of years Charter Hall has performed exceptionally well and it’s actually been receiving quite a lot of performance fees. Obviously, over the last 18 months to two years, with the markets down, the performance fees are lacking. And so, if you look at comparing the results today with a couple of years ago or even last year, they are devoid of meaningful performance fees. So that’s one thing. And the other thing is because there’s been a lack of transactional activity, they’ve been more they’re more reliant now on inflows into their funds and that sort of is slowing down as well. But they are concentrating on quality assets. They’ve started developing a new building which they’re putting up in Chifley, a new tower, which is going to be exceptionally good. But again, that’s a little bit down the track.

Manny Anton: Okay, great. Well Charter Hall, you know, pretty well known and… staying on Charter Hall, as part of their results this week I think they made quite a few comments around around what they’re expecting to see in terms of workers coming back to the office. And obviously that impacts them significantly. But, you know, they’re not the only ones. There have been a number of companies making similar commentary suggesting that, you know, the market is moving back to 5 days a week and that we can expect those numbers of of workers coming into the city and coming into the offices to continue to ramp up. What are your thoughts on that? And then obviously, there are implications for valuations if that is the case.

Winston Sammut: The reality is that these entities are talking their book, right? And whilst they do like to see people coming back five days a week, it’s not happening. And in fact this week there was a discussion about the Fair Work Commission looking at putting into awards the ability to work from home. So, you know, that’s the other side of the equation. I would expect – There has been an improvement in terms of the number of people coming back to the office, but I doubt very much it will get to the five days a week. And that’s why groups like Charter Hall and Dexus and GPT, they are concentrating on quality assets, top of the range (new buildings as opposed to the older ones), which is where the damage is going to be in terms of looking at forward as people move away from those into the quality buildings.

Manny Anton: Right. And that’s just a function of ‘they can afford to be choosy’. But you’ve got much better opportunities and why go for the second tier stuff when you can have the first tier stuff at previous prices?

Winston Sammut: Correct.

Manny Anton: Okay. All right. So another one that you’ve spoken about on your weekly series a fair bit is the Newmark BWP merger. And we tend to check in with you on this one every week, so what’s the latest update on on on Newmark BWP?

Winston Sammut: Well, the latest update there is that in the coming week we will be lodging our request to call an EGM.

Manny Anton: Right? So that hasn’t yet been locked in, though?

Winston Sammut: No.

Manny Anton: Okay. But the intention is to try to call one?

Winston Sammut: Correct.

Manny Anton: Okay, great. And just to sort of to wrap it up, looking forward to next week. You know, still some results left to come. What are you looking for? What should we pay attention to in terms of property? Are there any big names that are coming?

Winston Sammut: No. Most of the big names have all reported – next week is probably the laggards because they’ve got through the 29 February (close of business) to lodge their results. And so it’s just the laggards coming through. I don’t think there’s going to be any change in terms of sentiment or otherwise. It’ll be more the same: valuations creeping in the wrong direction. But operationally looking okay.

Manny Anton: Okay. Well, Winston, thank you for your time and your insights as always. And we’ll be back next week with another edition of Winston’s Weekly next Friday. Have a great day.

Winston Sammut: Thank you.

Disclaimer: Sequoia Financial Group (ASX:SEQ), the parent company of Finance News Network, owns a 20 per cent interest in Euree Asset Management.