Australia’s six largest institutional retail property funds have generated negative annualised returns for the first time in a decade.
The vehicles, which manage some A$32bn (€19.5bn) of assets between them, posted a return of -1.7% for the 12 months to the end of January 2020.
The funds recorded annualised returns of 6.8% over five years and 4.9% over three years, according to the latest MSCI/Mercer Australia Core Wholesale Monthly Property Fund Index.
The previous negative annualised return was from June 2009 to May 2010.
The worst performer was the Lendlease-managed Australian Prime Property Fund (APPF) Retail, generating a net-of-fees return of -8.9%, followed by GPT Wholesale Shopping Centre Fund (-3%) and AMP Capital Shopping Centre Fund (-2.9%).
The QIC Shopping Centre Fund showed a positive 0.5% return, and the ISPT Retail Australia Fund generated 1%.
As previously reported, the funds have collectively built up A$5bn of redemption requests, as a number of investors seek to exit or to reduce their exposure.
Lendlease’s APPF Retail fund alone has received requests totalling A$2.2bn, and industry sources suggest QIC is facing redemption requests of a similar magnitude.
GPT has previously told IPE Real Assets that its shopping centre fund has A$400m worth of units trading on the secondary market.
But industry consultants say that, even if investors were prepared to accept a loss on their investments, there is currently no taker for secondary retail units.
Lendlease has been the most proactive in disposing of assets to raise capital to meet redemption requests. Last year, it sold a 50% stake in Westfield Marion in South Australia to Singapore’s SPH REIT for A$670m.
It is currently selling a stake in Westfield Carindale, in Brisbane, with an asking price of around $850m.
QIC has sold a small shopping centre in Queensland for A$250m and is drawing up a strategy to reposition its Australian shopping centre fund. This includes disposing of non-retail assets, such as 80 Collins Street, a mixed-use development project in Melbourne, which sold to Dexus last year for A$1.5bn and a commercial centre in Brisbane for A$250m.
Despite the negative performance of retail property funds, the MSCI/Mercer index, which covers 18 unlisted funds, showed a gain of 5.6%.
Industrial funds had the highest return, at 11.8%, while office funds returned 11.1%.
The best-performing fund was the Investa Commercial Property Fund, chalking up 14.83 net of fees.
The next three best performers were Goodman Australia Industrial Partnership, delivering 12%, Charter Hall Prime Industrial Fund, with 12.1%, and Lendlease’s APPF Industrial, at 11.5%.
