Cromwell Phoenix Property Securities Fund’s objective is to provide investors with a total return (after fees) in excess of the S&P/ASX 300 A-REIT Accumulation Index over rolling three year periods while delivering lower total risk (as measured by the volatility of returns) over this period.
Goodman Group (GMG) ♦ 6.9% GMG represents one of the biggest holdings in the portfolio. However, given the substantial benchmark weight, the portfolio remains underweight in a relative sense. The position thereby detracted value from a relative perspective during the quarter.
GMG released its full year financial result in August. The result itself was in line with expectations. Property investments performed solidly, with net property income growing 4.7%, supported by strong rental reversions upon releasing, particularly in North America. Despite the solid performance, GMG is not immune from cap rate expansion, with the portfolio’s weighted average capitalisation rate expanding from 4.0% to 4.5% over the year, with further expansion likely in coming periods. GMG’s funds management performance slightly disappointed, with earnings down from 2022 as performance fees were not recognised in the second half of the financial year. Over the longer term, GMG guided to fee income of -0.9% of assets under management, below previous suggestions of -1.0%. Assets under management did grow strongly, now at $81 billion. GMG’s development earnings were the driver of growth in the 2023 financial year, increasing from $960.7 million in 2022, to $1,307.2 million. A strong yield on cost for developments and completions of $6.9 billion supported this robust outcome.
GMG’s share price initially had a muted reaction to the solid result, however some commentary in the earnings call and subsequent consideration by market participants led to a rally in GMG’s share price. There was a focus on GMG’s data centre business. The company commented that of their development work-in- progress, data centres represented 30%. This comes from rezoning existing industrial land and developing data centres. There was also commentary around the ability to establish a data centre platform, which could double the end value of developments. With much market excitement surrounding the use of data, artificial intelligence and the structural shifts that this may cause, some got excited about this nascent business. This business is still small relative to GMG’s wider business and the ability to create a full operational platform is still uncertain. Economic depreciation of data centre infrastructure (as opposed to solely property) remains uncertain and could make this line of business more questionable.
Much like in the past, GMG also highlighted some of its more valuable land bank, which over time will be converted to residential usage. Property in South Sydney and North Ryde in Sydney and Port Melbourne are likely to have residential uses in the next decade. Whilst there is no doubt upside from these sites, it must be remembered that much of this property is held in partnerships, in which GMG is a minority investor and must be considered in the context of GMG’s market capitalisation of more than $44 billion.
Abacus Group (ABP): Abacus Property Group (ABG) ♦ 19.8% / Abacus Storage King (ASK) ♦ 26.2% The portfolio began the quarter holding an overweight position in ABP and ended the quarter holding an overweight position in both of the restructured entities, ABG and ASK. Their underperformance detracted value from an absolute and relative perspective over the quarter.
During the September quarter, ABP split into two stocks, a newly spun off ASK and the residual entity, ABG. Initially announced at its half yearly financial result in February, ABP completed its spinoff of its storage properties into ASK in August. ASK is now the owner and operator of 131 self-storage property assets across Australia. These properties are operated under the Storage King brand, which itself is now owned by ASK. In Phoenix’s view ASK owns the premier storage property portfolio in the nation, with a heavy weighting to in-demand, metropolitan locations. Under Abacus management, the self-storage portfolio has had a very strong history of industry leading occupancy and revenue per available metre (RevPAM) growth. Abacus also has a strong history of developing successful self-storage assets. Currently 36 of its 131 assets are classified as part of the “stabilising portfolio”, meaning they are either development sites or recently completed developments.
Globally, the self-storage asset class is in strong demand. US heavyweight, Public Storage, recently announced it was acquiring Simply Self Storage from Blackstone for US$2.2 billion and Teachers Insurance Annuity Association of America (TIAA) announced it was acquiring Norwegian company Self Storage Group ASA for a premium of 66.7% to its prevailing share price. ASK’s most direct competitor, National Storage REIT (NSR), finished the quarter trading at a relatively modest 11% discount to its net tangible asset backing. In contrast, ASK finished the period trading at an enormous 34% discount to its net tangible asset backing.
As part of the split transaction, ASK undertook a capital raise, which served to reduce gearing across the Abacus entities. The ongoing ABG entity is a beneficiary of this. With reduced leverage, ABG now owns the fund manager of ASK and its largest asset is a 19.9% stake in ASK. It also owns office properties with a carrying value of more than $1.7 billion and other property assets (mostly retail property) with a carrying value of more than $800 million. These assets suffer from the same concerns as any office property portfolio, with the requirement to pay elevated levels of incentives and a more uncertain future of the usage of office buildings. ABG closed the quarter trading at approximately a 50% discount to its net tangible asset backing, among the largest discounts in the sector. This discount exists despite ABG having significantly lower leverage than many other REITS and an investment in the more popular self-storage sector.
What is Cromwell Phoenix Property Securities Cromwell Phoenix Property Securities is an Managed Funds investment product that is benchmarked against ASX Index 200 A-REIT Index and sits inside the Property - Australian Listed Property Index. Think of a benchmark as a standard where investment performance can be measured. Typically, market indices like the ASX200 and market-segment stock indexes are used for this purpose. The Cromwell Phoenix Property Securities has Assets Under Management of 277.08 M with a management fee of 0.82%, a performance fee of 0.00% and a buy/sell spread fee of 0.4%.
How has the investment product performed recently?
The recent investment performance of the investment product shows that the Cromwell Phoenix Property Securities has returned 11.04% in the last month. The previous three years have returned 5.39% annualised and 19.38% each year since inception, which is when the Cromwell Phoenix Property Securities first started.
How is risk measured in this investment product?
There are many ways that the risk of an investment product can be measured, and each measurement provides a different insight into the risk present. They can be used on their own or together to perform a risk assessment before investing, but when comparing investments, it is common to compare like for like risk measurements to determine which investment holds the most risk. Since Cromwell Phoenix Property Securities first started, the Sharpe ratio is 0.36 with an annualised volatility of 19.38%. The maximum drawdown of the investment product in the last 12 months is -17.2% and -62.68% since inception. The maximum drawdown is defined as the high-to-low decline of an investment during a particular time period.
What is the relative performance of the investment product?
Relative performance is what an asset achieves over a period of time compared to similar investments or its peers. Relative return is a measure of the asset's performance compared to the return to the other investment. The Cromwell Phoenix Property Securities has a 12-month excess return when compared to the Property - Australian Listed Property Index of -4.94% and 2.01% since inception.
Does the investment product produce Alpha over its Peers?
Alpha is an investing term used to measure an investment's outperformance relative to a market benchmark or peer investment. Alpha describes the excess return generated when compared to peer investment. Cromwell Phoenix Property Securities has produced Alpha over the Property - Australian Listed Property Index of -0.44% in the last 12 months and 0.18% since inception.
What are similar investment products?
For a full list of investment products in the Property - Australian Listed Property Index category, you can click here for the Peer Investment Report.
What level of diversification will Cromwell Phoenix Property Securities provide?
Cromwell Phoenix Property Securities has a correlation coefficient of 0.97 and a beta of 1.02 when compared to the Property - Australian Listed Property Index. Correlation measures how similarly two investments move in relation to one another. This establishes a 'correlation coefficient', which has a value between -1.0 and +1.0. A 100% correlation between two investments means that the correlation coefficient is +1. Beta in investments measures how much the price moves relative to the broader market over a period of time. If the investment moves more than the broader market, it has a beta above 1.0. If it moves less than the broader market, then the beta is less than 1.0. Investments with a high beta tend to carry more risk but have the potential to deliver higher returns.
How do I compare the investment product with its peers?
For a full quantitative report on Cromwell Phoenix Property Securities and its peer investments, you can click here for the Peer Investment Report.
How do I compare the Cromwell Phoenix Property Securities with the ASX Index 200 A-REIT Index?
For a full quantitative report on Cromwell Phoenix Property Securities compared to the ASX Index 200 A-REIT Index, you can click here.
Can I sort and compare the Cromwell Phoenix Property Securities to do my own analysis?
To sort and compare the Cromwell Phoenix Property Securities financial metrics, please refer to the table above.
Has the Cromwell Phoenix Property Securities been independently verified by SMSF Mate?
This investment product is in the process of being independently verified by SMSF Mate. Once we have verified the investment product, you will be able to find more information here.
How can I invest in Cromwell Phoenix Property Securities?
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Comments from SMSF Mates
SMSF Mate does not receive commissions or kickbacks from the Cromwell Phoenix Property Securities. All data and commentary for this fund is provided free of charge for our readers general information.
Performance Commentary - June 30, 2023 The S&P/ASX 300 A-REIT Accumulation Index moved higher in the June quarter, rising 3.2%. Property stocks reversed recent trends and outperformed broader equities in the quarter, with the S&P/ASX 300 Accumulation Index adding a lessor 1.0%. This outperformance is relatively surprising considering the 10 Year Australian Government Bond yield increased meaningfully over the quarter, finishing at approximately 4.0%.
Many property owners released their valuations as at 30 June. Broadly speaking properties saw expansions in capitalisation rates (cap rates). For industrial property owners, strong market rent growth mostly offset this cap rate expansion, holding valuations close to flat in most cases. Retail and office properties did not hold up as well, with market rents holding relatively steady amidst cap rate expansion. Properties with long weighted average lease expiries (WALEs) and low capitalisation rates saw the biggest declines in values due to their interest rate sensitive nature.
Property fund managers were predominantly outperformers during the quarter. Smaller capitalisation fund managers performed particularly well, with Centuria Capital Group (CNI) up 13.1%, Qualitas Limited (QAL) gaining 12.6% and Elanor Investors Group (ENN) adding 9.3%. Goodman Group (GMG) was also a solid performer, lifting by 7.6%, while Charter Hall Group (CHC) gave up ground, off 0.7%, likely due to its exposure to office property.
Retail property owners were the major underperformers during the quarter. A series of more negative data points came out across the period. Firstly, retail sales figures underperformed expectations. Furthermore, many retailers who provided sales updates during the quarter disappointed investors. Fashion retailer Universal Store Holdings Limited (UNI) severely disappointed and fell almost 40% in May. Larger retailers JB Hi-Fi (JBH) and Super Retail Group (SUL) also had soft performance, declining by more than 10% from intra-period highs. This weak performance of retailers was reflected in the share prices of their landlords. Vicinity Centres (VCX) lost 5.1%, Scentre Group (SCG) gave up 3.6% and offshore property owner Unibail-Rodamco-Westfield finished 3.8% lower. The performance of less discretionary neighbourhood shopping centre owners was not as weak, however still underperformed the broader property market, with Region Group (RGN) and Charter Hall Retail REIT (CQR) off 0.1% and 0.6% respectively.
Office property owners had mixed fortunes in the June quarter. Dexus (DXS) recovered some lost ground in the period, adding 7.0%. In contrast, Centuria Office REIT (COF) lost 1.7% and Growthpoint Properties Australia (GOZ) gave up 5.0%. Direct office transactions have been extremely limited in recent periods, with buyers and sellers appearing to have divergent price expectations. Those properties that have traded have done so at discounts to book value of between 10% and 25%.
Those with exposure to residential development had a very strong period of performance. Mirvac Group (MGR) led the way, up 11.2%, while large capitalisation peer Stockland added 4.9%. Peet Limited was also an outperformer in the quarter, gaining 9.3%. Resilience in residential house prices has been surprising, with developers likely to be supported by high net immigration numbers along with limited supply of new housing.
Performance Commentary - March 31, 2023 • Since inception, in April 2008, the Fund has delivered an annualised return, net of fees, of 7.4% compared to a 4.0% return from the S&P/ASX 300 A-REIT Accumulation Index
• The Fund delivered a net return of -1.2% over the March 2023 quarter, underperforming the 0.3% return from the S&P/ASX 300 A-REIT Accumulation Index
• Positive contributions to the Fund’s relative performance over the quarter came from an overweight position in residential developer Peet Limited along with no holdings in some of the weaker stocks such as Region Group, Ingenia Communities and Dexus
• Detracting from the Fund’s relative performance over the quarter were overweight positions in Charter Hall Group, Qualitas Limited, and Hotel Property Investments, each of which performed poorly, along with underweight positions in relatively strong performers, Goodman Group and National Storage REIT
Performance Commentary - December 31, 2022 Since inception, in April 2008, the Fund has delivered an annualised return, net of fees, of 7.60% compared to a 4.01% return from the S&P/ASX 300 A-REIT Accumulation Index.
The Fund delivered a net return of -9.10% over the December 2022 quarter, underperforming the 11.56% return from the S&P/ASX 300 A-REIT Accumulation Index
The property index outperformed the broader equity market, with the S&P/ASX 300 Accumulation Index up 9.1%
Positive contributions to the Fund’s relative performance over the quarter came from overweight positions in Hotel Property Investments and Unibail-Rodamco-Westfield along with an underweight position in the underperforming Scentre Group
Detracting from the Fund’s relative performance over the quarter was an underweight position in the outperforming Dexus, combined with overweight positions in Lendlease Group, Sunland Group, Charter Hall and GDI Property Group, each of which performed poorly
Performance Commentary - September 30, 2022 Since inception, in April 2008, the Fund has delivered an annualised return, net of fees, of 7.1% compared to a 3.3% return from the S&P/ASX 300 A-REIT Accumulation Index
The Fund delivered a net return of -2.7% over the September 2022 quarter, outperforming the -6.9% return from the S&P/ASX 300 A-REIT Accumulation Index
The property index underperformed the broader equity market, which moved slightly higher in the period
Positive contributions to the Fund’s performance over the quarter came from positions in Charter Hall Group, Qualitas Limited, and Peet
Detracting from the Fund’s performance over the quarter was a holding in Transurban Group, and poor relative positioning in Scentre Group
Performance Commentary - June 30, 2021 • Since inception, in April 2008, the Fund has delivered an annualised return, net of fees, of 8.8% compared to 5.1% return from the S&P/ASX 300 A-REIT Accumulation Index.
• The property sector powered higher over the quarter, adding 10.7%.
• The property sector outperformed the broader market with the S&P/ASX 300 Accumulation Index also delivering a solid 8.5% gain.
• Positive contributions to the Fund’s relative performance over the quarter came from an overweight position in the outperforming APN Property Group and Charter Hall Group along with an underweight position in the underperforming Scentre Group.
• Detracting from the Fund’s relative performance over the quarter was an underweight position in Goodman Group combined with overweight positions in Lendlease Group and Sydney Airport, each of which performed poorly.
Performance Commentary - December 31, 2020 • Since inception, in April 2008, the Fund has delivered an annualised return, net of fees, of 8.3% compared to 4.5% return from the S&P/ASX 300 A-REIT Accumulation Index
• The property sector underperformed the broader market with the S&P/ASX 300 Accumulation Index adding 13.8%
• The property sector underperformed the broader market gaining 13.3%, with the S&P/ASX 300 Accumulation Index adding 13.8%
• Positive contributions to the Fund’s relative performance over the quarter came from an overweight position in the outperforming UnibailRodamco-Westfield, Sunland Group, and Charter Hall Group along with an underweight position in the underperforming Goodman Group
• Detracting from the Fund’s relative performance over the quarter was an underweight position in Scentre Group. Overweight positions in the underperforming APN Convenience Retail REIT and Charter Hall Long WALE REIT also detracted value
Performance Commentary - September 30, 2020 • Since inception, in April 2008, the Fund has delivered an annualised return, net of fees, of 7.0% compared to 3.6% return from the S&P/ASX 300 A-REIT Accumulation Index
• Over the September 2020 quarter, the Fund delivered a return of 4.0%, underperforming the benchmark which returned 7.4%
• The property sector outperformed the broader market gaining 7.4%, with the S&P/ASX 300 Accumulation Index losing 0.1%
• Positive contributions to the Fund’s relative performance over the quarter came from an overweight position in the outperforming Charter Hall Group, Charter Hall Social Infrastructure REIT and Sunland Group along with an underweight position in the underperforming Vicinity Centres
• Detracting from the Fund’s relative performance over the quarter was an underweight position in Stockland combined with no holding in Goodman Group, both of which performed well. Overweight positions in the underperforming Unibail-Rodamco-Westfield ALE Property Group, Lendlease Group and APN Property Group also detracted value
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