- A-REITs collectively met market expectations during the latest profit-reporting season, unlike industrial stocks, which disappointed, particularly on their earnings guidance for 2015-16.
- The Asia Pacific Data Centre Group (AJD) A-REIT owns data centres and is a lower-risk play on the cloud-computing boom, while National Storage REIT is benefiting from opportunities in the highly fragmented self-storage industry.
- The Arena A-REIT invests in the growth sectors of healthcare, childcare and education and has exposure to government-tenanted facilities, while the US Masters Residential Property Fund A-REIT invests in undervalued neighbourhoods in growth markets that are within an hour’s commute of downtown Manhattan.
A 9% correction in the Australian Real Estate Investment Trusts (A-REIT) sector since March has put it back on the radar for long-term income investors. Smaller, specialist A-REITs, in particular, look interesting after heavy price falls.
A pullback was needed. The search for yield sparked a stunning rally in A-REITs last year and early this year, and drove many above their asset backing. The sector was overvalued but the weight of money and expectations of rising property prices fuelled gains. Let’s have a closer examination of the sector before considering five smaller A-REITs that could add value.