Where to find deep discounts and the prospect for outsized returns on the ASX

Note: This interview was taped on Monday 21 October 2024.

After a rough 2022 and most of 2023, the ASX 200 REITs index has been a trade that's worked like a charm. Wide investor expectations of falling interest rates, falling bond yields, and a recovery in occupancy rates for many types of properties have been the perfect cocktail for a sector that was on a rollercoaster ride.

And while the REITs sector may look like a wonderful trade just from this one chart, there is a very important piece of information missing from this chart. A lot of this gain has been seen in just one company - Goodman Group (ASX: GMG). So much so that GMG is now 39% of the ASX 200 REITs index. And that, by any investor's definition, is very concentrated. 

But, as Steve Bennett, CEO of the Direct Property division at Charter Hall explains, that also presents a fantastic opportunity to manage a portfolio of ASX REIT stocks in a way that better highlights the value to be found in the rest of the sector. 

Take Dexus (ASX: DXS), a conglomerate with more than $54 billion in its portfolio. Its public stock has a distribution yield of 6.4%, and it delivered a 10% return in the twelve months to 30 September versus the sector return of 46%. Or Mirvac (ASX: MGR), which delivered a 6% return even though it too has a healthy development pipeline and a diversified portfolio.

Retail investors may not necessarily recognise this opportunity but Charter Hall's team do. With 1600 properties in its portfolio, Charter Hall is Australia's largest property owner and also has one of the industry's largest teams. As Bennett puts it, the Charter Hall team have the resources, the time, and the research to drill deep into finding those best ideas without having to take excessive risk.

To walk us through the opportunity in ASX REIT stocks, the risks investors should know about, as well as the tailwinds and headwinds facing the sector, Bennett joined Livewire to discuss the Charter Hall Deep Value A-REIT Partnership 3 Fund as part of our Fund in Focus series. 

Before watching this interview, please note that this fund is open to wholesale investors only.

Timecodes

• 0:00 - Intro
• 0:34 - Can this huge run-up in ASX A-REIT share prices continue? -- Stocks mentioned: Goodman Group (ASX: GMG)
• 1:26 - What are the key headwinds investors need to be aware of and how has this affected your positioning?
• 2:42 - What does 'deep value' mean to you and where are you finding it in the real estate market? -- Stocks mentioned: Dexus (ASX: DXS), Mirvac (ASX: MGR)
• 4:35 - Does this fund also list in unlisted property?
• 5:21 - How do you manage risk and can you give us an example?
• 6:25 - What makes this fund unique compared to others like it?
• 7:19 - How can eligible investors access this opportunity?
  
  

Interested in investing?

Contact DVAP3 fund managers Mark Ferguson or Patrick Barrett directly for further information, or visit the Charter Hall website.